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 2025, 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.
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:
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Market Trends and Uncertainties
We anticipate growing demand for our ApolloTM platform across our two major markets, Automotive and Non-Automotive, and we believe this expected growth will enable us to capture market share across both the Automotive and Non-Automotive markets. We plan to pursue opportunities in advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking, while also exploring opportunities in the Non-Automotive market, such as in the railway, airport safety and security, perimeter monitoring, aerospace and defense, transportation logistics, and intelligent transportation systems, or ITS segments. This diversified approach provides us with multiple opportunities for sustained growth by enabling new applications and product features across a broad range of industries and 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, 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.
We anticipate that Non‐Automotive applications will be a more significant driver of our near‐term revenue given the generally shorter sales cycles and development timelines in these markets. We are beginning to see adoption across a diverse group of sectors. Our typical engagement model begins with proof‐of‐concept evaluations, which allow customers to validate performance in their operational environments; however, there is no guarantee that these evaluations will ultimately result in a commercial deployment, and timelines may extend sometimes significantly, due to competing customer priorities or broader program changes. In many Non‐Automotive opportunities, we work through third‐party systems integrators or solution providers who deliver complete solutions to the end customer, and in those situations our visibility into, and ability to influence, the final customer decision process may be limited.
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. We have unified our supply chain for the Automotive and Non-Automotive markets and plan to leverage our Tier 1 automotive suppliers to produce products for us to sell into our Non-Automotive markets, whereas in the Automotive markets, we anticipate licensing our technology to our Tier 1 suppliers in exchange for a royalty. The unified supply chain should allow us to leverage the scale, efficiencies, and volume associated with supplying the Automotive market to benefit our Non-Automotive market customers. In 2023, as part of our effort to reduce fixed operating costs, simplify our supply chain, and focus resources on our next‐generation architecture, we wound down support for our legacy Non‐Automotive product. Since launching ApolloTM in 2024, we have seen renewed interest from Non‐Automotive customers across a broad range of sectors and are now actively engaged on multiple opportunities.
In early 2024, we engaged LITEON as our Tier 1 automotive supplier and are actively working with LITEON to bring our product to market. We announced an expansion of this relationship and an investment from a leading global institutional investor to fund a dedicated production line for ApolloTM, with capacity to produce up to 60,000 units annually. We are starting to see an inflection point in customer demand, and this expansion ensures we can meet that growth as it develops. This partnership enables us to leverage LITEON’s manufacturing expertise to produce high-quality products 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 Accelight Technologies, Inc. ("ATI") and LighTekton Co., Ltd to manufacture and distribute our products in China. This collaboration provides us with 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.
In July 2025, we announced the validation of our lidar technology on the NVIDIA DRIVE AGX platform. We have since expanded this collaboration and demonstrated our lidar with NVIDIA's next-generation DRIVE AGX Thor platform, enabling our sensors to interface directly with NVIDIA’s autonomous‐driving compute architecture and development toolchain. These integrations are intended to support alignment with NVIDIA’s Hyperion reference architecture and may provide opportunities to engage with global automotive OEMs and Tier 1 suppliers that adopt NVIDIA‐based ADAS and automated‐driving systems. We continue to demonstrate advances in the high‐speed and long‐range performance of our lidar systems, which we believe further strengthen the technical basis for these integrations. Because these engagements are relatively recent, there can be no guarantee that they will result in commercial adoption.
In July 2025, we launched OPTISTM, a complete physical AI solution designed to modernize legacy infrastructure and deliver actionable intelligence across diverse industries. OPTISTM integrates our software-defined ApolloTM lidar technology with advanced computing to bridge the gap between perception and real-time action. Beyond addressing critical needs in transportation, safety, and security, OPTISTM opens our platform to third-party partners and developers, creating an ecosystem for innovation and growth beyond automotive applications. Since launch, we’ve transitioned OPTISTM from concept to a structured offering, with initial deployments already completed. Recent additions to our partner network include Black Sesame Technologies, BlueBand, Flasheye, and Vueron.
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In January 2026, we introduced STRATOSTM, the next product in our lidar family. STRATOSTM is based on the same underlying software‐defined ApolloTM architecture but delivers an extended detection range of approximately 1.5 kilometers and roughly twice the angular resolution. STRATOSTM is designed for applications requiring enhanced long‐distance performance, including certain automotive, infrastructure, aviation, industrial, and defense sensing environments.
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, 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.
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 and may continue to be negatively impacted by inventory write-downs. 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 be more cost competitive in other markets.
To date, we have primarily generated revenue through sales of our products to Non‐Automotive customers and through development contracts with OEMs and Tier 1 suppliers. Non‐Automotive applications typically command higher average selling prices and may carry higher gross margins than Automotive programs due to lower volume sensitivity, more specialized operating requirements, and greater willingness by customers to pay for performance differentiation. These engagements often involve customization of our product’s capabilities to address application‐specific needs, including software‐based configuration of scan patterns, region‐of‐interest tuning, advanced perception features, and other enhancements. In many cases, customers require more complex configurations or software‐enabled feature additions, which allows us greater latitude to price these solutions at a premium. As a result, customized Non‐Automotive deployments generally reflect higher contractual pricing and may contribute more favorably to gross margin relative to standard Automotive configurations.
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 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.
Our next‐generation lidar portfolio is built on our Intelligent Sensing Platform, a modular and software‐defined architecture that allows us to create differentiated product offerings with limited incremental hardware changes. By maintaining a common core design and enabling performance enhancements through software—such as configurable scan patterns, range distribution, and perception features—we are able to address diverse application requirements while minimizing the operational complexity typically associated with managing a large product portfolio. This platform‐based approach also allows us to introduce new products efficiently. For example, STRATOSTM, launched in January 2026, is derived from the Apollo'sTM architecture but offers extended range and higher angular resolution to support long‐distance and higher‐performance applications.
In June 2024, we introduced ApolloTM, our next generation lidar sensor. ApolloTM 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. ApolloTM can be integrated behind the windshield, on the roof, or in the grille, allowing OEMs to implement essential safety features with minimal impact on vehicle design. This innovative sensor leverages our Intelligent Sensing Platform, providing a highly programmable and customizable lidar solution that can be continually enhanced via software updates. With a horizontal field of view up to 120° and long-range detection capabilities of up to one kilometer, ApolloTM is poised to be a key player in advancing vehicle safety and autonomy, as well as smart infrastructure and logistics applications.
Building on this foundation, we launched OPTISTM in July 2025, a complete physical AI solution that extends our capabilities beyond automotive. OPTISTM combines Apollo’sTM software-defined lidar with advanced computing to deliver actionable intelligence for modernizing legacy infrastructure. This platform not only addresses critical needs in transportation, safety, and security but also opens our ecosystem to third-party partners and developers, fostering innovation across industries. Since launch, OPTISTM has moved from concept to structured offering, with initial deployments completed and new partners such as Black Sesame Technologies, BlueBand, Flasheye, and Veuron joining our network. In addition, in January 2026, we announced STRATOSTM, the next product in this family. STRATOSTM is based on the same underlying architecture as ApolloTM but offers extended detection range of approximately 1.5 kilometers and roughly twice the angular resolution. STRATOSTM is intended for applications that require enhanced long‐distance performance or operate at higher speeds, including certain automotive, infrastructure, defense, and industrial sensing environments. Like ApolloTM, STRATOSTM leverages our software‐defined sensing approach, enabling performance updates without a hardware redesign.
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.
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Components of Results of Operations
Revenues
Our product revenue primarily relates to unit sales of our lidar units, software and support. Revenue from these sales is typically recognized at a point in time when the control of the goods is transferred to the customer, generally upon delivery of or shipment to the customer, and when services have been provided. Revenue from development and/or collaboration contracts are earned from R&D activities and collaboration with OEMs and Tier 1 suppliers. These contracts primarily focus on customization of our product's capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs. Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time. This assessment is made at the outset of the arrangement for each performance obligation.
We are seeing strong interest in ApolloTM from non-automotive customers across multiple industries and are actively advancing these opportunities. Proof-of-concept deployments are validating our technology in real-world scenarios, creating a solid foundation for future growth. While customer evaluation and testing cycles are typically extended, these engagements position us well for gradual revenue contributions and set the stage for meaningful expansion through higher volume programs. We view this as the first step in a disciplined growth roadmap designed to unlock adoption and scale with confidence.
Several partners are also exploring new platforms based on our ApolloTM architecture and have initiated discussions on development work, which we expect will increase over time.
