Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Please read the following discussion and analysis of our financial condition and results of operations together with “Note about Forward-Looking Statements,” Part I, Item 1 “Business,” Part I, Item 1A “Risk Factors,” and our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.
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 fiscal year 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 Annual Report, including our 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 our 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 was 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 Annual Report on Form 10-K have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.
Dowslake Transaction
On May 10, 2024, we entered into a Securities Purchase Agreement with Dowslake Microsystems Corporation, or Dowslake, pursuant to which Dowslake agreed to purchase 330,823 shares of common stock for a purchase price of $854, which represents a per share purchase price of $2.58, and an unsecured promissory note in the principal amount of $146 for an aggregate purchase price of $1,000.
Registered Direct Offering
On May 29, 2024, we entered into a Securities Purchase Agreement with certain institutional investors pursuant to which we agreed to issue and sell, in a registered direct offering, an aggregate of 727,706 shares of Common Stock at a per share purchase price of $3.448 for gross proceeds of approximately $2,509, before deducting estimated offering expenses payable by us.
New Circle Transaction
On July 25, 2024, we entered into a Stock Purchase Agreement with New Circle Principal Investments LLC, or New Circle, pursuant to which we have the right, but not the obligation, to sell to New Circle, and New Circle is obligated to purchase, up to $50,000 of our Common Stock. Such sales of common stock by us, if any, may occur from time to time at our sole discretion, over a 36-month period.
A.G.P. Transaction
On September 12, 2024, we entered into an At Market Issuance Sales Agreement with Alliance Global Partners, or A.G.P., pursuant to which we may issue and sell through A.G.P., up to $2,600 of our common stock from time to time through an "at-the-market" equity offering program. Such sales of common stock by us, if any, may occur from time to time at our sole discretion, over a 36-month period. In December 2024 and January 2025, we increased the amount of our common stock that we may issue and sell through AGP, up to $5,230 and $15,293, respectively.
Convertible Note Transaction
On January 2, 2025, we entered into a Securities Purchase Agreement to finance an aggregate principal amount of up to $3,240 with a certain institutional investor and issued (i) a senior unsecured convertible promissory note (the "Note") in the aggregate principal amount of $3,240 for an aggregate purchase price of $3,000 and (ii) a warrant to purchase up to 805,263 shares of our common stock. The Note, subject to an original issue discount of 7.4%, has a term of eighteen months and accrues interest at the rate of 7.0% per annum. The Note is convertible into Common Stock, at a per share conversion price equal to $2.22, subject to adjustments noted in the Note. The Warrant has an initial exercise price of $2.22, and is exercisable after the six month and one day anniversary of its issuance (the “Initial Exercisability Date”) until for four years following the Initial Exercisability Date.
Key Factors Affecting Our 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 “Risk Factors” section of this Annual Report on Form 10-K.
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:
• develop and protect our intellectual property;
• maintain and enhance the value of our reputation and brand;
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Market Trends and Uncertainties
We anticipate growing demand for our 4SightTM Intelligent Sensing Platform across two major markets, Automotive and Non-Automotive. We believe this expected growth will allow us to capture market share as well as pursue specialized opportunities like highway autonomous driving applications that benefit from our products. 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 addition, we will look for opportunities in the Non-Automotive market, such as in the railway, security, and intelligent transportation systems, or ITS segments. This strategy 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 market demand and customer adoption. In the Automotive market for example, which accounted for an insignificant portion of our revenues in 2024 and 70% of our revenues in 2023, 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 should provide a substantial competitive advantage over our competitors given their large scale, mass-production capabilities, and existing OEM relationships held by our Tier 1 partners. If we fail to remain engaged with one or more Tier 1 automotive suppliers, it may have an adverse effect on our business. The markets for lidar are projected to see significant growth in both the near and long-term.
As is common in early-stage companies with limited operating histories, we are subject to risks and uncertainties such as those described in Part I, Item 1A of this Annual Report on Form 10-K. Since inception, we have incurred net losses and negative cash flows from operations and expect to continue incurring losses up to commercialization, which means we are dependent upon raising additional capital to provide the cash necessary to continue our ongoing operations. As a result, it remains critical for us to preserve cash and manage spending to extend our liquidity. We also plan to improve our liquidity position through securing additional financing, engaging with partners and OEMs, and executing on our critical milestones. However, successfully raising capital is outside of our control and there can be no assurance that we will be able to obtain additional financing on terms acceptable to us, on a timely basis, or at all.
During 2024, we raised $12,905 in gross proceeds through share issuances on our stock purchase agreements and other financing initiatives. After year-end, we raised an additional $11,055 in gross proceeds through share issuances on our stock purchase agreements and a convertible note. We also have access to additional liquidity through our ELOC and ATM facilities.
Partnerships and Commercialization
Our technology is designed to be a key enabler in certain Automotive and Non-Automotive 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 win 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 design win can vary significantly, making it difficult to predict our financial performance. In the Non-Automotive 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 Non-Automotive market. With that in mind, in the fourth quarter of 2023, we made the decision to wind down our legacy product line for the Non-Automotive market and curtailed support. Since the launch of our new product, Apollo, in 2024, we have seen renewed interest from Non-Automotive customers across a broad range of sectors and are actively engaged on multiple opportunities.
In early 2024, we engaged LITEON as our Tier 1 automotive supplier and are actively working with them to bring our products to market. As part of this initiative, LITEON has committed to building and delivering Apollo B0 samples to us by the first quarter of 2025, marking a significant milestone in our product development. This partnership has enabled us to leverage their manufacturing expertise to produce high-quality samples that meet stringent performance standards, which is a critical step towards scaling production and delivering our advanced lidar solutions to the market. In May 2024, we announced a strategic partnership with ATI and LighTekton Co., Ltd to manufacture and distribute our products in China. This collaboration opens access to a potential $2.5 billion market opportunity. By leveraging ATI's and LighTekton's extensive networks and manufacturing capabilities, we aim to accelerate our market penetration and deliver our advanced lidar solutions to a broader audience. We have also made substantial progress in our collaboration efforts with Nvidia, demonstrating significant advances in the high-speed and long-range detection performance of our lidar systems, which we believe puts us on track for future integration with their Hyperion platform. Given these engagements are relatively recent, there is no guarantee that these endeavors will be successful.
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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 current Tier 1 partner, LITEON, or our previous partner Continental, which represented 70% of 2023 revenue, and these partners securing program awards from OEMS and scaling to high volume production of our lidar sensors. Delays in autonomy programs by OEMs that we are currently or plan to be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the time frame we anticipate, or at all.
Restructuring
In 2023, we implemented a revised strategic plan, which focused on key products and critical customer engagements 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 legacy Non-Automotive product and reducing fixed operating costs. In August 2024, fixed operating costs were further reduced by the termination of the prior headquarters lease.
The winding down of our legacy Non-Automotive product, combined with an accumulation of other triggering events such as the termination of our partnership with Continental, and a current period and history of cash flow losses, indicated that the carrying amount of our long-lived assets may not be recoverable. We performed an impairment review of our long-lived assets as of December 31, 2023 and wrote down our property and equipment and the ROU asset and leasehold improvements related to the prior headquarters lease to its fair value.
As a result of the implementation of our revised strategic plan and the impairment review of our long-lived assets, we recorded restructuring charges of $19,153 for the year ended December 31, 2023 primarily relating to one-time employee termination benefits, inventory and other current asset write-downs, losses on purchase commitments, and impairment and disposal charges on our long-lived assets. We recorded restructuring gains of $368 for the year ended December 31, 2024, primarily relating to the net gain on the termination of the prior headquarters lease, losses on purchase commitments and one-time termination benefits.
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 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 legacy product line for the Non-Automotive 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 primarily been generated through development contracts with OEMs and Tier 1 suppliers, as well as unit sales of our products to Non-Automotive customers. These development contracts primarily focus on customization of our proprietary 4SightTM 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 Non-Automotive market.
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Investment and Innovation
Our proprietary adaptive, intelligent lidar technology delivers industry-leading performance, addressing the toughest challenges in achieving partial or full autonomy. Unlike traditional sensing systems that passively collect data, our active 4SightTM Intelligent Sensing Platform employs principles from automated targeting systems and biomimicry to actively scan the environment, intelligently focusing on critical elements to enable safer, smarter, and faster decisions in complex scenarios.
