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 2022, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Annual Report, including our consolidated financial statements and accompanying notes.
All dollar amounts expressed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands of dollars, except for per share amounts and unless otherwise specified.
Business Combination and Public Company Costs
As a result of the Business Combination, which closed on August 16, 2021, a subsidiary of CF Finance Acquisition Corp III, or CF III, Meliora Merger Sub, Inc., merged with and into AEye, Inc., then known as AEye Technologies, Inc., or AEye Technologies, with AEye Technologies continuing as the surviving entity as a wholly owned subsidiary of CF III, and CF III thereafter operating under the new name AEye, Inc., or AEye, or the combined entity.
The Business Combination was accounted for as a reverse recapitalization, in accordance with U.S. GAAP. Under this method of accounting, AEye Technologies was treated as the accounting acquirer, meaning CF III was treated as the acquired company for financial reporting purposes. This determination is primarily based on AEye Technologies’ stockholders comprising a relative majority of the voting power of the combined entity and having the ability to nominate the majority of the governing body of the combined entity. Additionally, AEye Technologies’ senior management comprises the senior management of the combined entity and AEye Technologies’ operations comprise the ongoing operations of the combined entity. Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of AEye Technologies, and the Business Combination will be treated as the equivalent of AEye Technologies issuing stock for the net assets of CF III, accompanied by a recapitalization. The most significant change in AEye Technologies’ financial position and results of the business combination was an increase in cash of $256,811 before transaction costs. Total non-recurring transaction costs incurred for this transaction were $52,661.
Upon the closing of the Business Combination, our common stock and warrants began trading under the symbols “LIDR” and “LIDRW,” respectively, on the Nasdaq Stock Market LLC, or Nasdaq. We anticipate that we will continue to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We have incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
Key Factors Affecting AEye’s Operating Results
We believe that our future performance and success depends to a substantial extent on our ability to capitalize on the following opportunities, which in turn is subject to significant risks and challenges, including those discussed below and the risk factors described in the section of this Annual Report on Form 10-K entitled “Risk Factors.”
We are subject to those risks common in the technology industry and also those risks common to early stage companies including, but not limited to, the possibility of not being able to successfully develop or commercialize our products; secure additional capital in a timely manner in order to meet operating cash flow needs; secure a "design win" with automotive OEMs and their suppliers; attract new customers and retain our existing customers; develop and protect our intellectual property; comply with existing and new or modified laws and regulations applicable to our business; maintain and enhance the value of our reputation and brand; hire, integrate, and retain talented people at all levels of our organization; and successfully develop new solutions to enhance the
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experience of, and deliver value to, our customers.
Market Trends and Uncertainties
We anticipate growing demand for our 4SightTM Intelligent Sensing Platform across two major markets, Automotive and Industrial. We also anticipate the total addressable market for lidar-based perception technology will grow to $42 billion by 2030. Within those markets, we are targeting attractive segments including advanced driver-assistance systems, or ADAS, autonomous driving, commercial trucking, robo-taxis, and various Industrial market segments such as mining, aerospace, defense, railway, and intelligent transportation systems, or ITS. This provides us with multiple opportunities for sustained growth by enabling new applications and product features across these market segments. However, as our customers continue R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market and customer adoption. In the Automotive market for example, which accounted for 52% and 76% of revenue in 2022 and 2021, respectively, our growth and financial performance will be heavily influenced by our ability to successfully integrate into OEM programs that require years of development, testing, and validation. Because of the size and complexity of these OEM programs, we see our existing Tier 1 partnerships as a substantial competitive advantage given their large scale, mass-production capabilities, and existing OEM customer relationships. Our primary focus in the Automotive market is on ADAS for passenger and commercial vehicle autonomy, particularly highway autonomy applications. We believe that growth in that market is driven by both more stringent safety regulations and consumer demand for vehicles offering increased safety. We will need to anticipate and adapt to any changes in the regulatory environment, as well as changes in consumer demand in order to take advantage of this opportunity.
Additionally, we are increasing our investments in international operations and partnerships that will position us to expand our business globally and meet growing demand in international markets. This is an important part of our core strategy and may expose us to additional factors such as foreign currency risk, additional operating costs, and other risks and challenges that may impact our ability to meet projected sales and margin targets.
