AEye, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Our actual results and the timing of events may differ materially from those described in or implied by these forward-looking statements due to a number of factors, including those discussed below and those set forth under “Risk Factors” herein and other filings we make with the SEC from time to time. Unless the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “we,” “our,” “us,” and “AEye,” refer to the business and operations of AEye, Inc. Overview This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understanding our financial results for the three months ended March 31, 2024, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report, including our condensed consolidated financial statements and accompanying notes. All dollar amounts expressed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands of dollars, except for per share amounts and unless otherwise specified. Reverse Stock Split On December 27, 2023, we effected a 1-for-30 reverse stock split of its issued and outstanding shares of common stock (the "Reverse Stock Split"). Pursuant to the Reverse Stock Split, every thirty (30) shares of issued and outstanding shares of common stock were combined into one (1) share of common stock. We did not issue fractional shares in connection with the Reverse Stock Split. Stockholders who were otherwise entitled to fractional shares of common stock were instead entitled to receive a proportional cash payment. The number of outstanding warrants were also proportionately adjusted. In connection with the Reverse Stock Split, there was no change to the number of shares authorized or in the par value per share of $0.0001. Accordingly, unless we indicate otherwise, all historical per share data, number of shares issued and outstanding, stock awards, and other common stock equivalents for the periods presented in this Quarterly Report on Form 10-Q have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split. Key Factors Affecting AEye’s Operating Results We believe that our future performance and success depends to a substantial extent on our ability to capitalize on the opportunities described herein, which in turn are subject to significant risks and challenges, including those discussed below, and the risk factors described in the section of this Quarterly Report on Form 10-Q entitled “Risk Factors.” We are subject to those risks common in the technology industry and also those risks common to early stage companies including, but not limited to: • the possibility of not being able to successfully develop or commercialize our products; • securing additional capital in a timely manner in order to meet operating cash flow needs; doing so on terms that are favorable to us, or at all, may be challenging given the current capital markets and overall macroeconomic conditions; • maintain and establish relationships with one or more Tier 1 automotive suppliers to facilitate "design wins" with potential end customers, which in our case are automotive OEMs; • develop and protect our intellectual property; • comply with existing and new or modified laws and regulations applicable to our business; • maintain and enhance the value of our reputation and brand; • hire, integrate, and retain talented people at all levels of our organization; and • successfully develop new solutions to enhance the experience of, and deliver value to, our customers. 20 Market Trends and Uncertainties We anticipate future demand for our 4Sight TM Intelligent Sensing Platform will come from two major markets - Automotive and Industrial. In the near term, we anticipate concentrating on the Automotive market by more effectively leveraging our business model, focusing on advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking. In the longer term, we will look for opportunities in the Industrial market, such as in the railway and intelligent transportation systems, or ITS, segments, when it becomes cost-effective to do so based on higher volume production in the Automotive market. This provides us with multiple opportunities for sustained growth by enabling new applications and product features across these market segments. However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end markets and customer adoption. In the Automotive market for example, which accounted for 0% and 81% of revenue in the three months ended March 31, 2024 and 2023, respectively, our growth and financial performance will be heavily influenced by our ability to successfully integrate into OEM programs that require years of development, testing, and validation. Because of the size and complexity of these OEM programs, having Tier 1 partnerships would provide a substantial competitive advantage over our competitors given their large scale, mass-production capabilities, and existing OEM customer relationships. The decision by our former Tier 1 partner, Continental, to discontinue our joint lidar development program could have a material and adverse effect on our business, if we are unable to find one or more Tier 1 automotive suppliers to replace Continental in a timely manner, as our business model is predicated on licensing our lidar designs and other intellectual property to Tier 1 automotive suppliers. Our primary focus in the Automotive market is on ADAS for passenger and commercial vehicle autonomy, particularly highway autonomy applications. We believe that growth in that market is driven by both more stringent safety regulations and consumer demand for vehicles offering increased safety and advanced driver assist features. We will need to anticipate