In June 2024, we introduced Apollo, the first product in our 4SightTM Flex family of next-generation lidar sensors. Apollo offers best-in-class range and resolution in a compact, power-efficient, and cost-effective form factor, making it ideal for both automotive and non-automotive applications. Apollo can be integrated behind the windshield, on the roof, or in the grille, allowing original equipment manufacturers (OEMs) to implement essential safety features with minimal impact on vehicle design. This innovative sensor leverages our 4SightTM Intelligent Sensing Platform, providing a highly programmable and customizable lidar solution that can be updated through software. With a horizontal field of view up to 120° and long-range detection capabilities of up to 1 km, Apollo is poised to be a key player in advancing vehicle safety and autonomy, as well as smart infrastructure and logistics applications.
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 bill of materials, or BOM costs, industrialize, the manufacturing process, 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 4SightTM 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.
Development contracts represented the majority of our total revenues in 2024 and 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 4SightTM 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.
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.
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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:
• 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. With a reduced workforce and consolidated global footprint, we plan to be more focused on investments that support our strategy and product development goals in the future. We expect our R&D costs to increase slightly from 2024 as we continue to invest in the development of our Apollo product.
Sales and Marketing
Historically, our sales and marketing, or S&M, efforts were focused primarily on sales, business development, and marketing programs in pursuit of revenue contracts from potential and existing customers. S&M expenses include:
• demonstration equipment;
• allocated overhead expenses.
We expect our S&M expenses to continue to be relatively low as we expect to leverage our Tier 1 partners to commercialize our products and manage relationships with the OEMs in the Automotive market. In the Non-Automotive market, we anticipate using the same supply chain to manufacture through global contract manufacturers, and we expect to sell our products primarily through system integrator channel partners that may integrate our lidar sensor and software as part of a larger solution for an end customer.
General and Administrative
Our general and administrative, or G&A, spending supports all business functions. G&A expenses include:
• consulting, accounting, audit, legal, and other professional fees;
• allocated overhead expenses.
We expect our G&A expenses to decrease slightly with reduced facility costs and professional fees, while continuing to incur expenses to support other departments as we continue to develop and commercialize our Apollo product.
Change in Fair Value of Convertible Note and Warrant Liabilities
The 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.
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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 financing costs, and amortization of premiums and accretion of discounts on marketable securities, net.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this report. The following table sets forth our consolidated results of operations data for the years ended December 31, 2024 and 2023 (in thousands, except for percentages):
Year ended December 31, Change Change
Impairment of long-lived assets — 9,988 (9,988 ) (100 )%
(Benefit) provision for income tax (2 ) 57 (59 ) (104 )%
Revenue
Prototype Sales
Prototype sales decreased by $380, or 80%, to $97 for the year ended December 31, 2024 from $477 for the year ended December 31, 2023. This was primarily due to a decrease in units sold of our 4SightTM-based Non-Automotive product due to our focus in 2024 on executing key automotive product development milestones.
Development Contracts
Development contracts decreased by $882, or 89%, to $105 for the year ended December 31, 2024, from $987 for the year ended December 31, 2023. The decrease was primarily due to lower development contract revenue as we fulfilled our obligations under a Tier 1 automotive supplier contract in the fourth quarter of 2023.
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Cost of Revenue
Cost of revenue decreased by $14,541, or 95%, to $778 for the year ended December 31, 2024, from $15,319 for the year ended December 31, 2023. This decrease was primarily due to fewer Non-Automotive product units sold in the current year, and also due to lower development contract costs as we completed our obligations under a Tier 1 automotive supplier contract in the fourth quarter of 2023. The decrease was also due to non-routine inventory write-downs associated with transitioning to certain higher-grade components in our automotive products as well as the implementation of our revised strategic plan which resulted in further inventory write-downs and losses related to purchase commitments.
Operating Expenses
Research and Development
Research and development expenses decreased by $9,782, or 37%, to $16,389 for the year ended December 31, 2024, from $26,171 for the year ended December 31, 2023. This decrease was primarily driven by the implementation of our revised strategic plan in 2023, with decreases in personnel costs of $4,055, stock-based compensation expense of $3,388, information technology and facilities expense of $778, engineering parts and lab equipment expense of $639, depreciation expense of $567, and third party research and development work of $534.
Sales and Marketing
Total sales and marketing expenses decreased by $11,977, or 96%, to $551 for the year ended December 31, 2024, from $12,528 for the year ended December 31, 2023. This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $5,853, stock-based compensation of $2,746, marketing and consultant spend of $2,090, travel and entertainment expenses of $446, and information technology and facilities expense of $642.
General and Administrative
Total general and administrative expenses decreased by $6,922, or 27%, to $18,312 for the year ended December 31, 2024, from $25,234 for the year ended December 31, 2023. This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in stock-based compensation of $2,754, accounting, legal, and consulting fees of $1,036, insurance of $947, facility and information technology, net of allocations, of $853, depreciation expense of $644 and personnel costs of $547.
Impairment of Long-Lived Assets
Impairment of long-lived assets decreased to zero for the year ended December 31, 2024, from $9,988 for the year ended December 31, 2023, primarily as a result of the non-cash impairment of property and equipment and right-of-use assets that occurred in 2023, but no similar event in 2024. In the fourth quarter of 2023 we determined that an accumulation of triggering events, including the winding down of our legacy Non-Automotive product as a result of the implementation of our automotive-first strategic plan to focus on commercialization of our automotive product, the termination of our partnership with a large Tier 1 automotive supplier, and a current period and history of cash flow losses, required an impairment review of our long-lived assets, resulting in our long-lived assets being written down to their fair values.
Change in Fair Value of Convertible Note and Warrant Liabilities
Change in fair value of convertible note and warrant liabilities decreased by $858, or 100%, to zero for the year ended December 31, 2024, from a loss of $858 for the year ended December 31, 2023. This decrease was primarily due to settlement of the 2022 Note in 2023 and an immaterial change in the fair value of warrant liabilities in 2024.
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Interest Income and Other
Interest income and other decreased by $518, or 39%, to $799 for the year ended December 31, 2024, from $1,317 for the year ended December 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 increased by $681, or 275%, to a loss of $433 for the year ended December 31, 2024, from a gain of $248 for the year ended December 31, 2023. This increase was primarily due to costs of $1,124 related to financing arrangements executed in the period, partially offset by an increase in accretion of discounts on marketable securities, net of $220.
(Benefit) Provision for Income Tax
(Benefit) provision for income tax decreased to a benefit of $2 for the year ended December 31, 2024, from a provision of $57 for the year ended December 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 $51,666, or 59%, to $35,460 for the year ended December 31, 2024, from $87,126 for the year ended December 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 and decreases in cost of revenues as we completed our obligations related to a Tier 1 automotive supplier contract in the fourth quarter of 2023.
Liquidity and Capital Resources
Sources of Liquidity
Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to establish and maintain relationship with one or more Tier 1 automotive suppliers 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 December 31, 2024, our cash, cash equivalents, and marketable securities totaled $22,278. For the years ended December 31, 2024 and 2023, we had a net loss of $35,460 and $87,126, respectively. We anticipate that we will continue to incur losses for at least the next several years.
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To date, our principal sources of liquidity have been proceeds received from the issuance of equity. In December 2021, we entered into a Purchase Agreement, with Tumim Stone Capital LLC, or Tumim Stone, pursuant to which we had 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 Purchase Agreement. On July 24, 2024, this Purchase Agreement was terminated in conjunction with us entering into a Common Stock Purchase Agreement, or CSPA, with New Circle. In total, 996,866 shares were issued under the Tumim Stone CSPA.
In September 2022, we entered into a Securities Purchase Agreement 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 Securities Purchase Agreement terminated.
On September 26, 2023, the U.S. Securities and Exchange Commission declared our registration statement on Form S-3 to be effective which allows us to raise up to $200,000 in capital over the next three years subject to baby shelf limitations.