Partnerships and Commercialization
Our technology is designed to be a key enabler of in certain Automotive and Industrial market applications. Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers. The timing of these design wins varies based on the market and application. Achieving a design win with an OEM within the Automotive market may take considerably longer than a design win with customers in the Industrial market. We consider design wins to be critical to our future success, although the revenue generated by each design win and the time necessary to achieve such a win can vary significantly, making it difficult to predict our financial performance.
We believe our revenue and profitability will also be dependent upon our success in licensing our technology to Tier 1 automotive suppliers, such as Continental, which represented 51% and 55% of 2022 and 2021 revenue, respectively, that intend to use our technology in volume production of lidar sensors for OEMs. Delays of autonomy programs by OEMs that we are currently or will be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the timeframe we anticipate. Our overall revenue and profitability will also be dependent upon both our success in selling our lidar solutions to customers in the Industrial market.
Gross Margin Improvement
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. 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 sell our own lidar solutions to customers in the Industrial market utilizing lower-cost components that are sourced, in part, from the Tier 2 automotive supply chain and assembled by our contract manufacturing partners. If our Tier 1 partners in the Automotive market do not achieve the volumes that we expect, then the cost of the components we use to address the Industrial market may not decrease to the extent we anticipate and may impact our gross margins and our ability to achieve profitability in the future.
To date, our revenue has been generated through development contracts with OEMs and Tier 1 suppliers, as well as unit sales of our products to Industrial customers. These development contracts primarily focus on customization of our proprietary 4Sight capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of
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particular perception capabilities to meet specific customer needs. In general, development contracts that require more complex configurations have higher prices. We expect development contracts to remain a significant part of our business in the near-term, but represent a smaller share of our total revenue over time, as we increase our focus on technology licensing and product sales. We expect our gross margins from the sale of products to improve over time as we outsource volume production of our lidar sensors to contract manufacturers, which we anticipate will both increase unit volumes and reduce the cost per unit. In September 2021, we commenced our transition process to contract manufacturers, and we completed the first phase of this transition in late 2022.
Investment and Innovation
Our proprietary adaptive, intelligent lidar technology delivers industry-leading performance that helps to solve the most difficult challenges in delivering partial or full autonomy. While traditional sensing systems passively collect data, our active 4SightTM Intelligent Sensing Platform leverages principles from automated targeting systems and biomimicry to scan the environment, while intelligently focusing on what matters most in order to enable safer, smarter, and faster decisions in complex scenarios.
We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position. This is further dependent on the investments we make in R&D. 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, and generate strong market demand for our products. If we fail to do this, our leading market position and revenue may be adversely affected, and our investments in that area will not be recovered.
Basis of Presentation
We currently conduct our business through one operating segment.
Components of Results of Operations
Total Revenues
We categorize our revenue as (1) prototype sales and (2) development contracts. In 2022 and 2021, our prototype sales revenue primarily related to unit sales of the company’s 4Sight product. Revenue from prototype sales is typically recognized at a point in time when the control of goods is transferred to the customer, generally upon delivery or shipment to the customer.
Development contracts represented the majority of our total revenues in 2022 and 2021. Revenue from development and/or collaboration arrangement contracts are earned from R&D activities and collaboration with OEMs and Tier 1 suppliers. These contracts primarily focus on customization of our proprietary 4Sight capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs. Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time. This assessment is made at the outset of the arrangement for each performance obligation.
Cost of Revenue
Cost of revenue includes the costs directly associated with the production of prototypes and certain costs associated with development contracts. Such costs for prototypes include direct materials, direct labor, indirect labor, inventory write downs, warranty expense, and allocation of overhead. Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts.
Operating Expenses
Research and Development
Our research and development, or R&D efforts are focused primarily on hardware, software, and system engineering related to the design and development of our advanced lidar solutions. R&D expenses include:
•personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation expense;
•third-party engineering and contractor costs;
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•lab equipment;
•engineering parts and test units;
•new hardware and software expenses; and
•allocated overhead expenses.