and adapt to any changes in the regulatory environment, as well as changes in consumer demand in order to take advantage of this opportunity. As is common in early-stage companies with limited operating histories, we are subject to risks and uncertainties such as those described in Part II, Item 1A of this Quarterly Report on Form 10-Q. Since inception, we have incurred net losses and negative cash flows from operations and expect to continue incurring losses until after we reach commercialization. We are dependent upon raising additional capital to provide the cash necessary to continue our ongoing operations. Should we not be to do so, we will require alternative sources of liquidity to continue our operations for the next 12 months. We plan to adjust spending in order to preserve and extend liquidity, and has plans which would further reduce operating expenses and cash outlays. We believe that these plans can be successfully implemented, which would likely result in adequate cash flows to support our ongoing operations for at least one year from the date of this Quarterly Report on Form 10-Q. Partnerships and Commercialization Our technology is designed to be a key enabler in certain Automotive and Industrial market applications. Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers. The time to achieve a design wins varies based on the market and application. We consider design wins to be critical to our future success, although the revenue that may be generated by each design win and the time necessary to achieve such a win can vary significantly, making it difficult to predict our financial performance. In the Industrial market, our strategy has been to sell our lidar solutions to customers utilizing components that are sourced, in part, from the Tier 2 automotive supply chain and assembled by our contract manufacturing partners. In the Automotive market, we will utilize a licensing model with Tier 1 suppliers that would generate a royalty for us and, hence, can be more easily replicated with multiple Tier 1 suppliers. As the Tier 2 automotive supply chain matures, we intend to leverage those suppliers, and the volume created for the Automotive market, to participate in the Industrial market. With that in mind, in the fourth quarter of 2023, we made the decision to wind down our existing product line for the Industrial market and curtail support until we achieve sufficient scale in our automotive products, which we believe represents our largest market opportunity. If we fail to achieve sufficient scale in our automotive products, we may not be in a position to reenter the Industrial market in the time frame we expect, or at all. In addition, as discussed above, the decision by our former Tier 1 partner, Continental, to discontinue our joint lidar development program could have a material and adverse effect on our business. We believe our revenue and profitability will also be dependent upon our success in licensing our technology to Tier 1 automotive suppliers, such as our previous partner, Continental, which represented 0% and 81% of revenue in the three months ended March 31, 2024 and 2023, respectively, t hat intend to use our technology in volume production of lidar sensors for OEMs. Delays of autonomy programs by OEMs that we are currently or will be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the timeframe we anticipate. 21 Restructuring In 2023, we implemented a revised strategic plan, which focused on key products and critical customer engagements in the Automotive market, and aligned our operations with evolving business needs by focusing on our transition from research and development to the commercialization of our automotive products, while winding down our existing industrial product and reducing fixed operating costs. Gross Margin Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of our development contracts with customers, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features. Our gross margins have in the past been, and may continue to be, negatively impacted by inventory write-downs. As an example, in 2023, we recorded inventory write-downs of $7,005 relating to the transition to certain higher grade components in our automotive products as well as the winding down of our existing product line for the Industrial market. In the future, we expect to generate attractive gross margins from licensing our lidar technology and software to our Tier 1 partners in the Automotive market. We also anticipate being able to leverage on our foundation in the Automotive market to move to other markets. To date, our revenue has been generated through development contracts with OEMs and Tier 1 suppliers, as well as unit sales of our products to Industrial customers. These development contracts primarily focus on customization of our proprietary 4Sight TM product capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of particular perception capabilities to meet specific customer needs. In general, development contracts that require more complex configurations have higher prices. We expect development contracts to remain a significant part of our business in the near-term, but represent a smaller share of our total revenue over time, as we increase our focus on technology licensing in the Automotive market and over time leverage the economies of scale we achieve to move into other markets including the Industrial Market. Investment and Innovation Our proprietary adaptive, intelligent lidar technology delivers industry-leading performance that helps to solve the most difficult challenges in delivering partial or full autonomy. While