On May 10, 2024, we entered into a Securities Purchase Agreement with Dowslake, pursuant to which Dowslake agreed to purchase 330,823 shares of common stock for a purchase price of $854, which represents a per share purchase price of $2.58, and an unsecured convertible promissory note with a principal amount of $146 for an aggregate purchase price of $1,000.
On May 29, 2024, we entered into a Securities Purchase Agreement with certain institutional investors pursuant to which we agreed to issue and sell, in a registered direct offering using our shelf registration statement on Form S-3, an aggregate of 727,706 shares of common stock at a per share purchase price of $3.448 for gross proceeds of $2,509, before deducting estimated offering expenses payable by us.
On July 25, 2024, we entered into a CSPA with New Circle, pursuant to which we agreed to issue and sell up to $50,000 of common stock, at our discretion from time to time, subject to the satisfaction of the conditions in the CSPA.
On September 12, 2024, we entered into an At Market Issuance Sales Agreement, or ATM Agreement, with A.G.P., pursuant to which we agreed to issue and sell up to $2,600 of common stock, at our discretion from time to time through an "at-the-market" equity offering, subject to the satisfaction of the conditions in the ATM Agreement. In December 2024 and January 2025, we increased the amount of our common stock that we may issue and sell through AGP, having a new aggregate value offering of up to $5,230 and $15,293 respectively.
On January 2, 2025, we entered into a Securities Purchase Agreement to finance an aggregate principal amount of up to $3,240 with a certain institutional investor and issued a note and warrant to purchase up to 805,263 shares of our common stock.
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 transactions described above, 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.
We are dependent upon raising additional capital to provide the cash necessary to continue our ongoing operations and execute against our strategic objectives. We believe that our potential liquidity 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 Annual Report on Form 10-K. If our cash needs are greater than we anticipate, we may be required to reduce our operating expenses further or raise additional capital sooner. 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 for certain opportunities delayed 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 Annual Report) are primarily related to funding operating expenses to support the commercialization of our products. For additional information regarding our cash requirements from lease obligations, lease termination liability, and contractual obligations, see Notes 6 and 21 in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
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.
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Cash Flow Summary
Year ended December 31,
(in thousands)
Net cash provided by (used in):
Operating Activities
For the year ended December 31, 2024, net cash used in operating activities was $26,620. Factors affecting our operating cash flows during this period were a net loss of $35,460, amortization of premiums and accretion of discounts on marketable securities, net of change in accrued interest of $611, and gain on termination of operating lease, net, of $491, offset by stock-based compensation of $9,047, common stock purchase agreement costs of $1,124, noncash lease expense of $956, and depreciation and amortization of $129. Within operating activities, the net changes in operating assets and liabilities were cash used of $1,498, primarily driven by decreases in accrued expenses and other liabilities, operating lease liabilities and other noncurrent liabilities of $2,389, $955 and $345, respectively. Cash used was offset by cash provided by decreases in prepaid and other current assets, inventories, and other noncurrent assets of $1,490, $245 and $215, respectively, and an increase in accounts payable of $156.
For the year ended December 31, 2023, net cash used in operating activities was $50,725. Factors affecting our operating cash flows during this period were net loss of $87,126, offset by stock-based compensation of $18,071, impairment of long-lived assets of $9,988, inventory write-downs of $7,712, depreciation and amortization of $1,547, noncash lease expense of $1,406, loss on advances to suppliers of $1,385, and change in fair value of convertible note and warrant liabilities of $858. Within operating activities, the net changes in operating assets and liabilities were cash used of $4,460, primarily driven by increases in inventories of $2,459, and decreases in accrued expenses and other current liabilities, and operating lease liabilities of $3,135 and $1,528, respectively. Cash used was offset by cash provided by decreases in prepaid and other current assets, accounts receivable, and other noncurrent assets of $2,279, $451, and $284, respectively, and an increase in accounts payable of $252.
Investing Activities
For the year ended December 31, 2024, net cash provided by investing activities was $7,744. The primary factors affecting net cash provided by investing activities during this period were proceeds from redemptions and maturities of marketable securities of $32,426, partially offset by the purchases of marketable securities of $24,241 and purchases of property and equipment of $486.
For the year ended December 31, 2023, net cash provided by investing activities was $55,351. The primary factors affecting net cash provided by investing activities during this period were proceeds from redemptions and maturities of marketable securities of $76,350, partially offset by the purchases of marketable securities of $19,331 and purchases of property and equipment of $1,951.
Financing Activities
For the year ended December 31, 2024, net cash provided by financing activities was $10,060. The primary factors affecting our financing cash flows during this period were proceeds from common stock purchase agreements of $11,080, partially offset by stock issuance costs related to common stock purchase agreements of $1,232.
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For the year ended December 31, 2023, net cash used in financing activities was $6,758. The primary factors affecting our financing cash flows during this period were payments for convertible note redemptions of $6,235 and payments for taxes related to net settlement of equity awards of $1,445, partially offset by proceeds from the exercise of stock options and from issuance of common stock through the Employee Stock Purchase Plan of $455 and $334, respectively.
Critical Accounting Policies and Estimates
Our 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 consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, fair value measures, and the related disclosures in the 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 judgement and complexity and have the greatest potential impact on our consolidated financial statements.
Revenue
We recognize revenues from R&D and development arrangements with OEMs and suppliers to the OEMs and from the sale of prototype products. Revenue represents the amount of expected consideration we are entitled to receive upon the transfer of promised goods or services in the ordinary course of our activities and is recorded net of sales taxes. We recognize revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, we also consider the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment; (ii) transfer of legal title; (iii) physical possession; (iv) significant risks and rewards of ownership; and (v) acceptance of the goods or service. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress toward complete satisfaction of a performance obligation.
The application of various accounting principles related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, complex development arrangements with nonstandard terms and conditions may require relevant contract interpretation to determine the appropriate accounting treatment, including whether the promised goods and services specified in a multiple element arrangement are capable of being distinct and accounted for as separate performance obligations. Determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment. When a contract involves multiple performance obligations, we account for individual products and services separately if the customer can benefit from the product or service on its own or with other resources that are readily available to the customer and the product or service is separately identifiable from other promises in the arrangement. For multiple element arrangements, the transaction price is allocated to each performance obligation using the relative stand-alone selling price, or SSP. Judgment is required to determine SSP for each distinct performance obligation. We use a range of amounts to estimate SSP when products and services are sold separately. In instances where SSP is not directly observable, we determine SSP using information that may include other observable inputs, or use a residual approach to estimate the SSP for performance obligations where SSP is highly variable or uncertain. Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.
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 consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
Interest Rate Risk
As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $22,278, which consisted primarily of deposits in our bank accounts, money market funds, and marketable securities. Such interest-earning instruments carry a degree of interest rate risk. Our investment policy is focused on the preservation of capital and supporting our liquidity needs. We invest in highly rated securities, while limiting the amount of credit exposure to any one issuer other than the U.S. government. A hypothetical 10% change in interest rates would not have a material impact on our financial condition or results of operations due to the short-term nature of our cash, cash equivalents and marketable securities.
Credit Risk
Our concentration of credit risk is determined by evaluating each customer and each vendor that accounts for more than 10% of our accounts receivable and accounts payable, respectively. As of December 31, 2024, there were three customers each accounting for 10% or more of our accounts receivable and one vendor accounting for 10% or more of our accounts payable.
We perform credit evaluations as needed and generally do not require collateral for our customers. We analyze accounts receivable, historical percentages of uncollectible accounts, and changes in payment history when evaluating the adequacy of the allowance for doubtful accounts for potential credit losses on customers’ accounts. For the years ended December 31, 2024 and 2023, we wrote off $70 and $0, respectively, and recorded a $35 and $35 provision for expected credit losses, respectively.
Foreign Currency Exchange Risk
Our foreign currency exchange gains and losses have been generated primarily from fluctuations in the euro versus the U.S. dollar, and the Japanese yen versus the U.S. dollar. The functional currency of all our entities is the U.S. dollar. Monetary assets and liabilities and transactions denominated in currencies other than an entity’s functional currency are remeasured into its functional currency using current exchange rates, whereas non-monetary assets and liabilities are remeasured using historical exchange rates. We recognize gains and losses from such remeasurements within interest income and other, or interest expense and other, as applicable on the consolidated statements of operations and comprehensive loss in the period of occurrence. We have in the past experienced, and in the future expect to experience, foreign currency exchange gains and losses on our non-functional currency-denominated balances. Foreign currency exchange gains and losses could have a material adverse effect on our business, operating results and financial condition. To date, we have not engaged in exchange rate hedging activities, and we do not expect to do so in the foreseeable future.