R&D costs are expensed as they are incurred. We expect our investment in R&D will continue to grow over time because we believe that investment in R&D is essential to maintain our position as a provider of one of the most advanced lidar solutions available.
Sales and Marketing
Our sales and marketing, or S&M, efforts are focused primarily on sales, business development, and marketing programs in pursuit of revenue contracts from potential and existing customers. S&M expenses include:
•personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation expense;
•demonstration equipment;
•trade shows expenses, advertising, and promotions expenses for press releases and other public relations services; and
•allocated overhead expenses.
We expect our S&M expenses to grow over time as we continue to expand our sales and marketing efforts to support the anticipated growth of our business.
General and Administrative
Our general and administrative, or G&A, spending supports all business functions. G&A expenses include:
•personnel-related costs, including salaries, benefits, bonuses, and stock-based compensation expense for executive, finance, legal, human resources, technical support, and other administrative personnel;
•consulting, accounting, audit, legal, and other professional fees;
•insurance premiums, software and computer equipment costs, general office expenses; and
•allocated overhead expenses.
We expect our G&A expenses to increase for the foreseeable future as we support the growth of our business, and as a result of operating as a public company, including additional costs and expenses associated with compliance with the rules and regulations of the SEC, legal, audit, insurance, investor relations, and other administrative and professional services.
Change in Fair Value of Convertible Note, Embedded Derivative Liability, and Warrant Liabilities
Changes in fair value of the convertible note, embedded derivative, and warrant liabilities are the result of the change in fair value at each reporting date. The convertible note, embedded derivative, and warrant liabilities are recorded at fair value for each reporting period, and the changes in fair value are reported as other income (expense) during the period. We have also elected to record interest expense on the 2022 convertible note as changes in fair value. Upon the closing of the Business Combination, the embedded derivative was settled, the pre-combination common stock warrants and Series A preferred stock warrants were net settled and converted to Class A common stock and private placement warrants were acquired.
Interest Income, Interest Expense and Other
Interest income consists primarily of interest earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash and cash equivalents balances and market rates. Interest expense consists primarily of convertible note issuance costs and amortization of premiums on marketable securities, net of accretion discounts.
Upon the closing of the Business Combination, our borrowings were repaid with any remaining debt issuance costs and discounts expensed. The pre-Business Combination convertible notes and accrued interest were settled and converted to Class A common stock. See additional discussion in Note 2 to our consolidated financial statements.
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Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
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, 2022 and 2021 (in thousands, except for percentages):
Year ended December 31, Change Change
Provision for income tax expense 58 — 58 100 %
Revenue
Prototype Sales
Prototype sales increased by $739, or 74%, to $1,743 for the year ended December 31, 2022 from $1,004 for the year ended December 31, 2021. This increase was primarily due to an increase in 4Sight unit sales.
Development Contracts
Development contracts decreased by $99, or 5%, to $1,904 for the year ended December 31, 2022, from $2,003 for the year ended December 31, 2021. The decrease was primarily due to less revenue recognized in the current year from a large Tier 1 Automotive Supplier contract.
Cost of Revenue
Cost of revenue increased by $5,095, or 140%, to $8,732 for the year ended December 31, 2022, from $3,637 for the year ended December 31, 2021. This increase was primarily due to the cost of revenue associated with the Tier 1 Automotive Supplier contract in the current period, increased prototype sales, and increased labor and warranty costs.
Operating Expenses
Research and Development
Research and development expenses increased by $11,101, or 42%, to $37,644 for the year ended
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December 31, 2022, from $26,543 for the year ended December 31, 2021. This increase was primarily driven by increases in stock-based compensation expense of $5,026, personnel costs of $4,804, information technology expense of $780, engineering parts of $757, rent and facilities expense of $953, and travel expense of $377. These increases were offset by decreases in third party research and development work of $1,530.
Sales and Marketing
Total sales and marketing expenses increased by $8,769, or 83%, to $19,317 for the year ended December 31, 2022, from $10,548 for the year ended December 31, 2021. This increase was primarily due to increases in stock-based compensation of $3,315, personnel costs of $2,813, marketing program spend of $973, travel expense of $809, information technology expense of $428, and rent and facilities expense of $306.