Cost of Revenue
Cost of revenue includes costs directly associated with the production of lidar units, cost of software and support, and certain costs associated with development contracts. Such costs for product include direct materials, direct labor, indirect labor, inventory write downs, losses on purchase commitments, warranty expense, and allocation of overhead. As we increase the volume of ApolloTM units that are manufactured, we expect the bill of material costs to decrease over time. Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts.
Operating Expenses
Research and Development
Our research and development ("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 personnel and overhead expenses, net.
R&D costs are expensed as incurred. We expect our R&D costs to increase as we continue to invest in product development, expanded product variations, and commercialization efforts; however, we anticipate these increases will occur at a more moderate pace relative to our investment in sales and marketing as we prioritize execution and near‐term commercial opportunities.
Sales and Marketing
Our sales and marketing ("S&M") efforts are focused primarily on sales, business development, and marketing programs in pursuit of revenue contracts from potential and existing customers. S&M expenses include:
• third party contractor costs;
• demonstration equipment;
• allocated personnel and overhead expenses, net.
We expect our S&M expenses to increase as we pursue Non-Automotive opportunities to accelerate profitability while continuing to leverage our Tier 1 partners to commercialize our products and manage relationships with the OEMs in the Automotive market.
General and Administrative
Our general and administrative ("G&A") spending supports all business functions. G&A expenses include:
• allocated personnel and overhead expenses, net.
We expect our G&A expenses to increase to support growth as we pursue Non-Automotive opportunities and as we continue to develop and commercialize our products.
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Change in Fair Value of Convertible Note and Warrant Liabilities
The changes in fair value of the convertible note and warrant liabilities are the result of the change in fair value at each reporting date. The convertible note and warrant liabilities were recorded at fair value for each reporting period, and the changes in fair value were reported within other income (expense), net during the period. We also elected to record interest expense on the convertible note as changes in fair value. We have fully repaid the 2025 convertible note and will not have change in fair value of the convertible note in future periods. In addition, we expect the change in fair value of warrant liabilities to decrease as the warrant associated with the 2022 convertible note was cancelled and the warrant associated with the 2025 convertible note was exercised in full.
Interest Income, Interest Expense and Other
Interest income and other consists primarily of interest and investment income earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash, cash equivalents, and marketable securities 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, amortization of premiums and accretion of discounts on marketable securities, net and foreign exchange gains and losses. We expect interest income will increase due to higher average cash, cash equivalents, and marketable securities balances.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
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, 2025 and 2024 (in thousands, except for percentages):
Year ended December 31, Change Change
Provision (benefit) for income tax 11 (2 ) 13 (650 )%
Revenue
Revenues increased by $31 or 15%, to $233 for the year ended December 31, 2025 from $202 for the year ended December 31, 2024. Revenue in 2025 primarily reflected sales of our ApolloTM lidar units as we expanded evaluations and proof‐of‐concept (“POC”) programs with customers. These evaluations represent the initial stage in our commercial adoption cycle, in which customers validate performance in their operational environments before progressing to higher‐volume deployments. As a result, the mix of revenue in 2025 shifted meaningfully toward unit sales supporting these early‐stage programs. By contrast, revenue in the prior year was largely generated from sales of our legacy Non‐Automotive product and service‐related development contracts, which have been wound down as we transitioned to our next‐generation architecture. Because POC activity is dependent on customer schedules and program readiness, the timing and magnitude of revenue associated with these early‐stage engagements may vary from period to period.
Cost of Revenue
Cost of revenue decreased by $224, or 29%, to $554 for the year ended December 31, 2025, from $778 for the year ended December 31, 2024. This decrease was primarily due to losses on purchase commitments recorded in 2024 along with lower provision adjustments and lower cost of professional services in 2025 compared to 2024.
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Operating Expenses
Research and Development
Research and development expenses decreased by $2,452, or 15%, to $13,937 for the year ended December 31, 2025, from $16,389 for the year ended December 31, 2024. This decrease was primarily driven by decreases in stock-based compensation expense of $2,018, allocated information technology and facilities expense of $1,117, and decreased personnel, net of allocations of $330. The decreases were partially offset by an $840 increase in fees to third parties for development work and engineering parts and lab equipment expenses. In addition, a portion of the year‐over‐year reduction reflects a deliberate shift in our operating focus toward commercialization, with resources allocated to supporting go‐to‐market execution, particularly in the Non‐Automotive market, resulting in a more moderate pace of R&D spending relative to our increased investment in sales and marketing.
Sales and Marketing
Sales and marketing expenses increased by $1,995, or 362%, to $2,546 for the year ended December 31, 2025, from $551 for the year ended December 31, 2024. This increase was primarily driven by increases in personnel and allocated personnel costs of $1,500 and marketing and consulting spend of $410 as we pursue Non-Automotive opportunities. The increase also reflects a deliberate shift in operating focus toward commercialization, including investment in go‐to‐market activities, sales tools, and lead‐generation systems to support near‐term revenue opportunities in the Non‐Automotive market.
General and Administrative
General and administrative expenses decreased by $3,385, or 18%, to $14,927 for the year ended December 31, 2025, from $18,312 for the year ended December 31, 2024. This decrease was primarily driven by lower stock-based compensation of $1,657, personnel costs, net of allocations of $1,153, and insurance of $556. The decrease is also due to lower net operating lease expense of $1,920, primarily due to the net gain recorded from the lease settlement, and also due to reduced rent expense as a result of leasing smaller facilities. These decreases were partially offset by lower allocations of facilities and IT to other departments, net of allocations of $1,186 and an increase in accounting, legal, and professional fees of $682.
Change in Fair Value of Convertible Note and Warrant Liabilities
Change in fair value of convertible note and warrant liabilities increased to $1,895 for the year ended December 31, 2025, from zero for the year ended December 31, 2024. This increase was primarily due to the change in fair value of the new convertible note issued in 2025 and related warrants, along with warrants issued in connection with the lease settlement, which was also newly issued in 2025.
Interest Income and Other
Interest income and other increased by $1,192, or 149%, to $1,991 for the year ended December 31, 2025, from $799 for the year ended December 31, 2024. This increase was primarily due to insurance proceeds received of $250 and higher interest earned on cash, cash equivalents, and marketable securities in the current period.
Interest Expense and Other
Interest expense and other increased by $1,879, or 434%, to $2,312 for the year ended December 31, 2025, from $433 for the year ended December 31, 2024. This increase was primarily due to an increase in costs related to financing arrangements of $1,232, higher foreign exchange losses of $377, and a decrease in accretion of discounts on marketable securities, net of $300.
Provision (benefit) for Income Tax
Provision (benefit) for income tax increased to $11 for the year ended December 31, 2025, from a benefit of $2 for the year ended December 31, 2024. This change is primarily due to changes in foreign taxes.
Net Loss
Net loss decreased by $1,502, or 4%, to $33,958 for the year ended December 31, 2025, from $35,460 for the year ended December 31, 2024. This decrease was primarily due to decreases in stock-based compensation and facilities expenses, partially offset by the increase in the change in fair value of convertible note and warrant, research and development investments in the development of ApolloTM, and increased sales and marketing costs as we pursue Non-Automotive opportunities.
Liquidity and Capital Resources
Sources of Liquidity; Liquidity Outlook
Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to establish and maintain a relationship with one or more Tier 1 automotive suppliers and the timing of any OEM design wins, our ability to effectively and efficiently manage our expenses, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products, and the market adoption of new and enhanced products and features. To date, our principal sources of liquidity have been the proceeds received from the issuance of equity.
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Tumim Stone Transaction
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 Purchase Agreement for gross proceeds totaling $5,516.
Shelf Registration
On September 26, 2023, the U.S. Securities and Exchange Commission declared our Registration Statement on Form S-3 effective (the "Shelf"), which allows us to raise up to $200,000 in capital over the following three years. The use of the Shelf is subject to a limitation of one-third of our public float in any rolling twelve-month period, when our public float is below $75,000, which is referred to as the “baby shelf" rules. Since July 28, 2025, we have not been subject to the "baby shelf" rules. Since the Shelf was established, we have used the Shelf to register the shares sold in the May 29, 2024 Registered Direct Offering and the September 12, 2024 A.G.P. Transaction, both of which are further described below.
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 $2,509, before deducting estimated offering expenses payable by us.
New Circle Transaction
On July 25, 2024, we entered into a common 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. In December 2025, we terminated the agreement with New Circle. The termination was part of our broader effort to simplify our capital structure and reduce the number of outstanding financing instruments, while consolidating our equity‐financing capacity under our existing at‐the‐market facility, which we believe provides more operational flexibility and alignment with our long‐term capital strategy. In total, we issued 8,980,713 shares of our common stock to New Circle under the agreement for gross proceeds totaling $27,754.