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Item 8. Financial Statements and Supplementary Data
AEye, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 34) 64
Consolidated Balance Sheets 66
Consolidated Statements of Operations and Comprehensive Loss 67
Consolidated Statements of Stockholders’ Equity (Deficit) 68
Consolidated Statements of Cash Flows 69
Notes to Consolidated Financial Statements 70
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and Board of Directors of AEye, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of AEye, Inc. and subsidiaries (the "Company") as of December 31, 2024, the related consolidated statement of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes to the consolidated financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2024.
Santa Clara, California
February 24, 2025
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and Board of Directors of AEye, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AEye, Inc. and subsidiaries (the "Company") as of December 31, 2023, and 2022, the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 16 to the financial statements, the accompanying 2023 and 2022 financial statements have been retrospectively adjusted for the adoption of Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 26, 2024 (February 24, 2025 as to Note 16)
We began serving as the Company’s auditor in 2018. In 2024 we became the predecessor auditor.
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As of December 31,
ASSETS
CURRENT ASSETS:
Accounts receivable, net 11 131
Prepaid and other current assets 2,706 2,517
Property and equipment, net 605 281
Restricted cash — 2,150
Other noncurrent assets 692 906
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accrued expenses and other current liabilities 7,709 6,585
Operating lease liabilities, noncurrent 479 14,858
Convertible notes 146 —
Other noncurrent liabilities 64 409
COMMITMENTS AND CONTINGENCIES (Note 20)
STOCKHOLDERS’ EQUITY:
Accumulated other comprehensive income 5 10
Total liabilities and stockholders’ equity $ 27,120 $ 54,317
The accompanying notes are an integral part of these consolidated financial statements.
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Year Ended December 31,
REVENUE:
Prototype sales $ 97 $ 477
OPERATING EXPENSES:
Impairment of long-lived assets — 9,988
OTHER INCOME (EXPENSE):
Change in fair value of convertible note and warrant liabilities — (858 )
Interest expense and other (433 ) 248
Total other income (expense), net 366 707
(Benefit) provision for income tax (2 ) 57
Change in fair value due to instrument-specific credit risk, net of tax — (21 )
Net losses reclassified into income during the period, net of tax — 46
PER SHARE DATA
Net loss per common share (basic and diluted) $ (4.89 ) $ (14.95 )
The accompanying notes are an integral part of these consolidated financial statements.
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Accumulated
Additional Other Total
Paid-in Comprehensive Accumulated Stockholders’
Preferred Stock Common Stock Capital Income (Loss) Deficit Equity
Shares Amount Shares Amount
Stock-based compensation — — — — 9,047 — — 9,047
Issuance of common stock upon exercise of stock options — — 44,255 — 134 — — 134
Other comprehensive loss, net of tax — — — — — (5 ) — (5 )
Accumulated
Additional Other Total
Paid-in Comprehensive Accumulated Stockholders’
Preferred Stock Common Stock Capital Income (Loss) Deficit Equity
Shares Amount Shares Amount
Issuance of common stock upon exercise of stock options — — 81,814 — 455 — — 455
Conversions of convertible note into common stock — — 502,530 — 3,338 — — 3,338
Other comprehensive income, net of tax — — — — — 1,289 — 1,289
The accompanying notes are an integral part of these consolidated financial statements.
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AEYE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 129 1,547
(Gain) loss on sale of property and equipment, net (12 ) 59
Noncash lease expense relating to operating lease right-of-use assets 956 1,406
Gain on termination of operating lease, net (491 ) (35 )
Impairment of long-lived assets — 9,988
Common stock purchase agreement costs 1,124 —
Inventory write-downs, net of scrapped inventory 161 7,712
Loss on advances to suppliers — 1,385
Change in fair value of convertible note and warrant liabilities — 858
Realized loss on instrument-specific credit risk — 46
Expected credit losses, net of write-off 35 35
Changes in operating assets and liabilities:
Accounts receivable, net 85 451
Inventories, current and noncurrent, net 245 (2,459 )
Prepaid and other current assets 1,490 2,279
Other noncurrent assets 215 284
Accrued expenses and other current liabilities (2,389 ) (3,135 )
Operating lease liabilities (955 ) (1,528 )
Contract liabilities — (987 )
Other noncurrent liabilities (345 ) 383
Net cash used in operating activities (26,620 ) (50,725 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (486 ) (1,951 )
Proceeds from sale of property and equipment 45 283
Proceeds from redemptions and maturities of marketable securities 32,426 76,350
Purchases of marketable securities (24,241 ) (19,331 )
Net cash provided by investing activities 7,744 55,351
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 134 455
Proceeds from the issuance of convertible notes 146 —
Payments for convertible note redemptions — (6,235 )
Taxes paid related to the net share settlement of equity awards (161 ) (1,445 )
Net cash provided by (used in) financing activities 10,060 (6,758 )
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (8,816 ) (2,132 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 19,082 21,214
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 10,266 $ 19,082
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ - $ 115
Cash (refunded) paid for income taxes, net (2 ) 16
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Operating lease liabilities extinguished upon termination of lease 16,325 335
Stock issuance costs included in accounts payable and accrued liabilities 198 —
Stock issuance costs through issuance of common stock 282 —
The accompanying notes are an integral part of these consolidated financial statements.
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AEYE,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data or otherwise stated)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AEye, Inc. and its wholly owned subsidiaries (the “Company” or “AEye”) is a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems, or ADAS, and robotic vision applications. AEye's 4SightTM Intelligent Sensing Platform includes a solid-state software definable active lidar sensor, an adaptive sensing SmartScan architecture to scan dynamic scenes/targets, and a sophisticated signal processing capability that provides precise measurements and imaging for various safety-critical applications. The 4SightTM Intelligent Sensing platform captures more information with less data, facilitating faster, more accurate, and more reliable perception of the environment.
AEye, formerly known as CF Finance Acquisition Corp. III, (“CF III”), was originally incorporated in Delaware on March 15, 2016 under the name CF SPAC Re Inc. On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc., entered into an Agreement and Plan of Merger with CF III. Based on CF III’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended. On August 16, 2021, the business combination contemplated by the Agreement and Plan of Merger was closed and CF III changed its name to AEye, Inc.
The Company’s common stock and public warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “LIDR” and “LIDRW”, respectively. Unless otherwise specified, “we,” “us,” “our,” “AEye,” and the “Company” refers to AEye, Inc. and its wholly owned subsidiaries.
Principle of Consolidation and Liquidity
The accompanying consolidated financial statements include the accounts of AEye, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company has funded its operations primarily through the business combination and issuances of stock. As of December 31, 2024, the Company’s existing sources of liquidity included cash, cash equivalents and marketable securities of $22,278.
ASC 205-40,Presentation of Financial Statements - Going Concern, requires management to assess an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date.
As is common in early-stage companies with limited operating histories, the Company is subject to risks and uncertainties such as its ability to develop and commercialize its products; produce and deliver lidar and software products meeting acceptable performance metrics; attract new and retain existing customers; develop, obtain, or progress strategic partnerships; secure an automotive OEM design win; secure additional capital to support the business plan; and other risks and uncertainties related to liquidity.
Since its inception, the Company has incurred net losses and negative cash flows from operations. As of December 31, 2024, the Company had an accumulated deficit of $373,095. For the years ended December 31, 2024 and 2023, the Company incurred a net loss of $35,460 and $87,126, respectively, and the Company had net cash outflows from operating activities of $26,620 and $50,725, respectively. As of December 31, 2024, the Company had $22,278 of cash, cash equivalents, and marketable securities. As the Company is still in its early stages, it is expected to incur additional operating losses and negative cash flows as it continues to focus on achieving commercialization of its lidar solutions. It remains critical for the Company to preserve cash and manage spending to extend its liquidity.