traditional sensing systems passively collect data, our active 4Sight TM Intelligent Sensing Platform leverages principles from automated targeting systems and biomimicry to scan the environment, while intelligently focusing on what matters most in order to enable safer, smarter, and faster decisions in complex scenarios. We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position. This is further dependent on the investments we make in research and development and our ability to commercialize our products. We believe price is becoming a critical differentiator in the marketplace and OEMs are favoring companies that have the infrastructure to build lower cost products at higher volumes. It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products, lower BOM costs, industrialize and generate strong market demand for our products. If we fail to do this, our market position and revenue may be adversely affected, and our investments in that area will not be recovered. Basis of Presentation We currently conduct our business through one operating segment. Components of Results of Operations Total Revenues We categorize our revenue as (1) prototype sales and (2) development contracts. In 2024 and 2023, our prototype sales revenue primarily related to unit sales of our 4Sight TM product. Revenue from prototype sales is typically recognized at a point in time when the control of goods is transferred to the customer, generally upon delivery or shipment to the customer. 22 Development contracts represented the majority of our total revenues in 2023. Revenue from development and/or collaboration arrangement contracts are earned from R&D activities and collaboration with OEMs and Tier 1 suppliers. These contracts primarily focus on customization of our proprietary 4Sight TM capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs. Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time. This assessment is made at the outset of the arrangement for each performance obligation. We expect our 2024 revenues related to prototype sales and development contracts to remain flat or marginally higher than in 2023. Cost of Revenue Cost of revenue includes the costs directly associated with the production of prototypes and certain costs associated with development contracts. Such costs for prototypes include direct materials, direct labor, indirect labor, inventory write downs, losses on purchase commitments, warranty expense, and allocation of overhead. Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts. We expect our 2024 costs of revenue to fluctuate in line with 2024 revenues. Operating Expenses Research and Development Our research and development, or R&D, efforts are focused primarily on hardware, software, and system engineering related to the design and development of our advanced lidar solutions. R&D expenses include: • personnel-related expenses, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense; • third-party engineering and contractor costs; • lab equipment; • engineering parts and test units; • new hardware and software expenses; and • allocated overhead expenses. R&D costs are expensed as they are incurred. We expect our investment in R&D to be reduced as a result of our revised strategic plan, with a reduced workforce and consolidated global footprint. We also plan to execute more focused spending with vendors in critical areas that support our strategy and product development, in line with our revised strategic plan and manage costs more efficiently. Sales and Marketing Our sales and marketing, or S&M, efforts are focused primarily on sales, business development, and marketing programs in pursuit of revenue contracts from potential and existing customers. S&M expenses include: • personnel-related expenses, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense; • demonstration equipment; • trade shows expenses, advertising, and promotions expenses for press releases and other public relations services; and • allocated overhead expenses. We expect our S&M expenses to be significantly reduced as a result of our revised strategic plan to focus on the commercialization of our automotive products. Through our capital light business, we are able to significantly reduce our workforce and consolidate our global footprint as we expect to leverage our Tier 1 partners to commercialize our products and manage relationships with the OEMs. 23 General and Administrative Our general and administrative, or G&A, spending supports all business functions. G&A expenses include: • personnel-related costs, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense for executive, finance, legal, operations, human resources, technical support, and other administrative personnel; • consulting, accounting, audit, legal, and other professional fees; • insurance premiums, software and computer equipment costs, general office expenses; and • allocated overhead expenses. We expect our G&A expenses to be reduced as a result of our revised strategic plan with a reduced workforce and consolidated global footprint. We also plan to manage spending with vendors more effectively to support our revised strategic plan to manage costs. Change in Fair Value of Convertible Note and Warrant Liabilities Changes in fair value of the 2022 Note and warrant liabilities are the result of the change in fair value at each reporting date. The 2022 Note and warrant liabilities are recorded at fair value for each reporting period, and the changes in fair value are reported within other income (expense), net during the period. We also elected to record interest expense on the 2022 Note as changes