General and Administrative
Total general and administrative expenses increased by $11,248, or 44%, to $36,762 for the year ended December 31, 2022, from $25,514 for the year ended December 31, 2021. This increase was primarily due to an increase in stock-based compensation of $5,471, directors' and officers' insurance premium of $2,467, professional accounting and legal fees of $2,387, investor and stock related expenses of $622, and travel expense of $348.
Change in Fair Value of Convertible Note, Embedded Derivative, and Warrant Liabilities
Change in fair value of convertible note, embedded derivative, and warrant liabilities (see Note 3) decreased by $237, or 106%, to $14 for the year ended December 31, 2022, from $223 for the year ended December 31, 2021. This decrease was primarily due to a decrease in the fair values of the warrant liabilities compared to prior period, offset by an increase in fair value of the 2022 convertible note.
Gain on PPP Loan Forgiveness
Gain on PPP loan forgiveness decreased by $2,297, or 100%, for the year ended December 31, 2022. In June 2021 the full principal and interest of the PPP loan was forgiven.
Interest Income and Other
Interest income and other increased by $984, or 175%, to $1,545 for the year ended December 31, 2022, from $561 for the year ended December 31, 2021. This increase was primarily due to the interest earned on our marketable securities of $1,545.
Interest Expense and Other
Interest expense and other decreased by $3,478, or 72%, to $1,379 for the year ended December 31, 2022, from $4,857 for the year ended December 31, 2021. This decrease was primarily due to $2,818 of prior period interest expense not recurring in the current year due to the payoff of the loan balances in the prior year, as well as $1,583 of costs associated with the Tumim Stone Common Stock Purchase Agreement in the prior year which did not recur in the current year. This is offset by $474 in convertible note issuance costs and an increase of $322 in amortization of premiums on marketable securities, net of accretion of discounts, in the current period.
Provision for Income Tax Expense
Provision for income tax expenses increased to $58 for the year ended December 31, 2022, from $0 for the year ended December 31, 2021. This increase is due to changes in pretax income (loss) in the U.S. and certain foreign entities and changes in tax rates.
Net Loss
Net loss increased by $33,703, or 52%, to $98,714 for the year ended December 31, 2022, from $65,011 for the year ended December 31, 2021. This increase was primarily due to an increase in operating expenses.
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Liquidity and Capital Resources
Sources of Liquidity
Our capital requirements will depend on many factors, including sales volume, the timing and extent of spending to support R&D efforts, investments in information technology systems, the expansion of sales and marketing activities, and market adoption of new and enhanced products and features. As of December 31, 2022, our cash, cash equivalents, and marketable securities totaled $94.2 million.
To date, our principal sources of liquidity have been proceeds received from the issuance of equity. In December 2021, we entered into a Common Stock Purchase Agreement, or CSPA, with Tumim Stone Capital LLC, or Tumim Stone, pursuant to which we have the right, but not the obligation, to issue and sell to Tumim Stone over a 36-month period up to $125,000 of the Company’s common stock. On May 6, 2022, the Company filed a Registration Statement on Form S-1, which related to the offer and resale of up to 30,865,419 shares of our common stock to be purchased by Tumim Stone, pursuant to the CSPA. As of December 31, 2022, 1,145,000 shares were issued under this CSPA. In September 2022, we entered into a Securities Purchase Agreement, or SPA, with an investor allowing for the sale and issuance of two convertible notes, each with cash proceeds of $10,000, for a total of $20,000 in proceeds between the two issuances (each, a "Note Closing"). On September 15, 2022, we closed the first Note Closing with the investor and received proceeds of $9,850 (net of fees paid to the investor). The second Note Closing may occur, at our option, after the ninetieth (90th) calendar day after the first Note Closing provided that we meet certain equity conditions. Until we can generate sufficient revenue from the sale of our products to cover operating expenses, working capital, and capital expenditures, we expect the funds raised in the Business Combination and PIPE financing, as well as any future funds from the CSPA and SPA, and other potential sources of capital, to fund our near-term cash needs.