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The Company is dependent upon raising additional capital to provide the cash necessary to continue its ongoing operations and execute against its strategic objectives. During the twelve months ended December 31, 2024, the Company issued shares through stock purchase agreements and a convertible note totaling $12,905. Subsequent to year-end, the Company raised an additional $11,055 in gross proceeds through financing activities (see Note 23, Subsequent Events.) However, successfully raising capital is outside of management's control and there can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis, or at all. Based on cash, cash equivalents and marketable securities at December 31, 2024, together with the net proceeds from financing activities subsequent to year-end, cash, available cash equivalents and marketable securities is sufficient to fund the Company’s operations for at least the next 12 months from the filing date of these consolidated financial statements. At some point after that time, the Company anticipates it will require additional financing to fund its future operations.
Based upon the results of Management’s assessment, which has been performed as of February 24, 2025, these consolidated financial statements have been prepared on a going concern basis.
Reverse Stock Split
On December 27, 2023, the Company effected a 1-for-30 reverse stock split of its issued and outstanding shares of common stock (the "Reverse Stock Split"). Pursuant to the Reverse Stock Split, every thirty (30) shares of issued and outstanding shares of common stock were combined into one (1) share of common stock. The Company did not issue fractional shares in connection with the Reverse Stock Split. Stockholders who were otherwise entitled to fractional shares of common stock were instead entitled to receive a proportional cash payment. The number of shares of common stock issuable under our equity incentive plans and exercisable under the outstanding warrants were also proportionately adjusted.
In connection with the Reverse Stock Split, there was no change to the number of shares authorized or in the par value per share of common stock of $0.0001. Accordingly, all historical per share data, number of shares issued and outstanding, stock awards, and other common stock equivalents for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. This may make it difficult or impossible to compare the Company’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include lease termination liability, write-downs of inventory to the lower of cost or net realizable value, investments, embedded derivative and warrant liabilities, stock-based compensation, impairment of long-lived assets, and fair value of the 2022 convertible note.
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Cash, Cash Equivalents, and Marketable Securities
The Company considers all highly liquid investments, such as treasury bills, commercial paper, certificates of deposit, and money market instruments with maturities of three months or less at the time of acquisition to be cash equivalents. Cash equivalents primarily consist of amounts held in interest-bearing money market accounts that are readily convertible to cash. Cash equivalents are stated at cost, which approximates fair market value.
Marketable securities have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses in fair value of the available-for-sale (“AFS”) debt securities are reported in other comprehensive income (loss). When the AFS debt securities are sold, cost is based on the specific identification method, and the realized gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company considers all AFS debt securities as available for use to support current operations, including those with maturity dates beyond one year and are classified as current assets under marketable securities in the accompanying consolidated balance sheets. AFS debt securities included in marketable securities on the consolidated balance sheets consist of securities with original maturities greater than three months at the time of purchase. Interest on marketable securities is included within interest income and other on the consolidated statements of operations. Amortization of premiums and accretion of discounts are included within interest expense and other on the consolidated statements of operations.
Restricted Cash
Restricted cash of $2,150 as of December 31, 2023, consisted of funds that were contractually restricted as to usage or withdrawal due to a contractual agreement. The Company had a letter of credit to the amount of $2,150 with Citibank N.A. as of December 31, 2023 as security for the payment of rent on its headquarters. In August 2024, the former landlord drew down on the letter of credit and the restricted cash was used to offset the letter of credit draw (see further discussion in Note 6). The Company had no restricted cash as of December 31, 2024.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and marketable securities, and accounts receivable. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, to limit the exposure of each investment. The Company’s marketable securities have investment grade ratings when purchased which mitigates risk.
The Company’s accounts receivable are derived from customers located in the U.S. and Europe. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral.
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The Company’s concentration of risk related to accounts receivable and accounts payable was determined by evaluating the number of customers and vendors accounting for 10% or more of accounts receivable (“AR”) and accounts payable (“AP”). As of December 31, 2024, the Company had three customers, each accounting for 10% or more of AR and one vendor accounting for 10% or more of AP. As of December 31, 2023, the Company had four customers, each accounting for 10% or more of AR and one vendor accounting for 10% or more of AP.
For the years ended December 31, 2024 and 2023, revenue from the Company’s major customers representing 10% or more of total revenue was as follows:
Year ended December 31,
Customer A 50 % *
Customer B 32 % *
Customer C * 70 %
*Customer accounted for less than 10% of total revenue in the period.
Fair Value of Financial Instruments
The Company defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. For additional discussion on fair value of financial instruments, see Note 2.
Derivatives
The Company accounts for derivative instruments in accordance with Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) Topic 815,Derivatives and Hedging (“ASC 815”). The Company’s objectives and strategies for using derivative instruments, and how the derivative instruments and related hedged items are accounted for affect the financial statements.
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk. Terms of convertible debt instruments are reviewed to determine whether they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract and recorded on the consolidated balance sheets at fair value.
An evaluation of specifically identified conditions is made to determine whether the fair value of the derivative issued is required to be classified as equity or as a derivative liability. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. For additional discussion of derivatives, see Note 2.
Accounts Receivable, net
Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.
If necessary, accounts receivable are reduced by a provision for expected credit losses, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable. The Company reviews the provision quarterly based on historical experience with each customer and the specifics of each arrangement. During the years ended December 31, 2024 and 2023, the Company had write-offs of $70 and $0, respectively. As of December 31, 2023, the Company recorded a $35 provision for expected credit losses. There is no provision for credit losses as of December 31, 2024.
Inventories, net
Inventories consist of raw materials, work in progress, and finished goods. Inventories are stated at the lower of cost and net realizable value and costs are computed under the standard cost method. Inventories that are not expected to be consumed in the next 12 months are classified within Other noncurrent assets. Prototype inventory cost consists of the associated raw material, direct labor, indirect labor and other overhead costs. The Company evaluates the need for inventory write-downs associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis and records a provision for excess and obsolete inventory to adjust the carrying value of inventory as needed. The Company's current and noncurrent inventory held as of December 31, 2024 and 2023 was written down by $4,659 and $5,062, respectively, in order to record inventory at its estimated net realizable value.
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Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 2 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or expected useful life of the improvements. Construction in progress is the construction or development of property and equipment that have not yet been placed in service. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the test for recoverability identifies a possible impairment, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The fair value is calculated based on estimated salvage value, estimated orderly liquidation value, or a value-in-use approach depending on the asset's highest and best use. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amount of the long-lived asset becomes its new cost basis which is depreciated over the asset's remaining useful life. The Company recorded $9,988 of non-cash impairment charges in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023. No impairment charges were recorded for the year ended December 31, 2024.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance. The warrants assumed in connection with the 2022 convertible note are accounted for in accordance with ASC 815-40,Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. The Private Placement Warrants issued in connection with the business combination are classified as liabilities. The Company adjusts the warrants to fair value at each reporting period. The warrant liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations.
Leases
The Company determines if an arrangement is or contains a lease at inception. The Company evaluates the classification of leases at commencement, and, as necessary, at modification. Operating leases, consisting of office leases, are included in Right-of-use ("ROU") assets, Accrued expenses and other current liabilities, and Operating lease liabilities, noncurrent, on the Company's consolidated balance sheets. The Company did not have any finance leases as of December 31, 2024. ROU assets represent the Company's right to an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made prior to lease commencement and initial direct costs and excludes lease incentives. Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. As most of the Company's leases do not include an implicit rate, the Company uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date in determining the present value of future payments. The incremental borrowing rate is a hypothetical rate based on the Company's understanding of what its credit rating would be for a secured borrowing when the lease was executed. The Company's lease term includes the noncancelable period, any rent-free periods provided by the lessor, and options to extend or terminate the lease when it is reasonably certain that it will exercise that option. At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations and comprehensive loss. The Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real estate leases.
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Convertible Notes
The Company adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The Company has elected to apply the fair value measurement option to the 2022 convertible note on the date that the Company first recognized the convertible note on September 15, 2022. The Company acknowledges that its election to apply the fair value option is irrevocable. As of December 31, 2024, the 2022 convertible note has no outstanding principal balance as all outstanding principal and accrued interest has been fully settled. Changes in fair value were recorded in the consolidated statements of operations and changes in fair value related to credit risk are recorded in other comprehensive loss. The Company reported interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes in the consolidated statement of operations.