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. In December 2025, we increased the aggregate amount available under the ATM program to $125,000, following multiple prior increases since the original agreement was entered into. Such sales of common stock by us, if any, may occur from time to time at our sole discretion, over a 36-month period. As of December 31, 2025, we have sold 23,220,784 shares under the ATM Agreement for gross proceeds totaling $68,436 and have remaining availability of $56,564.
2025 Convertible Note
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 "2025 Note") for an aggregate purchase price of $3,000 and (ii) a warrant to purchase up to 805,263 shares of our common stock. The 2025 Note, subject to an original issue discount of 7.4%, had a term of eighteen months and accrued interest at the rate of 7.0% per annum. The 2025 Note was convertible into Common Stock, at a per share conversion price equal to $2.22, subject to adjustments noted in the 2025 Note. The Warrant had an exercise price of $2.22, and was 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. These warrants were exercised in full on July 28, 2025.
During the year ended December 31, 2025, the Company made total cash payments of $989. Additionally, $2,591 in aggregate principal and interest was converted into 2,405,573 shares of common stock. The 2025 Note was fully paid in 2025.
Capital Structure
During 2025, we undertook a concerted and disciplined effort to simplify and strengthen our capital structure. This included paying down outstanding debt obligations and eliminating certain legacy warrants that had been issued in prior financing transactions. These actions were intended to reduce overhang associated with historical instruments, streamline our equity structure, and improve our flexibility to utilize our at‐the‐market facility as our primary source of potential equity financing. We believe these steps position us with a cleaner and more efficient capital structure as we continue to fund operations and pursue commercialization of our products.
Until we are able to 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 earlier, and other potential sources of capital, are sufficient 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.
For the years ended December 31, 2025 and 2024, we had a net loss of $33,958 and $35,460, respectively. We expect that our expenses will continue to exceed our operating income and, as a result, we may need additional capital resources to fund our operations. We believe we currently have sufficient financial resources 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. 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 continued development and commercialization of our products. For additional information regarding our cash requirements from contractual obligations, see Note 20 in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
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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, 2025, net cash used in operating activities was $27,777. Factors affecting our operating cash flows during this period were a net loss of $33,958, a gain on termination of operating lease, net, of $1,014, partially offset by stock-based compensation of $5,522, change in fair value of convertible note and warrant liabilities of $1,895, debt issuance costs of $2,020, and common stock purchase agreement costs of $337. Within operating activities, the net changes in operating assets and liabilities were cash used of $2,553, primarily driven by increases in accounts receivable, inventories, and prepaid and other current assets of $68, $678, and $1,054, respectively, partially offset by a decrease in other noncurrent assets of $241. Further, cash used was also due to decreases in accrued expenses and other current liabilities of $767 and operating lease liabilities of $236.
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 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.
Investing Activities
For the year ended December 31, 2025, net cash used in investing activities was $30,798. The primary factors affecting net cash used in investing activities during this period were purchases of marketable securities of $53,768, partially offset by proceeds from redemptions and maturities of marketable securities of $23,079.
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.
Financing Activities
For the year ended December 31, 2025, net cash provided by financing activities was $91,665. The primary factors affecting our financing cash flows during this period were from proceeds from issuance of common stock under our common stock purchase agreements, proceeds from the issuance of convertible notes, and proceeds from the exercise of warrants of $90,961, $2,950 and $1,788, respectively. Cash provided by financing activities was partially offset by stock issuance costs related to the common stock purchase agreements, payments for convertible note redemptions, and transaction costs related to the issuance of convertible note of $1,835, $989, and $658, respectively.
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.
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 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.
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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.
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.
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, 2025, we had cash, cash equivalents, and marketable securities of $86,460, 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, 2025, 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, 2025 and 2024, we had write-offs of $2 and $70, respectively, and recorded a $2 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. 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) 43
Consolidated Balance Sheets 45
Consolidated Statements of Operations and Comprehensive Loss 46
Consolidated Statements of Stockholders’ Equity (Deficit) 47
Consolidated Statements of Cash Flows 48
Notes to Consolidated Financial Statements 49
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and Board of Directors of AEye, Inc.
AEye, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of AEye, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and December 31, 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and December 31, 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the accounting for and valuation of convertible debt
As discussed in Notes 1 and 9 to the consolidated financial statements, in January 2025, the Company entered into a Securities Purchase Agreement and issued (i) a senior unsecured convertible promissory note (the 2025 Note) for a principal amount of $3,240 thousand for an aggregate purchase price of $3,000 thousand and (ii) a warrant to purchase shares of the Company’s common stock. The Company elected to apply the fair value option to measure the 2025 Note. As a result of this election, the 2025 Note was recorded as a liability at fair value and was remeasured at each reporting period, with changes in fair value recognized in change in fair value of convertible note and warrant liabilities on the consolidated statement of operations.
We identified the evaluation of the accounting for, and valuation of, the 2025 Note as a critical audit matter. A high degree of subjective and complex auditor judgment was required, including the involvement of professionals with specialized skills and knowledge, to evaluate the appropriate accounting treatment and fair value of the 2025 Note.
The following are the primary procedures we performed to address this critical audit matter. We involved professionals with specialized skills and knowledge in complex debt transactions, who assisted us in evaluating the Company’s accounting assessment of the 2025 Note by inspecting the underlying agreements to identify relevant contract terms and evaluating whether the Company's accounting was in accordance with the technical accounting guidance. We involved valuation professionals with specialized skills and knowledge, who assisted us in evaluating the Company’s fair value estimate for the 2025 Note by comparing it to an independently developed fair value estimate using publicly available data.
/s/ KPMG LLP
We have served as the Company’s auditor since 2024.
Santa Clara, California
March 18, 2026
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As of December 31,
ASSETS
CURRENT ASSETS:
Accounts receivable, net 77 11
Prepaid and other current assets 2,081 2,706
Property and equipment, net 577 605
Other noncurrent assets 242 692
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accrued expenses and other current liabilities 4,957 7,709
Operating lease liabilities, noncurrent 235 479
Other noncurrent liabilities 598 64
COMMITMENTS AND CONTINGENCIES (Note 20)
STOCKHOLDERS’ EQUITY:
Accumulated other comprehensive income 30 5
Total liabilities and stockholders’ equity $ 90,893 $ 27,120
The accompanying notes are an integral part of these consolidated financial statements.
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Year Ended December 31,
OPERATING EXPENSES:
OTHER INCOME (EXPENSE):
Change in fair value of convertible note and warrant liabilities (1,895 ) —
Interest expense and other (2,312 ) (433 )
Total other income (expense), net (2,216 ) 366
Provision (benefit) for income tax 11 (2 )
PER SHARE DATA
Net loss per common share (basic and diluted) $ (1.47 ) $ (4.89 )
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 Deficit Equity
Shares Amount Shares Amount
Stock-based compensation — — — — 5,522 — — 5,522
Other comprehensive income, net of tax — — — — — 25 — 25
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 )
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 155 129
Gain on sale of property and equipment, net — (12 )
Noncash lease expense relating to operating lease right-of-use assets 211 956
Gain on termination of operating lease, net (1,014 ) (491 )
Common stock purchase agreement costs 337 1,124
Debt issuance costs 2,020 —
Gain on extinguishment of warrant (64 ) —
Inventory write-downs, net of scrapped inventory 48 161
Change in fair value of convertible note and warrant liabilities 1,895 —
Expected credit losses, net of write-off 2 35
Changes in operating assets and liabilities:
Accounts receivable, net (68 ) 85
Inventories, current and noncurrent, net (678 ) 245
Prepaid and other current assets (1,054 ) 1,490
Other noncurrent assets 241 215
Accounts payable 9 156
Accrued expenses and other current liabilities (767 ) (2,389 )
Operating lease liabilities (236 ) (955 )
Other noncurrent liabilities — (345 )
Net cash used in operating activities (27,777 ) (26,620 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (109 ) (486 )
Proceeds from sale of property and equipment — 45
Proceeds from redemptions and maturities of marketable securities 23,079 32,426
Purchases of marketable securities (53,768 ) (24,241 )
Net cash provided by (used in) investing activities (30,798 ) 7,744
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options — 134
Proceeds from the issuance of convertible notes 2,950 146
Payments for convertible note redemptions (989 ) —
Transaction costs related to issuance of convertible note (658 ) —
Taxes paid related to the net share settlement of equity awards (643 ) (161 )
Proceeds from exercise of warrant 1,788 —
Net cash provided by financing activities 91,665 10,060
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 10,266 19,082
CASH AND CASH EQUIVALENTS—End of period $ 43,356 $ 10,266
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ — $ —
Cash paid (refunded) for income taxes, net 58 (2 )
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Noncash debt issuance costs $ 1,362 $ —
Operating lease liabilities extinguished upon termination of lease — 16,325
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 physical AI sensing solutions built on high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems, or ADAS, robotic vision applications and a range of Non-Automotive applications. Our physical AI approach combines software‐defined sensing with adaptive perception capabilities that enable machines to interpret and respond to complex physical environments in real time. Our proprietary Intelligent Sensing Platform incorporates a solid‐state, software‐definable active lidar sensor; an adaptive SmartScan architecture that dynamically adjusts scan patterns for different scenes and targets; and a signal‐processing pipeline designed to deliver precise measurements and imaging for safety‐critical use cases. This platform is designed to support a broad set of markets beyond passenger vehicles, including rail, aerospace and defense, smart infrastructure, and security, where long‐range performance, environmental robustness, and software‐based configurability are key requirements.