If we are required to raise additional funds by issuing equity securities, dilution of stockholders will result. Any debt securities issued may also have rights, preferences, and privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.
For the years ended December 31, 2022 and 2021, we had a net loss of $98,714 and $65,011, respectively. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development, selling and marketing, and general and administrative expenses will continue to be significant and, as a result, we may need additional capital resources to fund our operations. We believe that the net proceeds from the Business Combination, CSPA, and SPA, together with our existing cash, cash equivalents, and marketable securities will enable us to fund our operating expenses, working capital, and capital expenditure requirements for a period of at least twelve months from the date of this Annual Report on Form 10-K. Our plans for the use of cash in the long-term (beyond twelve months from this Annual Report) are similarly related to funding operating expenses and capital expenditure requirements as we continue to scale the business. For additional information regarding our cash requirements from lease obligations and contractual obligations, see Notes 7 and 21 in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
On March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or FDIC, was appointed as receiver. We have deposit accounts at SVB. The standard deposit insurance amount is up to $250 thousand per depositor, per insured bank, for each account ownership category. As of March 10, 2023, we had approximately $9.6 million in deposit accounts at SVB, of which approximately $2.2 million is held as collateral for a letter of credit under our lease agreements. We do not maintain any other material accounts or lines of credit with SVB. On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023.
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Cash Flow Summary
Twelve months ended December 31,
(in thousands)
Net cash provided by (used in):
Operating Activities
For the year ended December 31, 2022, net cash used in operating activities was $71,649. Factors affecting our operating cash flows during this period were net loss of $98,714, offset by stock-based compensation of $23,959, depreciation and amortization of $1,422, noncash lease expense of $1,338, amortization of premiums on marketable securities, net of change in accrued interest, of $1,086, inventory write-downs of $675, and issuance costs of $474. Within operating activities, the net changes in operating assets and liabilities were cash used of $1,980, primarily driven by increases in inventories and prepaid and other current assets of $2,634 and $1,130, respectively, and decreases in operating lease liabilities and contract liabilities of $1,341 and $1,931, respectively. Cash used was offset by cash provided by decreases in accounts receivable and other noncurrent assets of $3,605 and $527, respectively, and increases in accounts payable of $839.
For the year ended December 31, 2021, net cash used in operating activities was $55,703. Factors affecting our operating cash flows during this period were net loss of $65,011 and gain on PPP loan forgiveness of $2,297, offset by stock-based compensation of $10,018 and depreciation and amortization of $1,014. Within operating activities, the net changes in operating assets and liabilities were cash used of $4,064, primarily driven by increases in prepaids and other current assets of $3,655, accounts receivable of $5,496, and accounts payable of $557.
Investing Activities
For the year ended December 31, 2022, net cash provided by investing activities was $68,463. The primary factors affecting net cash provided by investing activities during this period were proceeds from redemptions and maturities of marketable securities of $96,592, offset by the purchases of available-for-sale debt securities of $23,929 and property and equipment purchases of $4,200.
For the year ended December 31, 2021, net cash used in investing activities was $151,546. The primary factor affecting net cash used in investing activities during this period was the purchase of available-for-sale debt securities of $150,525.
Financing Activities
For the year ended December 31, 2022, net cash provided by financing activities was $8,067. The primary factors affecting our financing cash flows during this period were net proceeds from the issuance of convertible notes of $9,850, proceeds from issuance of common stock under the CSPA of $2,891, and proceeds from the exercise of stock options of $1,174, offset by taxes paid related to the net share settlement of equity awards of $4,621 and payments for convertible note redemptions of $874.
For the year ended December 31, 2021, net cash provided by financing activities was $207,084. The primary factors affecting our financing cash flows during this period were the proceeds from the Business Combination and PIPE financing of $256,811 and proceeds from a bank loan of $10,000, partially offset by transaction costs related to the Business Combination of $52,372 and principal payments on bank loans of $13,333.
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
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accounting policies involve the greatest degree of judgement and complexity and have the greatest potential impact on our consolidated financial statements.