Revenue Recognition
The Company generates revenues from the sale of prototypes and from development arrangements with automakers and suppliers to automakers. Under FASB ASC Topic 606,Revenue from Contracts with Customers (“ASC 606”), the Company accounts for such arrangements as contracts with customers and accordingly recognizes revenue by applying the following steps:
• Identification of the contract, or contracts, with a customer
• Identification of the performance obligations in the contract
• Determination of the transaction price
Revenue from the sale of prototypes is generally recognized at a point in time when control of the goods is transferred. Certain prototype sales contracts include services to install and commission or customize the prototypes for customers. Revenues from these services are categorized as prototype revenue and recognized either over time as the services are being performed, or at a point in time, depending on the nature of the services and whether the criteria for recording revenue over time are met in accordance with ASC 606.
Revenue from development arrangements is either recognized at a point in time or over time depending on the performance obligations in the contract. For performance obligations that are satisfied over time, such as services which require engineering and development based on customer requirements, the Company recognizes revenue using an input method based on contract costs incurred to date compared to total estimated contract costs.
See Note 17, Revenue, for additional information related to the application of ASC 606 to the Company’s primary revenue streams.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of operations and comprehensive loss.
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Arrangements with Multiple Performance Obligations
When a contract involves multiple performance obligations, the Company accounts for individual products and services separately if the customer can benefit from the product or service on its own or with other resources that are readily available to the customer and the product or service is separately identifiable from other promises in the arrangement. The consideration is allocated between separate performance obligations in proportion to their estimated standalone selling price (SSP). The SSP reflects the price the Company would charge for a specific product or service if it were sold separately in similar circumstances and to similar customers. If the selling price is not directly observable, the Company determines SSP using information that may include other observable inputs, such as the cost plus margin approach, to estimate SSP. In instances where SSP is not directly observable, the Company determines SSP using information that may include other observable inputs such as expected costs plus margin, or uses the residual approach for performance obligations whose SSP is highly variable or uncertain.
The Company provides standard product warranties for a term of typically 30 days to one year to ensure that its products comply with agreed-upon specifications. Standard warranties are considered to be assurance type warranties and are not accounted for as separate performance obligations. Estimated future warranty costs are accrued and charged to cost of sales in the period that the related revenue is recognized. These estimates are based on historical warranty experience and any known or expected changes in warranty exposure, such as trends of product reliability and costs of repairing and replacing defective products. The Company assesses the adequacy of its recorded warranty liabilities on a quarterly basis and adjusts the amounts as necessary. Warranty costs are included within accrued expenses and other liabilities on the consolidated balance sheets. Refer to Note 9 for further information on warranty reserve amounts.
Other Policies, Judgments and Practical Expedients
Contract assets and liabilities. Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract liabilities relate to deferred revenue. Deferred revenue consists of amounts that have been invoiced and/or cash received but for which revenue has not been earned. This generally includes unrecognized revenue balances for development arrangements. Deferred revenue that will be realized during the succeeding 12-month period is recorded within current liabilities and the remaining deferred revenue is recorded as noncurrent liabilities. The Company did not have any contract assets or contract liabilities as of December 31, 2024.
Right of return. The Company’s general terms and conditions for its contracts do not contain a right of return that allows the customer to return products and receive a credit. Therefore, the Company does not estimate returns and generally recognizes revenue at contract price upon product shipment or delivery.
Significant financing component. In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The expected timing difference between the payment and satisfaction of performance obligations for all of the Company’s contracts is one year or less; therefore, the Company applies a practical expedient and does not consider the effects of the time value of money on transaction price. The Company’s contracts with customer prepayment terms do not include a significant financing component because the primary purpose is not to receive financing from the customers. The Company did not have any outstanding receivables with financing components as of December 31, 2024.
Contract modifications. The Company may modify contracts to offer customers additional products or services. Each of the additional products and services are generally considered distinct from those products or services transferred to the customer before the modification. The Company evaluates whether the contract price for the additional products and services reflects the standalone selling price as adjusted for facts and circumstances applicable to that contract. In these cases, the Company accounts for the additional products or services as a separate contract. In other cases where the pricing in the modification does not reflect the standalone selling price as adjusted for facts and circumstances applicable to that contract, the Company accounts for the additional products or services as part of the existing contract primarily on a prospective basis.
Judgments and estimates. Accounting for contracts recognized over time under ASC 606 involves the use of various techniques to estimate total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a contract will be revised in the near term. The Company reviews and updates its contract-related estimates quarterly, and records adjustments as needed. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized in the period in which the revisions to the estimates are made.
Cost of Revenue
Cost of revenue primarily consists of costs directly associated with the production of those prototypes that are held for sale and certain costs associated with development arrangements. Such costs for prototypes are direct materials, direct labor, indirect labor, inventory write-downs, losses on purchase commitments, warranty expense, and allocation of overhead. Direct and indirect labor includes personnel-related costs and packaging and procurement respectively associated with the production of prototypes. Other costs such as indirect manufacturing costs are recognized in research and development and general and administrative expenses on the consolidated statements of operations and comprehensive loss. Costs associated with development arrangements include the direct costs and allocation of overhead costs involved in the execution of the contract.
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Research and Development Expenses
Research and development expenses include personnel costs (including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation), new hardware and software materials to the extent no future economic benefits are expected, other related expenses such as lab equipment, third party development-related contractors, and allocated overhead expenses. Substantially all the R&D expenses are related to the development of new products and services, including contract development expenses. They are expensed as incurred and included in the consolidated statements of operation and comprehensive loss.
Stock-Based Compensation
The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all share-based awards based on estimated grant-date fair values. The Company uses the straight-line attribution method to allocate compensation cost to reporting periods over each awardee’s requisite service period, which is generally the vesting period of the award. The Company measures nonemployee awards at the date of grant, which generally is the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The Company’s policy is to recognize the effect of forfeitures in the period they occur. The grant-date fair value of the restricted stock units, or “RSUs,” is equal to the fair market value of the Company’s common stock on the grant date. The grant-date fair value for stock options and stock purchase rights under the employee stock purchase plan ("ESPP") is estimated using the Black-Scholes option-pricing model. The grant-date fair value for RSUs with an associated market condition is estimated using the Monte-Carlo simulation model. Both the Black-Scholes option-pricing model and the Monte-Carlo simulation model require the input of subjective assumptions, including the award’s expected term and the price volatility of the underlying stock.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset valuation allowance would be made to reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with FASB ASC Topic 740,Income Taxes (“ASC 740”) on the basis of a two-step process in which determinations are made (1) whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income tax expense in the accompanying consolidated statements of operations and comprehensive loss. Accrued interest and penalties are included in accrued expenses and other current liabilities in the consolidated balance sheets. As of and for the year ended December 31, 2024 and 2023, there were no interest or penalties recorded.
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Net Loss per Share
Basic net loss per share is computed using net loss available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the dilutive effects of stock options, restricted stock units, preferred stock, stock to be issued under the ESPP, convertible notes, and warrants outstanding during the period to the extent such securities would not be anti-dilutive and is determined using the if-converted and treasury stock methods.
The Company calculates weighted average number of common shares outstanding during the period using the Company’s common stock outstanding.
Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding was anti-dilutive, as AEye is currently operating in a net loss position.
Comprehensive Income (Loss)
Comprehensive income (loss) includes all changes in equity (net assets) from non-owner sources during a period, changes in fair value due to instrument-specific credit risk, and net unrealized gains (losses) on available-for-sale debt securities.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update ("ASU") 2023-09,Income Taxes (Topic 740) - Improvements to Income Tax Disclosures to increase the transparency and usefulness of income tax information through improvements to the income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is currently in the process of evaluating the effects of the new guidance.
In November 2024, the FASB issued ASU 2024-03,Disaggregation of Income Statement Expenses, which requires annual and interim disclosure of disaggregated disclosures of certain costs and expenses on the income statement. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, .2027, with early adoption permitted. Amendments are applied on a prospective basis with retrospective application permitted. The Company is currently evaluating the impact of this guidance.