AEye, formerly known as CF Finance Acquisition Corp. III, (“CF III”), was originally incorporated in Delaware on March 15, 2016 under the name CF SPAC Re Inc. On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc., entered into an Agreement and Plan of Merger with CF III. Based on CF III’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended. On August 16, 2021, the business combination contemplated by the Agreement and Plan of Merger was closed and CF III changed its name to AEye, Inc.
The Company’s common stock and public warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “LIDR” and “LIDRW,” respectively. Unless otherwise specified, “we,” “us,” “our,” “AEye,” and the “Company” refers to AEye, Inc. and its wholly owned subsidiaries.
Principle of Consolidation and Liquidity
The accompanying consolidated financial statements include the accounts of AEye, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company has funded its operations primarily through the issuances of common stock. Since its inception, the Company has incurred net losses and negative cash flows from operations and expects to incur additional operating losses and negative operating cash flows as management continues to focus on achieving commercialization of its lidar solutions and execute on its strategic initiatives. As of December 31, 2025, the Company's existing sources of liquidity included cash, cash equivalents, and marketable securities of $86,460. Management believes that the Company has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they come due in the next twelve months from the date of issuance of these consolidated financial statements.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include lease termination liability, write-downs of inventory to the lower of cost or net realizable value, investments, embedded derivative and warrant liabilities, stock-based compensation, and convertible notes.
Cash, Cash Equivalents, and Marketable Securities
The Company considers all highly liquid investments, such as treasury bills, commercial paper, certificates of deposit, and money market instruments with maturities of three months or less at the time of acquisition to be cash equivalents. Cash equivalents primarily consist of amounts held in interest-bearing money market accounts that are readily convertible to cash. Cash equivalents are stated at cost, which approximates fair market value.
Marketable securities have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses in fair value of the available-for-sale (“AFS”) debt securities are reported in other comprehensive income (loss). When the AFS debt securities are sold, cost is based on the specific identification method, and the realized gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company considers all AFS debt securities as available for use to support current operations, including those with maturity dates beyond one year and are classified as current assets under marketable securities in the accompanying consolidated balance sheets. AFS debt securities included in marketable securities on the consolidated balance sheets consist of securities with original maturities greater than three months at the time of purchase. Interest on marketable securities is included within interest income and other on the consolidated statements of operations. Amortization of premiums and accretion of discounts are included within interest expense and other on the consolidated statements of operations.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and marketable securities, and accounts receivable, net. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, to limit the exposure of each investment. The Company’s marketable securities have investment grade ratings when purchased which mitigates risk.
The Company’s accounts receivable, net are derived from customers located in the U.S., Europe, and Asia-Pacific. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral.
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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, 2025, the Company had three customers, each accounting for 10% or more of AR and one vendor accounting for 10% or more of AP. As of December 31, 2024, the Company had four customers, each accounting for 10% or more of AR and one vendor accounting for 10% or more of AP.
For the years ended December 31, 2025 and 2024, revenue from the Company’s major customers representing 10% or more of total revenue was as follows:
Year ended December 31,
Customer A 27 % *
Customer B 15 % *
Customer C 12 % *
Customer D 10 % *
Customer E * 50 %
Customer F * 32 %
*Customer accounted for less than 10% of total revenue in the period.
Fair Value of Financial Instruments
The Company defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. For additional discussion on fair value of financial instruments, see Note 2.
Derivatives
The Company accounts for derivative instruments in accordance with the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) Topic 815,Derivatives and Hedging (“ASC 815”). The Company’s objectives and strategies for using derivative instruments, and how the derivative instruments and related hedged items are accounted for affect the financial statements.
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk. Terms of convertible debt instruments are reviewed to determine whether they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract and recorded on the consolidated balance sheets at fair value.
An evaluation of specifically identified conditions is made to determine whether the fair value of the derivative issued is required to be classified as equity or as a derivative liability. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. For additional discussion of derivatives, see Note 2.
Accounts Receivable, net
Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.
If necessary, accounts receivable are reduced by a provision for expected credit losses, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable. The Company reviews the provision quarterly based on historical experience with each customer and the specifics of each arrangement. During the years ended December 31, 2025 and 2024, the Company had write-offs of $2 and $70, respectively. There are no provisions for credit losses as of December 31, 2025 and 2024.
Inventories, net
Inventories consist of raw materials, work in progress, and finished goods. Inventories are stated at the lower of cost and net realizable value and costs are computed under the standard cost method. Inventories that are not expected to be consumed in the next 12 months are classified within Other noncurrent assets. Inventory cost consists of the associated raw material, direct labor, indirect labor and other overhead costs. The Company evaluates the need for inventory write-downs associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis and records a provision for excess and obsolete inventory to adjust the carrying value of inventory as needed.
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 2 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or expected useful life of the improvements. Construction in progress is the construction or development of property and equipment that have not yet been placed in service. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.
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Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the test for recoverability identifies a possible impairment, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The fair value is calculated based on estimated salvage value, estimated orderly liquidation value, or a value-in-use approach depending on the asset's highest and best use. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amount of the long-lived asset becomes its new cost basis which is depreciated over the asset's remaining useful life. No impairment charges were recorded for the years ended December 31, 2025 and 2024.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance. The warrants assumed in connection with the 2022 convertible note, the 2025 convertible note, and the warrants issued in connection with the lease settlement are accounted for in accordance with ASC 815-40,Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. The Private Placement Warrants issued in connection with the business combination are classified as liabilities. The Company adjusts the warrants to fair value at each reporting period. The warrant liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations.
Leases
The Company determines if an arrangement is or contains a lease at inception. The Company evaluates the classification of leases at commencement, and, as necessary, at modification. Operating leases, consisting of office leases, are included in Right-of-Use ("ROU") assets, Accrued expenses and other current liabilities, and Operating lease liabilities, non-current, on the Company's consolidated balance sheets. The Company did not have any finance leases as of December 31, 2025 and 2024. ROU assets represent the Company's right to an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made prior to lease commencement and initial direct costs and excludes lease incentives. Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. As most of the Company's leases do not include an implicit rate, the Company uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date in determining the present value of future payments. The incremental borrowing rate is a hypothetical rate based on the Company's understanding of what its credit rating would be for a secured borrowing when the lease was executed. The Company's lease term includes the non-cancelable period, any rent-free periods provided by the lessor, and options to extend or terminate the lease when it is reasonably certain that it will exercise that option. At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations and comprehensive loss. The Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real estate leases.
Convertible Notes
The Company adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The Company elected to apply the fair value measurement option to the 2022 convertible note and the 2025 convertible note on the dates that the Company first recognized the respective convertible note in the consolidated balance sheets. The Company acknowledges that its election to apply the fair value option is irrevocable. As of December 31, 2025, the 2022 convertible note and the 2025 convertible note have no outstanding principal balance, as all outstanding principal and accrued interest has been fully settled. Changes in fair value were recorded in the consolidated statements of operations and changes in fair value related to credit risk are recorded in other comprehensive loss. The Company reported interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes in the consolidated statement of operations.
Revenue Recognition
The Company generates revenues from the sale of products and from development arrangements with companies in both the Automotive and Non-Automotive markets. Under FASB ASC Topic 606,Revenue from Contracts with Customers (“ASC 606”), the Company accounts for such arrangements as contracts with customers and accordingly recognizes revenue by applying the following steps:
• Identification of the contract, or contracts, with a customer
• Identification of the performance obligations in the contract
• Determination of the transaction price
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Revenue from the sale of products is generally recognized at a point in time when control of the goods is transferred. Certain sales contracts include services to install and commission or customize the product for customers. Revenues from these services are categorized as product revenue and recognized either over time as the services are being performed, or at a point in time, depending on the nature of the services and whether the criteria for recording revenue over time are met in accordance with ASC 606.