Revenue
We recognize revenues from R&D and development arrangements with OEMs and suppliers to the OEMs and from the sale of prototype products. Revenue represents the amount of expected consideration we are entitled to receive upon the transfer of promised goods or services in the ordinary course of our activities and is recorded net of sales taxes. We recognize revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, we also consider the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment; (ii) transfer of legal title; (iii) physical possession; (iv) significant risks and rewards of ownership; and (v) acceptance of the goods or service. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress toward complete satisfaction of a performance obligation.
The application of various accounting principles related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, complex development arrangements with nonstandard terms and conditions may require relevant contract interpretation to determine the appropriate accounting treatment, including whether the promised goods and services specified in a multiple element arrangement are capable of being distinct and accounted for as separate performance obligations. Determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment. When a contract involves multiple performance obligations, 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. For multiple element arrangements, the transaction price is allocated to each performance obligation using the relative stand-alone selling price, or SSP. Judgment is required to determine SSP for each distinct performance obligation. We use a range of amounts to estimate SSP when products and services are sold separately. In instances where SSP is not directly observable, we determine SSP using information that may include other observable inputs, or use a residual approach to estimate the SSP for performance obligations where SSP is highly variable or uncertain. Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.
Emerging Growth Company Status
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Following the closing of the Business Combination, we will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which the Company has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which the Company has issued more than $1.0 billion in non-convertible debt in the prior three-year period, or (iv) December 31, 2025. We expect to continue to take advantage of the benefits of the extended transition period, although we may decide to adopt such new or revised accounting standards early to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted
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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, 2022, we had cash, cash equivalents, and marketable securities of $94,199, 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 2022 Convertible Note bears a fixed interest rate, and therefore is not subject to 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, 2022, there were fourcustomers each accounting for 10% or more of our accounts receivable and two vendors each 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. At December 31, 2022 and 2021, we did not have write-offs and did not record an allowance for doubtful accounts on the consolidated balance sheets.
Foreign Currency Exchange Risk
Our foreign currency exchange gains and losses have been generated primarily from fluctuations in the euro versus the US dollar, and the Japanese yen versus the US dollar. The functional currency of all our entities is the US 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) 54
Consolidated Balance Sheets 55
Consolidated Statements of Operations and Comprehensive Loss 56
Consolidated Statements of Stockholders’ Equity (Deficit) 57
Consolidated Statements of Cash Flows 58
Notes to Consolidated Financial Statements 59
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and Board of Directors of AEye, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AEye, Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 15, 2023
We have served as the Company’s auditor since 2018.
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AEYE, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and par value)
As of December 31,
ASSETS
CURRENT ASSETS:
Prepaid and other current assets 6,181 5,051
Right-of-use assets 15,502 —
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accrued expenses and other current liabilities 9,764 8,739
Convertible notes 8,594 —
Operating lease liabilities, noncurrent 16,681 —
Deferred rent, noncurrent — 3,032
Other noncurrent liabilities 126 786
COMMITMENTS AND CONTINGENCIES (Note 21)
STOCKHOLDERS’ EQUITY:
Accumulated other comprehensive loss (1,279) (391)
Total liabilities and stockholders’ equity $ 133,340 $ 186,153
The accompanying notes are an integral part of these consolidated financial statements.
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Twelve Months Ended December 31,
REVENUE:
OPERATING EXPENSES:
OTHER INCOME (EXPENSE):
Gain on PPP loan forgiveness — 2,297
Interest expense and other (1,379) (4,857)
Total other income (expense), net 152 (1,776)
Provision for income tax expense 58 —
Change in fair value due to instrument-specific credit risk, net of tax (25) —
Net losses reclassified into income during the period, net of tax 77 —
PER SHARE DATA
Net loss per common share (basic and diluted) $ (0.63) $ (0.60)
The accompanying notes are an integral part of these consolidated financial statements.