Recently Adopted Accounting Pronouncements
The Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, in the fourth quarter of 2024. The amendments in this update require public entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”) and which are included within each reported measure of segment profit or loss as well as disclosure of other segment items and a description of their composition. The amendments also require public entities to disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The adoption of this guidance resulted in incremental disclosures in the Company’s consolidated financial statements.
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2. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities is determined in accordance with the fair value hierarchy established in FASB ASC Topic 820,Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
Level1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level2—Observable inputs, other than Level 1 inputs, which are observable either directly or indirectly or can be corroborated by observable market data using quoted prices for similar assets or liabilities.
Level3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
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The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, other current and noncurrent liabilities, and convertible note. The carrying values of these financial instruments approximate their fair values.
The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
Fair Value Measured as of December 31, 2024 Using:
Cash and
Adjusted Unrealized Fair Cash Marketable
Cost gains Value Equivalent Securities
Assets
Level 1
Level 2
Liabilities
Level 2
Private placement warrant liability $ — $ — $ — $ — $ —
Level 3
Derivative warrant liability — — 26 — —
Total financial liabilities $ — $ — $ 26 $ — $ —
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Fair Value Measured as of December 31, 2023 Using:
Cash and
Adjusted Unrealized Fair Cash Marketable
Cost gains Value Equivalent Securities
Assets
Level 1
Level 2
Liabilities
Level 2
Private placement warrant liability $ — $ — $ — $ — $ —
Level 3
Derivative warrant liability — — 26 — —
Total financial liabilities $ — $ — $ 26 $ — $ —
The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following:
Money Market Funds: The Company holds financial assets consisting of money market funds. These securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Marketable Securities: The Company holds financial assets consisting of fixed-income U.S. government agency securities, corporate bonds, and commercial paper. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities.
Derivative Warrant Liability: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $10,500 (the "2022 Note"). The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note. The warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of the Company's common stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. The term to expiration was calculated as the contractual term of the warrants of four years. Finally, the Company does not currently anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the consolidated balance sheets.
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Private Placement Warrant Liability: The Private Placement Warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of the Company's public warrants, as terms of both warrants are substantially similar. Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the consolidated balance sheets.
The Company measures certain nonfinancial assets at fair value on a nonrecurring basis, primarily property and equipment and ROU assets, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The fair value of the Company's property and equipment was based upon estimated salvage value or estimated orderly liquidation value, depending on the asset's highest and best use. As the fair value of property and equipment was estimated using primarily unobservable inputs, these are considered Level 3 fair value measurements. The fair value of the Company’s headquarters ROU asset and associated leasehold improvements were based on a value-in-use approach utilizing market rent comparable information, and is considered a Level 2 fair value measurement. For more information regarding impairment charges, see Notes 1,6,7, and 18.
For the years ended December 31, 2024 and 2023, there were no transfers between Level 1 and Level 2 inputs.
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3. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash, cash equivalents, and restricted cash as of December 31, 2024 and 2023 were as follows (in thousands):
As of December 31,
Restricted cash — 2,150
Total cash, cash equivalents, and restricted cash $ 10,266 $ 19,082
Restricted cash of $2,150 as of December 31, 2023 consisted of funds that were contractually restricted as to usage or withdrawal due to a contractual agreement. The Company had a letter of credit in the amount of $2,150 with Citibank N.A. as security for the payment of rent on its headquarters. In August 2024, the landlord drew down on the letter of credit and the restricted cash was used to offset the letter of credit draw (see further discussion in Note 6, Leases).
4. INVENTORIES
Inventory, net of write-downs, as of December 31, 2024 and 2023 were as follows (in thousands):
As of December 31,
Work in-process — 159
Total inventory, net $ 176 $ 583
The Company also had $209 and $208 of noncurrent inventory (raw materials), net of write-downs, classified within other noncurrent assets on the consolidated balance sheet as of December 31, 2024 and December 31, 2023, respectively.
5. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets as of December 31, 2024 and 2023 were as follows (in thousands):
As of December 31,
Advances to suppliers — 79
Receivable for issuance of common stock 1,679 —
Total prepaid and other current assets $ 2,706 $ 2,517
The Company's advances to suppliers as of December 31, 2024 and 2023 were written down by $1,041 and $1,385, respectively, associated with the winding down of its legacy Non-Automotive product as part of its revised strategic plan in 2023. See Note 18, Restructuring, for further details.
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6. LEASES
The Company leases office facilities in Northern California under non-cancelable operating leases. In July 2024, the Company entered into two new long-term leases, one of which the Company uses as its headquarters.
Some of the Company's leases include options to renew, with renewal terms that, if exercised by the Company, extend the lease term from two to five years. The exercise of these renewal options is at the Company's discretion. The Company's lease agreements do not contain any material terms and conditions of residual value guarantees or material restrictive covenants. The Company's short-term lease expense was determined to not be material.
On November 14, 2023, the Company assigned an operating lease resulting in the Company being relieved of its primary obligation under this lease. As a result of the lease assignment, a new tenant assumed the primary obligation under the lease, with the Company becoming secondarily liable. If the new tenant should fail to perform under the lease, the Company could be liable to fulfill any remaining lease obligations. The lease had a remaining term of 2.7 years as of December 31, 2024 with the Company serving as guarantor for the remaining term. The resulting maximum exposure includes $265 of undiscounted future minimum lease payments plus potential additional payments to satisfy maintenance, taxes, and insurance requirements for the remainder of the lease term.
In August 2024, one of the Company's existing leases, originally set to expire on November 30, 2026, was terminated early. In conjunction with the early termination, the Company recorded a net gain of $491 on termination of the operating lease during the year ended December 31, 2024. The net gain included a gain of $5,954, comprised of a $16,325 net liability reduction, partially offset by a $10,371 decrease in its remaining right of use asset. Additionally, in accordance with terms in the lease agreement and based on certain assumptions, the Company recorded a lease termination loss of $5,463, representing estimated unpaid rent for the remaining term. The net gain was recorded in general and administrative expenses in the condensed consolidated statement of operations and comprehensive loss. The lease termination liability was reduced by the draw-down of the $2,150 letter of credit by the landlord in August 2024; the remaining lease termination liability of $3,313 is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. See Note 18, Restructuring, and Note 21, Commitments and Contingencies, for further discussion.
The Company recorded a gain of $35 on early lease termination for one of its leases, originally set to expire in August 2027, within interest income and other on the consolidated statements of operations during the twelve months ended December 31, 2023.
During the year ended December 31, 2023, the Company recorded an impairment charge on right-of-use assets of $2,570, included within impairment of long-lived assets within the Company's consolidated statements of operations. See Note 18, Restructuring. No impairment charges were recorded for the year ended December 31, 2024.
The components of operating lease expenses, excluding the gain on lease termination, for the years ended December 31, 2024 and 2023 were as follows (in thousands):
Year ended December 31,
Total operating lease cost $ 1,702 $ 2,719
Supplemental cash flow information for the years ended December 31, 2024 and 2023 were as follows (in thousands):
Year ended December 31,
Supplemental balance sheet information related to operating leases as of December 31, 2024 and 2023 was as follows (in thousands):
As of December 31,
Operating lease right-of-use assets $ 652 $ 11,226
Operating lease liabilities:
Operating lease liabilities, current $ 267 $ 2,415
Lease termination liability 3,313 —
Operating lease liabilities, non-current 479 14,858
Total operating lease liabilities $ 4,059 $ 17,273
As of December 31,
Weighted average remaining lease term (in years) 2.89 7.89
Weighted average discount rate 6.40 % 5.32 %
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Maturities of lease liabilities, excluding the lease termination liability, were as follows (in thousands).
Years ending - December 31:
Total lease payments 816
Less amount to discount to present value (70 )
Present value of lease liabilities $ 746
7. PROPERTY AND EQUIPMENT, NET
Property and equipment, net as of December 31, 2024 and 2023 consists of the following (in thousands):
As of December 31,
Machinery and equipment $ 171 $ 171
Computers, software and related equipment 25 26
Office furniture and equipment 5 24
Leasehold improvements 204 —
Construction in progress 246 —
Total property and equipment 707 281
Less accumulated depreciation and amortization (102 ) —
Property and equipment, net $ 605 $ 281
During the year ended December 31, 2023, the Company recorded impairment charges on assets classified as property and equipment of $7,418, included within impairment of long-lived assets within the Company's consolidated statements of operations. No impairment charges were recorded for the year ended December 31, 2024.