Revenue from development arrangements is either recognized at a point in time or over time depending on the performance obligations in the contract. For performance obligations that are satisfied over time, such as services which require engineering and development based on customer requirements, the Company recognizes revenue using an input method based on contract costs incurred to date compared to total estimated contract costs.
See Note 16, Revenue, for additional information related to the application of ASC 606 to the Company’s primary revenue streams.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of operations and comprehensive loss.
Arrangements with Multiple Performance Obligations
When a contract involves multiple performance obligations, the Company accounts for individual products and services separately if the customer can benefit from the product or service on its own or with other resources that are readily available to the customer and the product or service is separately identifiable from other promises in the arrangement. The consideration is allocated between separate performance obligations in proportion to their estimated standalone selling price (SSP). The SSP reflects the price the Company would charge for a specific product or service if it were sold separately in similar circumstances and to similar customers. If the selling price is not directly observable, the Company determines SSP using information that may include other observable inputs, such as the cost plus margin approach, to estimate SSP. In instances where SSP is not directly observable, the Company determines SSP using information that may include other observable inputs such as expected costs plus margin, or uses the residual approach for performance obligations whose SSP is highly variable or uncertain.
The Company provides standard product warranties for a term of typically 90 days to one year to ensure that its products comply with agreed-upon specifications. Standard warranties are considered to be assurance type warranties and are not accounted for as separate performance obligations. Estimated future warranty costs are accrued and charged to cost of sales in the period that the related revenue is recognized. These estimates are based on historical warranty experience and any known or expected changes in warranty exposure, such as trends of product reliability and costs of repairing and replacing defective products. The Company assesses the adequacy of its recorded warranty liabilities on a quarterly basis and adjusts the amounts as necessary. Warranty costs are included within accrued expenses and other liabilities on the consolidated balance sheets. Refer to Note 8 for further information on warranty reserve amounts.
Other Policies, Judgments and Practical Expedients
Contract assets and liabilities. Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract liabilities relate to deferred revenue. Deferred revenue consists of amounts that have been invoiced and/or cash received but for which revenue has not been earned. This generally includes unrecognized revenue balances for development arrangements. Deferred revenue that will be realized during the succeeding 12-month period is recorded within current liabilities and the remaining deferred revenue is recorded as noncurrent liabilities. The Company did not have any contract assets or contract liabilities as of December 31, 2025.
Right of return. The Company’s general terms and conditions for its contracts do not contain a right of return that allows the customer to return products and receive a credit. Therefore, the Company does not estimate returns and generally recognizes revenue at contract price upon product shipment or delivery.
Significant financing component. In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The expected timing difference between the payment and satisfaction of performance obligations for all of the Company’s contracts is one year or less; therefore, the Company applies a practical expedient and does not consider the effects of the time value of money on transaction price. The Company’s contracts with customer prepayment terms do not include a significant financing component because the primary purpose is not to receive financing from the customers. The Company did not have any outstanding receivables with financing components as of December 31, 2025.
Contract modifications. The Company may modify contracts to offer customers additional products or services. Each of the additional products and services are generally considered distinct from those products or services transferred to the customer before the modification. The Company evaluates whether the contract price for the additional products and services reflects the standalone selling price as adjusted for facts and circumstances applicable to that contract. In these cases, the Company accounts for the additional products or services as a separate contract. In other cases where the pricing in the modification does not reflect the standalone selling price as adjusted for facts and circumstances applicable to that contract, the Company accounts for the additional products or services as part of the existing contract primarily on a prospective basis.
Judgments and estimates. Accounting for contracts recognized over time under ASC 606 involves the use of various techniques to estimate total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a contract will be revised in the near term. The Company reviews and updates its contract-related estimates quarterly, and records adjustments as needed. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized in the period in which the revisions to the estimates are made.
Cost of Revenue
Cost of revenue primarily consists of costs directly associated with the production of lidar units that are held for sale and certain costs associated with development arrangements. Such costs for product are direct materials, direct labor, indirect labor, inventory write-downs, losses on purchase commitments, warranty expense, and allocation of overhead. Direct and indirect labor includes personnel-related costs and packaging and procurement respectively associated with the production of lidar units. Other costs such as indirect manufacturing costs are recognized in research and development and general and administrative expenses on the consolidated statements of operations and comprehensive loss. Costs associated with development arrangements include the direct costs and allocation of overhead costs involved in the execution of the contract.
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Research and Development Expenses
Research and development expenses include personnel costs (including salaries, benefits, bonuses, and stock-based compensation), new hardware and software materials to the extent no future economic benefits are expected, other related expenses such as lab equipment, third party development-related contractors, and allocated overhead expenses. Substantially all the R&D expenses are related to the development of new products and services, including contract development expenses. They are expensed as incurred and included in the consolidated statements of operation and comprehensive loss.
Stock-Based Compensation
The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all share-based awards based on estimated grant-date fair values. The Company uses the straight-line attribution method to allocate compensation cost to reporting periods over each awardee’s requisite service period, which is generally the vesting period of the award. The Company measures nonemployee awards at the date of grant, which generally is the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The Company’s policy is to recognize the effect of forfeitures in the period they occur. The grant-date fair value of the restricted stock units, or “RSUs,” is equal to the fair market value of the Company’s common stock on the grant date. The grant-date fair value for stock options and stock purchase rights under the employee stock purchase plan ("ESPP") is estimated using the Black-Scholes option-pricing model. The grant-date fair value for RSUs with an associated market condition is estimated using the Monte-Carlo simulation model. Both the Black-Scholes option-pricing model and the Monte-Carlo simulation model require the input of subjective assumptions, including the award’s expected term and the price volatility of the underlying stock.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset valuation allowance would be made to reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with FASB ASC Topic 740,Income Taxes (“ASC 740”) on the basis of a two-step process in which determinations are made (1) whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income tax expense in the accompanying consolidated statements of operations and comprehensive loss. Accrued interest and penalties are included in accrued expenses and other current liabilities in the consolidated balance sheets. As of and for the year ended December 31, 2025 and 2024, there were no interest or penalties recorded.
Net Loss per Share
Basic net loss per share is computed using net loss available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the dilutive effects of stock options, restricted stock units, preferred stock, stock to be issued under the ESPP, convertible notes, and warrants outstanding during the period to the extent such securities would not be anti-dilutive and is determined using the if-converted and treasury stock methods.
The Company calculates weighted average number of common shares outstanding during the period using the Company’s common stock outstanding.
Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding was anti-dilutive, as AEye is currently operating in a net loss position.
Comprehensive Income (Loss)
Comprehensive income (loss) includes all changes in equity (net assets) from non-owner sources during a period and net unrealized gains (losses) on available-for-sale debt securities.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03,Disaggregation of Income Statement Expenses, which requires annual and interim disclosure of disaggregated disclosures of certain costs and expenses on the income statement. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Amendments are applied on a prospective basis with retrospective application permitted. The Company is currently evaluating the impact of this guidance.
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Recently Adopted Accounting Pronouncements
The Company adopted, ASU 2023-09,Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, in the fourth quarter of 2025. The amendments in this update require public entitiesto increase the transparency and usefulness of income tax information through improvements to the income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The adoption of this guidance resulted in incremental disclosures in the Company’s consolidated financial statements.
2. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities is determined in accordance with the fair value hierarchy established in FASB ASC Topic 820,Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
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.
The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, other current and noncurrent liabilities, and the noncurrent convertible note. The carrying values of these financial instruments approximate their fair values.
The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
Fair Value Measured as of December 31, 2025 Using:
Cash and
Adjusted Unrealized Fair Cash Marketable
Cost gains Value Equivalent Securities
Assets
Level 1
Level 2
Liabilities
Level 2
Private placement warrant liability $ — $ — $ — $ — $ —
Level 3
Derivative warrant liability — — 560 — —
Total financial liabilities $ — $ — $ 560 $ — $ —
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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 $ — $ —
The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following:
Money Market Funds: The Company holds financial assets consisting of money market funds. These securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Marketable Securities: The Company holds financial assets consisting of fixed-income U.S. government securities, corporate bonds, commercial paper, agency bonds, and asset-backed securities. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities.
Derivative Warrant Liability: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $10,500 (the "2022 Note"). The Company issued warrants as part of the 2022 Note. The warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of the Company's common stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. The term to expiration was calculated as the contractual term of the warrants of five years. Finally, the Company does not currently anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability was included within other noncurrent liabilities on the consolidated balance sheets. These warrants were cancelled on July 28, 2025.