in fair value. Interest Income, Interest Expense and Other Interest income and other consists primarily of interest earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash and cash equivalents balances and market rates. Interest income and other also includes gains on sale of property and equipment. Interest expense and other consists primarily of convertible note issuance costs, amortization of premiums, and accretion of discounts on marketable securities, net. 24 Results of Operations Comparison of the three months ended March 31, 2024 and 2023 The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report. The following table sets forth our consolidated results of operations data for the three months ended March 31, 2024 and 2023 (in thousands, except for percentages): Three Months Ended March 31, Change Change 2024 2023 $ % Prototype sales $ 20 $ 125 $ (105) (84) % Development contracts — 511 (511) (100) % Total revenue 20 636 (616) (97) % Cost of revenue 263 2,261 (1,998) (88) % Gross loss (243) (1,625) 1,382 (85) % Research and development 4,532 9,442 (4,910) (52) % Sales and marketing 341 6,268 (5,927) (95) % General and administrative 5,615 8,554 (2,939) (34) % Total operating expenses 10,488 24,264 (13,776) (57) % Loss from operations (10,731) (25,889) 15,158 (59) % Change in fair value of convertible note and warrant liabilities 2 (810) 812 (100) % Interest income and other 195 277 (82) (30) % Interest expense and other 317 176 141 80 % Total other income (expense), net 514 (357) 871 (244) % Loss before income tax expense (10,217) (26,246) 16,029 (61) % Provision for income tax expense 2 19 (17) (89) % Net loss $ (10,219) $ (26,265) $ 16,046 (61) % Revenue Prototype Sales Prototype sales decreased by $105, or 84%, to $20 for the three months ended March 31, 2024, from $125 for the three months ended March 31, 2023. This was primarily due to a decrease in units sold of our 4Sight™-based industrial product due to our focus on key automotive milestones in the Automotive market. Development Contracts Development contracts decreased by $511, or 100%, to $0 for the three months ended March 31, 2024, from $511 for the three months ended March 31, 2023. The decrease was primarily due to the termination of a contract with a Tier 1 automotive supplier in the fourth quarter of 2023. Cost of Revenue Cost of revenue decreased by $1,998, or 88%, to $263 for the three months ended March 31, 2024, from $2,261 for the three months ended March 31, 2023. This decrease was primarily due to fewer units sold in the current period due to the wind-down of our existing industrial product and also no development contract costs as we fulfilled our obligations on a Tier 1 automotive supplier contract in the fourth quarter of 2023. 25 Operating Expenses Research and Development Research and development expenses decreased by $4,910, or 52%, to $4,532 for the three months ended March 31, 2024, from $9,442 for the three months ended March 31, 2023. This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $2,392, stock-based compensation expense of $1,069, third party research and development work of $675, engineering parts and lab equipment expense of $446, and information technology and facilities expense of $130. Sales and Marketing Sales and marketing expenses decreased by $5,927, or 95%, to $341 for the three months ended March 31, 2024, from $6,268 for the three months ended March 31, 2023. This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $2,563, stock-based compensation of $1,186, trade show, marketing, and consultant spend of $1,579, travel and entertainment expense of $307, and information technology and facilities expense of $254. General and Administrative General and administrative expenses decreased by $2,939, or 34%, to $5,615 for the three months ended March 31, 2024, from $8,554 for the three months ended March 31, 2023. This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in stock-based compensation of $1,184, personnel costs of $765, accounting, legal, and consulting fees of $511, insurance of $392, and travel and entertainment expense of $84. Change in Fair Value of Convertible Note and Warrant Liabilities Change in fair value of convertible note and warrant liabilities decreased by $812, or 100%, to a gain of $2 for the three months ended March 31, 2024, from a loss of $810 for the three months ended March 31, 2023. This decrease was primarily due to settlement of the 2022 Note in the third quarter of 2023. Interest Income and Other Interest income and other decreased by $82, or 30%, to $195 for the three months ended March 31, 2024, from $277 for the three months ended March 31, 2023. This decrease was primarily due to less interest earned on our marketable securities in the current period. Interest Expense and Other Interest expense and other decreased by $141, or 80%, to a gain of $317 for the three months ended March 31, 2024, from a gain of $176 for the three months ended March 31, 2023. This increase was primarily due to a favorable increase in accretion of discounts on marketable securities, resulting in a net decrease within amortization of premiums and accretion of discounts on marketable securities, net, of $83, and favorable increase in foreign exchange gain of $72. Provision for Income Tax Expense Provision for income tax expenses decreased to $2 for the three months ended March 31, 2024, from $19 for the three months ended March 31, 2023. This change is due to changes in pretax income (loss) in the U.S. and certain foreign entities and changes in tax rates. Net Loss Net loss decreased by $16,046, or 61%, to $10,219 for the three months ended March 31, 2024, from $26,265 for the three months ended March 31, 2023. This decrease was primarily due to decreases in operating expenses following restructuring and cost reduction efforts in connection with our revised strategic plan as announced during 2023. 