Depreciation and amortization expense related to property and equipment amounted to $129 and $1,547 recognized within research and development, sales and marketing, and general and administrative expenses within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024 and 2023, respectively. The Company recorded disposals of gross property and equipment of $59 and $1,041 in the years ended December 31, 2024 and 2023, respectively. The carrying amounts of the property and equipment disposed in the years ended December 31, 2024 and 2023 were $32 and $342, respectively.
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8. OTHER NONCURRENT ASSETS
Other noncurrent assets as of December 31, 2024 and 2023 were as follows (in thousands):
As of December 31,
Noncurrent inventory $ 209 $ 208
Long-term prepaid expenses 352 626
Total other noncurrent assets $ 692 $ 906
9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of December 31, 2024 and 2023 were as follows (in thousands):
As of December 31,
Lease termination liability $ 3,313 $ —
Operating lease liabilities 267 2,415
Accrued severance — 402
Total accrued expenses and other current liabilities $ 7,709 $ 6,585
10. CONVERTIBLE NOTES
2022 Convertible Note
On September 14, 2022, the Company entered into a Securities Purchase Agreement with an investor allowing for the sale and issue of up to two convertible notes, each with a principal balance of $10,500 and gross cash proceeds of $10,000, for a total of $20,000 in proceeds between the two issuances (each, a "Note Closing"). The first Note Closing ("First Closing") occurred on September 15, 2022, and the Company entered into a Senior Unsecured Convertible Note with the investor pursuant to which the Company issued to the investor one convertible note ("2022 Note") with a principal balance of $10,500 for net cash proceeds of $9,850. As part of the First Closing, the Company also issued warrants to the investor see Note 12 for further details. The second Note Closing ("Second Closing") lapsed on March 15, 2024, upon which the Company's right to effect a Second Closing automatically terminated.
The 2022 Note bore interest at an annual rate of 5.0%, in addition to an original issue discount of 4.76%, and had an initial a maturity date of March 15, 2024.
Beginning December 14, 2022, and the first trading day of each subsequent month (each a "Monthly Redemption Date" or an "Installment Date"), the Company was required to redeem the Monthly Redemption Amount until the 2022 Note was fully redeemed. The Monthly Redemption Amount, in most instances, was 1/15th of the original principal amount, plus any amount accelerated pursuant to the 2022 Note, accrued but unpaid interest, and late fees, if any. The principal and interest could be settled in cash or, so long as certain equity conditions were met and at the option of the Company, shares of common stock, which was payable together with the Monthly Redemption Amount.
If the Company elected to settle the Monthly Redemption Amount in shares of common stock, the number of shares to be settled was based on an Installment Conversion Price equal to the lower of (i) $75.00 or (ii) 95% of the lowest daily volume weighted average price of the common stock during the five trading days immediately preceding the applicable Monthly Redemption Date. If the Company elected to settle the Monthly Redemption Amount in cash, the Monthly Redemption Amount would have included a 5% premium.
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The investor was permitted to accelerate up to four Monthly Redemption Amounts in any calendar month (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price, subject to a $2,800 limit per month. The Acceleration Conversion Price was the lower of (i) the Installment Conversion Price for such current Installment Date or (ii) the greater of $9.00 and 95% of the lowest daily volume weighted average price of the common stock during the five trading days immediately preceding the Acceleration Date.
If either the relevant Installment Conversion Price or Acceleration Conversion Price, as applicable, was less than $9.00 per share, then a Conversion Floor Price Condition existed and the Company must deliver to the investor the Conversion Installment Floor Amount in cash, in addition to the required number of shares, which were valued at $9.00 regardless of the actual trading price of the Company's shares. The Conversion Installment Floor Amount was an amount in cash equal to the product obtained by multiplying (A) the higher of (i) the highest price that the common stock traded at on the Trading Day immediately preceding the relevant Share Delivery Date and (ii) the applicable Installment Conversion Price or Acceleration Conversion Price and (B) the difference obtained by subtracting (i) the number of shares of common stock delivered to the investor on the applicable Share Delivery Date with respect to such Conversion from (ii) the quotient obtained by dividing (x) the applicable Installment or Acceleration amount subject to such Conversion, by (y) the applicable Installment Conversion Price. Interest payments were also trued-up in cash when the value of the Company's shares was below $9.00 per share.
The Company elected to apply the fair value option to the measurement of the 2022 Note. As a result of adopting the fair value option, no embedded derivatives were bifurcated from the 2022 Note. The Company classified the 2022 Note as a liability at fair value and remeasured the 2022 Note to fair value at each reporting period. The fair value measurement included the assumption of accrued interest and expense and thus a separate amount was not reflected on the consolidated statement of operations.
The 2022 Note was fully settled through Monthly Redemptions and Accelerations in 2023. As part of the debt extinguishment, the Company reclassified the accumulated change in fair value due to instrument-specific credit risk out of accumulated other comprehensive loss on the consolidated balance sheet and into interest expense and other on the consolidated statement of operations and comprehensive loss.
The Company evaluated the Second Closing and associated warrants to be a contingently issuable financial asset with a fair value of zero at inception in accordance with ASC 815-40Contracts in an Entity's own Equity. The contingently issuable warrants are considered issued for accounting purposes - see Note 12 for further details.
2024 Convertible Note
On May 10, 2024, the Company entered into a Securities Purchase Agreement with an investor for the sale and issuance of 330,823 shares of common stock and a 5-year promissory note with a principal balance of $146 ( “May 2024 Note”) for total gross cash proceeds of $1,000. The May 2024 Note bears interest at an annual rate equal to the Secured Overnight Financing Rate plus 1.0%, which is compounded quarterly in arrears, and has a maturity date of June 4, 2029. At maturity, the principal balance and accrued, unpaid and uncapitalized interest can be settled in cash, shares of common stock based on the closing price of the common stock as of the immediately preceding trading day, or any combination of the foregoing at the option of the investor.
11. INTEREST EXPENSE AND OTHER
Interest expense and other for the years ended December 31, 2024 and 2023 consisted of the following (in thousands):
Year ended December 31,
Common stock purchase agreement costs $ 1,124 $ —
Expected credit losses 35 35
Loss on disposal of assets — 111
Interest expense and other $ 433 $ (248 )
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12. STOCKHOLDERS’ EQUITY
The Company is authorized to issue 600,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2024, the Company had 13,734,160 shares of common stock issued and outstanding.
Class A Common Stock —Class A common stock has the following rights:
Voting rights: Each holder of Class A common stock will be entitled to one (1) vote in person or by proxy for each share of the Class A common stock held of record by such holder. The holders of shares of the Class A common stock will not have cumulative voting rights. Except as otherwise required in the Charter or by applicable law, the holders of the Class A common stock vote together as a single class on all matters on which stockholders are generally entitled to vote.
Dividend rights: Subject to any other provisions of the Charter, each holder of Class A common stock will be entitled to receive, in proportion to the number of shares of the Class A common stock held, such dividends and other distributions in cash, stock or property of the Company when, as and if declared thereon by the Board from time to time out of assets or funds of the Company legally available therefor.
Rights upon liquidation: In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of the Company, after payments to creditors of the Company that may at the time be outstanding, and subject to the rights of any holders of the Company preferred stock that may then be outstanding, holders of shares of the Class A common stock will be entitled to receive ratably, in proportion to the number of shares of the Class A common stock held by them, all remaining assets of the Company available for distribution.
Preferred Stock — The Company has the authority, without stockholder approval, to issue shares of preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or more class or series and to fix for each such class or series the designations, preferences, privileges, and restrictions of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference, and the number of shares constituting any series or the designation of any series to the fullest extent permitted by the Delaware General Corporation Law. The issuance of the Company’s preferred stock could have the effect of decreasing the trading price of the Class A common stock, restricting dividends on the capital stock of the Company, diluting the voting power of the Class A common stock, impairing the liquidation rights of the capital stock of the Company, or delaying or preventing a change in control of the Company. Although the Company does not currently intend to issue any shares of preferred stock, the Company may choose to do so in the future.