In January 2025, the Company entered into a convertible note agreement with a face value of $3,000 (the "2025 Note"). The Company issued a warrant to purchase up to 805,263 shares of the Company’s common stock. The warrant was recorded on the accompanying consolidated balance sheet at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrant was based on a Black-Scholes model. Inherent in a Black-Scholes model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. Changes in fair value were recognized in other income (expense) for each reporting period. Derivative Warrant Liability was included within other noncurrent liabilities on the consolidated balance sheets. These warrants were exercised in full on July 28, 2025.
In August 2025, in connection with the lease settlement (see Note 5 for details of the settlement), the Company issued warrants, which are recorded on the accompanying consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Black-Scholes model. Inherent in a Black-Scholes model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the consolidated balance sheets.
Private Placement Warrant Liability: The Private Placement Warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of the Company's public warrants, as terms of both warrants are substantially similar. Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the consolidated balance sheets.
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For the years ended December 31, 2025 and 2024, there were no transfers between Level 1 and Level 2 inputs.
The following table presents a summary of the changes in fair value of the Company’s Level 3 financial instruments for the year ended December 31, 2025 (in thousands):
Derivative
Warrant
Liability 2025 Note Total
Change in fair value included in other income (expense), net 1,581 314 1,895
Payments and conversions — (3,580 ) (3,580 )
Extinguishment and exercise (2,992 ) — (2,992 )
The key inputs into the Black-Scholes model for the derivative warrant issued as a result of the lease settlement valued at December 31, 2025 are as follows:
Expected term (years) 4.7
Expected volatility 140.0 %
Risk-free interest rate 3.7 %
Dividend yield — %
Exercise price $ 2.22
If factors or assumptions change, the estimated fair values could be materially different. The value of the Company’s derivative warrant liabilities would increase if a higher risk-free interest rate was used and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the liabilities, and a lower volatility assumption would decrease the value of the liabilities.
3. INVENTORIES
Inventory, net of write-downs, as of December 31, 2025 and 2024 were as follows (in thousands):
As of December 31,
Work in-process 78 —
The Company also had $0 and $209 of noncurrent inventory (raw materials), net of write-downs, classified within other noncurrent assets on the consolidated balance sheet as of December 31, 2025 and 2024, respectively.
4. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets as of December 31, 2025 and 2024 were as follows (in thousands):
As of December 31,
Receivable for issuance of common stock — 1,679
Total prepaid and other current assets $ 2,081 $ 2,706
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5. LEASES
The Company leases office facilities in Northern California under non-cancelable operating leases. In July 2024, the Company entered into two new long-term leases, one of which the Company uses as its headquarters, which was amended in February 2026 to extend the term and add additional square footage.
Some of the Company's leases include options to renew, with renewal terms that, if exercised by the Company, extend the lease term for five years. The exercise of these renewal options is at the Company's discretion. The Company's lease agreements do not contain any material terms and conditions of residual value guarantees or material restrictive covenants. The Company's short-term lease expense was determined to not be material.
On November 14, 2023, the Company assigned an operating lease resulting in the Company being relieved of its primary obligation under this lease. As a result of the lease assignment, a new tenant assumed the primary obligation under the lease, with the Company becoming secondarily liable. If the new tenant should fail to perform under the lease, the Company could be liable to fulfill any remaining lease obligations. The lease had a remaining term of 1.7 years as of December 31, 2025 with the Company serving as guarantor for the remaining term. The resulting maximum exposure includes $166 of undiscounted future minimum lease payments plus potential additional payments to satisfy maintenance, taxes, and insurance requirements for the remainder of the lease term.
In August 2024, one of the Company's existing leases, originally set to expire on November 30, 2026, was terminated early. In conjunction with the early termination, the Company recorded a net gain of $491 on termination of the operating lease during the year ended December 31, 2024. The net gain included a gain of $5,954, comprised of a $16,325 net liability reduction, partially offset by a $10,371 decrease in its remaining right of use asset. Additionally, in accordance with terms in the lease agreement and based on certain assumptions, the Company recorded a lease termination loss of $5,463, representing estimated unpaid rent for the remaining term. The net gain was recorded in general and administrative expenses in the consolidated statement of operations and comprehensive loss. The lease termination liability was reduced by the draw-down of the $2,150 letter of credit by the landlord in August 2024; the remaining lease termination liability of $3,313 as of December 31, 2024 was recorded in accrued expenses and other current liabilities in the consolidated balance sheet.
On April 28, 2025, the Company and the former landlord entered into a settlement agreement to resolve all outstanding disputes related to the early termination of the lease. Under the terms of the agreement, the Company paid $1,400 in cash and issued a warrant to purchase up to 350,000 shares of the Company's common stock at an exercise price of $2.22 per share, which had a fair value of $899 on the date of issuance. The Company recorded a net gain on termination of operating lease of $1,014 during the year ended December 31, 2025.
The components of operating lease expenses, excluding the gain on lease termination, for the years ended December 31, 2025 and 2024 were as follows (in thousands):
Year ended December 31,
Variable lease cost 16 204
Total operating lease cost $ 305 $ 1,702
Supplemental cash flow information for the years ended December 31, 2025 and 2024 were as follows (in thousands):
Year ended December 31,
Cash paid for operating leases included in operating cash flows $ 306 $ 1,497
Supplemental balance sheet information related to operating leases as of December 31, 2025 and 2024 was as follows (in thousands):
As of December 31,
Operating lease right-of-use assets $ 441 $ 652
Operating lease liabilities:
Operating lease liabilities, current $ 275 $ 267
Lease termination liability — 3,313
Operating lease liabilities, non-current 235 479
Total operating lease liabilities $ 510 $ 4,059
As of December 31,
Weighted average remaining lease term (in years) 1.89 2.89
Weighted average discount rate 6.40 % 6.40 %
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Maturities of lease liabilities as of December 31, 2025, are as follows (in thousands).
Years ending - December 31:
Total lease payments 540
Less amount to discount to present value (30 )
Present value of lease liabilities $ 510
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net as of December 31, 2025 and 2024 consists of the following (in thousands):
As of December 31,
Machinery and equipment $ 218 $ 171
Computers, software and related equipment 63 25
Office furniture and equipment 16 5
Construction in progress 254 246
Total property and equipment 835 707
Less accumulated depreciation and amortization (258 ) (102 )
Property and equipment, net $ 577 $ 605
Depreciation and amortization expense related to property and equipment amounted to $155 and $129 recognized within research and development, sales and marketing, and general and administrative expenses within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024, respectively. The Company recorded disposals of gross property and equipment of $59 in the year ended December 31, 2024. The carrying amount of the property and equipment disposed in the year ended December 31, 2024 was $32. There were no disposals during the year ended December 31, 2025.
7. OTHER NONCURRENT ASSETS
Other noncurrent assets as of December 31, 2025 and 2024 were as follows (in thousands):
As of December 31,
Noncurrent inventory $ — $ 209
Long-term prepaid expenses 136 352
Total other noncurrent assets $ 242 $ 692
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of December 31, 2025 and 2024 were as follows (in thousands):
As of December 31,
Lease termination liability $ — $ 3,313
Operating lease liabilities 275 267
Total accrued expenses and other current liabilities $ 4,957 $ 7,709
9. CONVERTIBLE NOTES
2024 Promissory Note
On May 10, 2024, the Company entered into a Securities Purchase Agreement with an investor for the sale and issuance of 330,823 shares of common stock and a 5-year promissory note with a principal balance of $146 ( “May 2024 Note”) for total gross cash proceeds of $1,000. The May 2024 Note bears interest at an annual rate equal to the Secured Overnight Financing Rate plus 1.0%, which is compounded quarterly in arrears, and has a maturity date of June 4, 2029. At maturity, the principal balance and accrued, unpaid and uncapitalized interest can be settled in cash, shares of common stock based on the closing price of the common stock as of the immediately preceding trading day, or any combination of the foregoing at the option of the investor.
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2025Convertible Note
In January 2025, the Company entered into a Securities Purchase Agreement with a certain institutional investor and issued (i) a senior unsecured convertible promissory note (the "2025 Note") for an aggregate principal amount of $3,240 for an aggregate purchase price of $3,000 and (ii) a warrant to purchase up to 805,263 shares of the Company’s common stock. The 2025 Note, subject to an original issue discount of 7.4%, had a term of eighteen months and accrued interest at the rate of 7% per annum. The interest may be settled in cash or shares at the option of the Company and was payable together with monthly redemptions of the outstanding principal amount of the 2025 Note. The 2025 Note was convertible into common stock, at a per share conversion price equal to $2.22, subject to adjustments noted in the 2025 Note.