26 Liquidity and Capital Resources Sour ces of Liquidity Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to find a replacement Tier 1 automotive supplier and the timing of an OEM design win, our ability to extend our cash runway based on the restructuring initiatives announced in the previous year, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products, and market adoption of new and enhanced products and features. As of March 31, 2024, our cash, cash equivalents, and marketable securities totaled $28,909. For the three months ended March 31, 2024 and 2023, we had a net loss of $10,219 and $26,265, respectively. We anticipate that we will continue to incur losses for at least the next several years. To date, our principal sources of liquidity have been proceeds received from the issuance of equity. In December 2021, we entered into a Common Stock Purchase Agreement, or CSPA, with Tumim Stone Capital LLC, or Tumim Stone, pursuant to which we have the right, but not the obligation, to issue and sell to Tumim Stone over a 36-month period, up to $125,000 of our common stock. On May 6, 2022, we filed a Registration Statement on Form S-1, which related to the offer and resale of up to 1,028,847 shares of our common stock to be purchased by Tumim Stone, pursuant to the CSPA. As of March 31, 2024, 196,754 shares have been issued under this CSPA. In September 2022, we entered into a Securities Purchase Agreement, or SPA, with an investor allowing for the sale and issuance of up to two convertible notes, each with cash proceeds of $10,000 , for a total of $20,000 in proceeds between the two issuances (each, a "Note Closing"). On September 15, 2022, we closed the first Note Closing with the investor and received cash proceeds of $9,850 (net of fees paid to the investor). On March 15, 2024, our right to effect a Second Closing under the SPA terminated. On September 26, 2023, the U.S. Securities and Exchange Commission declared our registration statement on Form S-3 to be effective (the "Shelf Registration"). The Shelf Registration may be used by us to raise up to $200,000 through one or more offerings of our securities over a period of three years. Although we have not yet utilized the Shelf Registration to offer securities, we intend to do so when market conditions are appropriate to support continued execution on our key automotive milestones. Until we can generate sufficient revenue from the sale of our products to cover operating expenses, working capital, and capital expenditures, we expect the funds raised in the business combination with CF Finance Acquisition Corp. III and PIPE financing, the CSPA and SPA, as well as any future funds from the CSPA, the Shelf Registration, and other potential sources of capital, to fund our near-term cash needs. If we are required to raise additional funds by issuing equity securities, dilution of stockholders will result. Any debt securities issued may also have rights, preferences, and privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. We may also be unable to raise additional capital through the sale of securities and debt financing, or to do so on terms that are favorable to us, particularly given current capital market and overall macroeconomic conditions. Accounting Standards Codification, or ASC, Subtopic 205-40, Presentation of Financial Statements - Going Concern , requires us to assess our ability to meet our future financial obligations as they become due within one year after the date that the financial statements are issued. Despite the recent restructuring initiatives, we expect that our expenses will continue to exceed our operating income and, as a result, we may need additional capital resources to fund our operations. We believe that the net proceeds from the business combination with CF Finance Acquisition Corp. III and PIPE financing, CSPA, SPA, and Shelf Registration, together with our existing cash, cash equivalents, and marketable securities and implementation of our plans should we be unable to secure additional financing or find one or more replacement Tier 1 partners will sufficiently alleviate the risk of substantial doubt about our ability to continue as a going concern and will enable us to fund our operating expenses, working capital, and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q. For additional discussion of our plans, see Note 1 in the Notes to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. If our cash needs are greater than we anticipate, we may be required to reduce our operating expenses even further or raise additional capital sooner. Reducing our operating expenses could be very challenging for us, since we have already undertaken significant operating expense reductions; further reductions could adversely impact our business operations. Given the current macroeconomic environment, OEMs appear to be more cautious about their capital spending and investments into new technologies and as a result we have seen the timelines delayed for certain opportunities which may negatively impact the time for us to reach positive cash flows from operations. Our plans for the use of cash in the long-term (beyond twelve months from this Quarterly Report on Form 10-Q) are primarily related to funding operating expenses to support the commercialization of our products. For additional information regarding our cash requirements from lease obligations and contractual obligations, see Notes 6 and 15 to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. 