Monthly redemptions began in April 2025 and were due on the first of each subsequent month (each a "Monthly Redemption Date" or an "Installment Date"). The Company was required to redeem the Monthly Redemption Amount until the 2025 Note was fully redeemed, paid in cash or, so long as certain equity conditions are met, shares of our common stock. The equity conditions that must be met in order for the Company to settle the Monthly Redemption Amount in common stock include requirements for the daily volume weighted average price of the Company's common stock to exceed $0.50 and the average daily trading volume of the Company's common stock to exceed $100 for the twenty (20) trading days prior to the applicable Installment Notice Date (which is the sixth (6th) trading day prior to each Installment Date). The Monthly Redemption Amount, in most instances, will be 1/15th of the original principal amount, plus any amount accelerated pursuant to the 2025 Note, accrued but unpaid interest, and late fees, if any. If the Company elects to settle such redemptions in shares of common stock, the number of shares to be settled shall be based on an Installment Conversion Price equal to the lower of (i) $2.22 or (ii) the greater of $0.30 and 90% of average volume weighted average price of the common stock during the five (5) trading days immediately preceding the applicable Monthly Redemption Date. The investor is permitted, not exceeding five times, to accelerate up to one Monthly Installment Amount, between Installments, (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price. The Acceleration Conversion Price shall be the lower of (i) $2.22 or (ii) the greater of $0.30 and 90% of average volume weighted average price of the common stock during the five (5) trading days immediately preceding the applicable Acceleration Date.
The 2025 Note may not be converted into common stock to the extent such conversion would result in the investor and its affiliates having beneficial ownership of more than 19.99% of our then outstanding shares of common stock. This limitation is waived if the Company either obtains stockholder approval as required by the applicable exchange rules or secures a satisfactory written opinion from its counsel stating that such approval is unnecessary.
The Company and investor entered into a registration rights agreement (the “Registration Rights Agreement”) to which the Company was required to file a registration statement registering the resale by the investor of any shares of the Company’s common stock issuable upon conversion, including the resale of shares issuable upon exercise of the associated warrants. The Company is required to meet certain obligations with respect to the timeliness of the filing and effectiveness of the registration statement. The Company filed such registration statement on January 16, 2025, and an amendment thereto on February 25, 2025, which was declared effective by the U.S. Securities and Exchange Commission on March 4, 2025.
The Company elected to apply the fair value option to the measurement of the 2025 Note. As a result of adopting the fair value option, no embedded derivatives are bifurcated from the 2025 Note. The Company classified the 2025 Note as a liability at fair value and remeasured the 2025 Note to fair value at each reporting period. The total proceeds received from the investor of $3,000 was allocated between the 2025 Note and the related warrants issued using the relative fair value method at issuance date. This resulted in an initial fair value of $3,266 being allocated to the 2025 Note, and $1,046 allocated to the associated warrants. The Company recorded a non-cash issuance cost of $1,312, representing the difference between the fair value and proceeds received, within Interest expense and other on the consolidated statement of operations. The fair value measurement included the assumption of accrued interest and expense and thus a separate amount was not reflected on the consolidated statement of operations.
During the year ended December 31, 2025, the Company made cash payments of $989. Additionally, $2,591 in aggregate principal and interest were converted into 2,405,573 shares of common stock. As of December 31, 2025, the 2025 Note was fully repaid and all associated warrants fully exercised.
10. INTEREST EXPENSE AND OTHER
Interest expense and other for the years ended December 31, 2025 and 2024 consisted of the following (in thousands):
Year ended December 31,
Common stock purchase agreement costs $ 337 $ 1,124
Debt issuance costs 2,020 —
Expected credit losses 2 35
Loss (gain) on foreign currency 340 (37 )
Interest expense and other $ 2,312 $ 433
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11. STOCKHOLDERS’ EQUITY
The Company is authorized to issue 600,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2025, the Company had 45,169,913 shares of common stock issued and outstanding.
Class A Common Stock —Class A common stock has the following rights:
Voting rights: Each holder of Class A common stock will be entitled to one (1) vote in person or by proxy for each share of the Class A common stock held of record by such holder. The holders of shares of the Class A common stock will not have cumulative voting rights. Except as otherwise required in the Charter or by applicable law, the holders of the Class A common stock vote together as a single class on all matters on which stockholders are generally entitled to vote.
Dividend rights: Subject to any other provisions of the Charter, each holder of Class A common stock will be entitled to receive, in proportion to the number of shares of the Class A common stock held, such dividends and other distributions in cash, stock, or property of the Company when, as and if declared thereon by the Board from time to time out of assets or funds of the Company legally available therefor.
Rights upon liquidation: In the event of any liquidation, dissolution, or winding up (either voluntary or involuntary) of the Company, after payments to creditors of the Company that may at the time be outstanding, and subject to the rights of any holders of the Company preferred stock that may then be outstanding, holders of shares of the Class A common stock will be entitled to receive ratably, in proportion to the number of shares of the Class A common stock held by them, all remaining assets of the Company available for distribution.
Preferred Stock — The Company has the authority, without stockholder approval, to issue shares of preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or more class or series and to fix for each such class or series the designations, preferences, privileges, and restrictions of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference, and the number of shares constituting any series or the designation of any series to the fullest extent permitted by the Delaware General Corporation Law. The issuance of the Company’s preferred stock could have the effect of decreasing the trading price of the Class A common stock, restricting dividends on the capital stock of the Company, diluting the voting power of the Class A common stock, impairing the liquidation rights of the capital stock of the Company, or delaying or preventing a change in control of the Company. Although the Company does not currently intend to issue any shares of preferred stock, the Company may choose to do so in the future.
The Company is authorized to issue up to 1,000,000 shares of preferred stock, each with a par value of $0.0001 per share. As of December 31, 2025, no shares of preferred stock were issued and outstanding.
Warrants —As of December 31, 2025, the Company had 5,555 Private Placement warrants and 255,555 Public warrants outstanding. Each warrant entitles the registered holder to purchase one share of the Company's common stock at a price of $345.00 per share.
In January 2025, in connection with the 2025 Note, the Company issued warrants to the investor. The warrants entitled the investor to purchase up to 805,263 shares of the Company’s common stock at a stock price of $2.22 per share. These warrants were exercised in full on July 28, 2025.
In August 2025, in connection with the lease settlement (see Note 5 for details of the settlement), the Company issued warrants. The warrant entitled the previous landlord to purchase up to 350,000 shares of the Company’s common stock with an exercise price of $2.22 per share, subject to a five year term. As of December 31, 2025, no shares were exercised pursuant to the warrants.
On September 15, 2022, in connection with the issuance of the 2022 Note, the Company issued warrants to the investor. The warrants are immediately exercisable and entitle the investor to purchase up to 58,333 shares of common stock at a price of $105.00 per share, subject to a four year term. These warrants were cancelled on July 28, 2025 and the Company recorded a gain of $64 in other income in the consolidated statements of operations during the year ended December 31, 2025.
Tumim Stone Common Stock Purchase Agreement — On December 8, 2021, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement with Tumim Stone Capital LLC (“Tumim Stone”). Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim Stone, and Tumim Stone is obligated to purchase up to the lesser of (i) $125,000 of the Company’s common stock, or (ii) the Exchange Cap equal to 1,028,847 shares of the Company's common stock, unless the Company’s stockholders approve the issuance of shares in excess of the Exchange Cap, or the average price of all applicable sales of common stock to Tumim Stone under the Purchase Agreement equals or exceeds $148.46 per share. Upon the satisfaction of various commencement conditions, such as the filing of the registration statement which provides for the resale of such shares pursuant to the Registration Rights Agreement, the Company has sole discretion to initiate such sales of common stock over the period of 36 months commencing December 8, 2021. In all instances, the Company may not sell shares of its common stock to Tumim Stone under the Purchase Agreement if doing so would result in Tumim Stone beneficially owning more than 9.99% of its common stock.
The purchase price per share to be purchased by Tumim Stone is equal to the volume-weighted average price for common stock on the applicable purchase date multiplied by 0.9615 (to be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or similar transaction). The maximum number of shares the Company may sell to Tumim Stone on any single business day is the lesser of (i) $20,000 divided by the closing sale price of the common stock on the trading day immediately preceding the purchase date, and (ii) 0.15 multiplied by the average daily trading volume in common stock for the three trading days preceding the purchase date.
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In connection with the Purchase Agreement, the Company issued 10,087 restricted common shares in the Company to Tumim Stone. The Company determined that the right to sell additional shares represents a freestanding put option under ASC 815Derivatives and Hedging, and as such, the financial instrument was classified as a derivative asset with a fair value of zero at inception of the Purchase Agreement on December 8, 2021.
This Purchase Agreement was terminated in July 2024. In total, 996,866 shares were issued under the Tumim Stone Purchase Agreement for gross proceeds totaling $5,516.
New Circle Principal Investments LLC (“New Circle”) Common Stock Purchase Agreement (the “CSPA”) — On July 25, 2024, the Company entered into a CSPA and a Registration Rights Agreement with New Circle. Under the terms and subject to the conditions of the CSPA, the Company has the right, but not the obligation, to sell to New Circle, and New Circle is obligated to purchase up to the lesser of (i) $50,000 of the Company's common stock, or (ii) the Exchange Cap equal to 1,721,755 shares of the Company's common stock, unless the Company's stockholders approve the issuance of shares in excess of the Exchange Cap, or the average price of all applicable sales of common stock to New Circle equals or exceeds $1.41 per share. The Company has sole discretion to initiate such sales of common stock over a period of 36 months. In all instances, the Company may not sell shares of its common stock to New Circle under the CSPA if doing so would result in New Circle beneficially owning more than 4.99% of the Company's common stock.
The purchase price per share to be purchased by New Circle shall equal either (i) the lowest volume-weighted average price for common stock either over a one-day trading period or 15 minutes after the number of intraday shares traded exceeds 500% of the shares included the purchase notice or one hour after the receipt of the purchase notice, or (ii) the volume-weighted average price for common stock for the three consecutive trading days commencing on the purchase notice date multiplied by 97.5%. The maximum number of shares the Company may sell to New Circle on any single business day is the lesser of (i) the number of shares equal to 100% of the average daily trading volume of the common stock of the Company during the five trading days immediately preceding the purchase notice, and (ii) 400,000 shares of common stock.
In connection with the CSPA, the Company issued to New Circle
225,563 shares of common stock in the Company as commitment shares for the facility. At issuance, the
225,563 shares of common stock had a fair value of
$282 and were recorded to Interest expense and other in the Company's consolidated statement of operations and comprehensive loss. The Company determined that the right to sell additional shares represents a freestanding put option under ASC
815,Derivatives and Hedging, and as such, the financial instrument was classified as a derivative asset with a fair value of
zero at inception of the CSPA on
July 25, 2024.
This CSPA agreement was terminated in December 2025. In total, the Company issued 8,980,713 shares of its common stock, including commitment shares, for gross proceeds totaling $27,754.
Alliance Global Partners (“A.G.P.”) At Market Issuance Sales Agreement (the “ATM Agreement”) — On September 12, 2024, the Company entered into the ATM and a Registration Rights Agreement with A.G.P. Under the terms and subject to the conditions of the ATM Agreement, the Company may issue and sell through A.G.P. the Company's common stock having an aggregate value offering price of up to $2,600 ("Placement Shares") from time to time through an "at-the-market" equity offering program. The Company has sole discretion to initiate such sales of common stock over a period of 36 months. Under the terms and subject to the conditions of the ATM Agreement, the Company will set the parameters for the sale of shares, including the number or dollar amount of Placement Shares to be issued, the time period during which sales are requested to be made, any limitation on the number or dollar amount of Placement Shares that may be sold in any one trading day and any minimum price below which sales may not be made. The Company will pay a cash commission rate of up to 3.0% of the gross proceeds from the sale of Placement Shares sold pursuant to the ATM Agreement. In December 2025, the Company increased the aggregate amount available under the ATM program to $125,000, following multiple prior increases since the original agreement.
The Company sold 23,220,784 shares through A.G.P. under the ATM Agreement for gross proceeds totaling $68,436 through December 31, 2025. The remaining availability under the agreement is $56,564 as of December 31, 2025.
Registered Direct Offering — On May 29, 2024, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 727,706 shares of the Company's common stock, par value $0.0001 per share, at a per share purchase price of $3.4480 for gross proceeds totaling $2,509.
12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) by component for the years ended December 31, 2025 and 2024 are as follows (in thousands):
Unrealized gains
(losses) on
available-for-sale
securities
Other comprehensive income (loss) before reclassifications, net of tax (5 )
Other comprehensive income (loss) before reclassifications, net of tax 25
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13. NET LOSS PER SHARE
The following table sets forth the basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except per share data):
Year ended December 31,
Numerator:
Net loss attributable to common stockholders $ (33,958 ) $ (35,460 )
Denominator:
Due to net losses for the years ended December 31, 2025 and 2024, basic and diluted net loss per share were the same, as the effect of all potentially dilutive securities would have been anti-dilutive. The following table sets forth the anti-dilutive common share equivalents for the periods listed:
Year ended December 31,
14. STOCK-BASED COMPENSATION
The Company has six equity incentive plans, the 2014 US LADAR Inc. Equity Incentive Plan (the “2014 Plan”), the 2016 Stock Plan (the “2016 Plan”), the 2021 Equity Incentive Plan (the “Incentive Plan”), the 2022 Employee Stock Purchase Plan (the "ESPP"), the 2023 CEO Inducement Grant Plan (the "CEO Plan"), and the 2025 Employment Inducement Incentive Award Plan, (“2025 EIIAP”). On August 16,2021, the Company’s 2014 Plan and 2016 Plan were terminated in connection with the closing of the business combination as defined in Note 1, but continue to govern the terms of outstanding equity awards that were granted prior to the termination of the plans.
2014 Plan and 2016 Plan
The 2014 and 2016 Plan provide for the grant of incentive stock options to employees only and non-statutory stock options and RSUs to employees, directors, and consultants of the Company. As of August 16,2021, the Company no longer grants equity awards pursuant to the 2014 Plan or 2016 Plan, and as of December 31, 2025, 58,056 RSUs were granted.
Under the 2016 Plan, options to purchase common stock generally vest over four years with 25% vesting at the end of the first year and the rest vesting ratably over the next three years. RSUs generally vest 25% at the end of the first year with the remaining RSUs vesting ratably over the next three years or they vest ratably over the four years. Under the 2014 Plan, the vesting period for options to purchase common stock range from immediate to four years. Under each plan, the options expire ten years from the date of grant.
2021 Equity Incentive Plan
The Incentive Plan became effective immediately upon the closing of the business combination on August 16,2021 and initially reserved 514,681 shares of common stock for issuance thereunder. The Incentive Plan includes an evergreen provision that provides for an annual increase in the number of shares of common stock available for issuance thereunder beginning on January 1, 2022 and ending on January 1, 2032, equal to 5% of the shares of the Company’s common stock outstanding on December 31, 2021 for the first year and by 3% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year for each year thereafter, or a lesser number of shares as determined by the Board of Directors. Since January 1, 2022, the Board of Directors have authorized the addition of 1,549,868 shares of common stock to be added to the Incentive Plan for issuance.
Under the Incentive Plan, RSU’s vest depending on their vesting schedule. For newly hired employees, RSU’s generally vest 25% during the quarterly release date following the recipient’s one year anniversary of their start date. The remaining amounts generally vest quarterly over the next two years. For existing employees, these RSUs generally vest quarterly over one year. The fair value of the RSU is equal to the fair value of the Company’s common stock on the date of grant.
The Company adds back cancelled, unvested shares and those shares withheld in connection with the net share settlement of vested RSU's to the pool of shares available for future grants. As of December 31, 2025, 3,225,045 RSUs were granted to certain individuals under the Incentive Plan.
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2022 Employee Stock Purchase Plan
On May 10, 2022, the Company's stockholders approved the 2022 Employee Stock Purchase Plan (the "ESPP"), authorizing 66,666 shares of common stock to be reserved for issuance under the ESPP. The number of shares reserved and available for issuance under the ESPP shall be cumulatively increased by the 1% of the number of shares issued and outstanding on December 31 of the preceding calendar year for each year thereafter, or a lesser number of shares as determined by the Board of Directors. Since January 1, 2023, the Board of Directors have authorized the addition of 252,806 shares of common stock to be added to the ESPP for issuance.
The ESPP provides an offering period of 24 months, with four purchase periods that are generally six months long and end on April 30 and October 31 of each year. The first purchase period to the Company's employees to purchase shares under the ESPP began on November 1, 2022. Each employee who is a participant in the ESPP may purchase shares by authorizing contributions at a minimum of 1% up to a maximum of 10% of his or her compensation for each pay period, to a maximum of $15 per purchase period and $25 per year, which will then be used to purchase shares on the last business day of the purchase period at a price equal to 85% of the fair market value of common stock on the offering date or the exercise date whichever is less.
During the years ended December 31, 2025 and 2024, 147,397 and 107,336 shares, respectively, were purchased under the ESPP. As of December 31, 2025 and 2024, the Company has withheld $49 and $41 of contributions from its employees within accrued expenses and other current liabilities on the consolidated balance sheets.