27 On March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or FDIC, was appointed as receiver. On March 27, 2023, First Citizens Bank entered into a whole bank purchase of SVB. We had, and continue to have, deposit accounts at SVB. The standard deposit insurance amount is up to $250 per depositor, per insured bank, for each account ownership category. We do not maintain any other material accounts or lines of credit with SVB. Although we continue to maintain an operating account at SVB, we subsequently established operating accounts at other financial institutions to mitigate the risks associated with any one financial institution's potential risk of insolvency or receivership. Cash Flow Summary Three months ended March 31, 2024 2023 (in thousands) Net cash provided by (used in): Operating activities $ (7,885) $ (17,195) Investing activities $ 368 $ 21,477 Financing activities $ 120 $ (2,845) Operating Activities For the three months ended March 31, 2024, net cash used in operating activities was $7,885. Factors affecting our operating cash flows during this period were net loss of $10,219, amortization of premiums and accretion of discounts on marketable securities, net of $252, offset by stock-based compensation of $3,014, and noncash lease expense of $364. Within operating activities, the net changes in operating assets and liabilities were cash used of $852, primarily driven by decreases in accrued expenses and other liabilities, operating lease liabilities, and other noncurrent liabilities of $1,343, $397 and $358, respectively. Cash used was offset by cash provided by a decrease in prepaid and other current assets of $772 and an increase in accounts payable of $309. For the three months ended March 31, 2023, net cash used in operating activities was $17,195 . Factors affecting our operating cash flows during this period were a net loss of $26,265 , offset by stock-based compensation of $6,513 , change in fair value of convertible note and warrant liabilities of $810 , noncash lease expense of $350 , depreciation and amortization of $330 , and inventory write-downs of $208 . Within operating activities, the net change in operating assets and liabilities was cash provided of $879 , primarily driven by decreases in prepaid and other current assets and accounts receivable of $2,722 and $494 , respectively. Cash provided was partially offset by cash used by decreases in accounts payable, contract liabilities, and operating lease liabilities of $985 , $511 , and $392 , respectively, and increases in inventories of $386 . Investing Activities For the three months ended March 31, 2024, net cash provided by investing activities was $368. The primary factors affecting net cash provided by investing activities during this period were proceeds from redemptions and maturities of marketable securities of $6,500, offset by the purchases of marketable securities of $6,045 and purchases of property and equipment of $87. For the three months ended March 31, 2023, net cash provided by investing activities was $21,477 . The primary factor affecting net cash provided by investing activities during this period were the proceeds from redemptions and maturities of marketable securities of $22,000 , offset by purchases of property and equipment of $599 . Financing Activities For the three months ended March 31, 2024, net cash provided by financing activities was $120. The primary factors affecting our financing cash flows during this period were proceeds from the exercise of the CSPA of $165, partially offset by payments for taxes related to net settlement of equity awards of $45. For the three months ended March 31, 2023, net cash used in financing activities was $2,845 . The primary factors affecting our financing cash flows during this period were payments for convertible note redemptions of $2,300 and payments for taxes related to net settlement of equity awards of $868 , partially offset by proceeds from the exercise of stock options of $323 . 28 Critical Accounting Policies and Estimates Our condensed consolidated financial statements are in accordance with GAAP. We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, fair value measures, and the related disclosures in the condensed consolidated financial statements. Our actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on our financial position and results of operations. We believe our critical accounting policies involve the greatest degree of judgment and complexity and have the greatest potential impact on our condensed consolidated financial statements. During the three months ended March 31, 2024, there were no significant changes in our critical accounting policies and estimates as compared to those previously disclosed in "Critical Accounting Policies and Estimates" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Annual Report on Form 10-K. Emerging Growth Company Status Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and we have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year period, or (iv) December 31, 2025. We expect to continue to take advantage of the benefits of the extended transition period, although we may decide to adopt such new or revised accounting standards early to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. Recent Accounting Pronouncements See Note 1 to our condensed consolidated f inancial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements as of the date of this Quarterly Report on Form 10-Q.