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Shares Amount Shares Amount
Issuance of common stock upon exercise of public warrants — — 10 — — — — —
Conversions of convertible note into common stock — — 1,029,699 — 600 — — 600
Other comprehensive loss, net of tax — — — — — (888) — (888)
Shares Amount Shares Amount
Repurchase of stock options — — — — (1,500) — — (1,500)
Unrealized loss on available-for-sale debt securities — — — — — (391) — (391)
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)
Twelve months ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,422 1,014
Noncash lease expense relating to operating lease right-of-use assets 1,338 —
Noncash common stock purchase agreement costs — 1,583
Inventory write-downs, net of scrapped inventory 675 1,203
Noncash gain on PPP loan forgiveness — (2,297)
Convertible note issuance costs 474 —
Amortization of debt issuance costs — 725
Amortization of debt discount — 752
Realized loss on redemption of marketable securities 77 —
Changes in operating assets and liabilities:
Inventories, current and noncurrent, net (2,634) (2,633)
Prepaid and other current assets (1,130) (3,655)
Accrued expenses and other current liabilities 85 5,496
Operating lease liabilities (1,341) —
Deferred rent — (538)
Net cash used in operating activities (71,649) (55,703)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,200) (1,021)
Proceeds from redemptions and maturities of marketable securities 96,592 —
Purchase of available-for-sale securities (23,929) (150,525)
Net cash provided by (used in) investing activities 68,463 (151,546)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,174 150
Proceeds from Business Combination and PIPE financing — 256,811
Transaction costs related to Business Combination and PIPE financing — (52,372)
Proceeds from the issuance of convertible notes 9,850 8,045
Payments for convertible note redemptions (874) —
Payment of 2022 convertible note issuance costs (324) —
Proceeds from bank loan — 10,000
Principal payments on bank loans — (13,333)
Payment of debt issuance costs — (717)
Taxes paid related to the net share settlement of equity awards (4,621) —
Repurchase of stock options — (1,500)
Net cash provided by financing activities 8,067 207,084
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 16,333 16,498
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Ending $ 21,214 $ 16,333
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 133 $ 358
Cash paid for income taxes 20 —
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
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. (the “Company” or “AEye”) is a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems (ADAS), and robotic vision applications. AEye’s software-definable 4SightTM Intelligent Sensing Platform combines solid-state active lidar, an optionally fused low-light HD camera, and integrated deterministic artificial intelligence to capture more intelligent information with less data, enabling faster, more accurate, and more reliable perception of the surroundings.
On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc. (“AEye Technologies”), entered into the Agreement and Plan of Merger (the “Merger Agreement”) with CF Finance Acquisition Corp. III, a Delaware corporation (“CF III”), now known as AEye, Inc., and Meliora Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CF III (“Merger Sub”). Based on CF III’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On August 16, 2021 (the “Closing Date”), CF III closed the business combination (the “Business Combination,” and together with the other transactions contemplated by the Merger Agreement, the “Transactions”) pursuant to the Merger Agreement, and Merger Sub was merged with and into AEye Technologies with AEye Technologies surviving the merger as a wholly owned subsidiary of CF III. On the Closing Date, and in connection with the closing of the Transactions (the “Closing”), CF III changed its name to AEye, Inc.
The Company’s common stock and public warrants are now 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., the combined entity following the Business Combination. Refer to Note 2 for further discussion of the Business Combination.
Principle of Consolidation and Liquidity
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company has funded its operations primarily through the Business Combination and issuances of stock. As of December 31, 2022, the Company’s existing sources of liquidity included cash, cash equivalents and marketable securities of $94.2 million. The Company has incurred losses and negative cash flows from operations. As the Company incurs additional losses in the future, it may need to raise additional capital through issuances of equity and debt. However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least the next 12 months.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. Advances to suppliers has been broken out from Other within Footnote 6, Prepaid and other current assets. Amortization of premiums on marketable securities, net within Footnote 13, Interest Expense and Other is now presented as Amortization of premiums on marketable securities, net of accretion and discounts.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to
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comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. This may make it difficult or impossible to compare the Company’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include investments, fair value of the 2022 convertible note, embedded derivative and warrant liabilities, and stock-based compensation.
Segment Reporting
The Company manages its business on the basis of one reportable and operating segment. Operating segments are defined as components of an enterprise with separate financial information, and are evaluated regularly by the chief operating decision maker, which is the Company's Chief Executive Officer (“CEO”). The CEO decides how to allocate resources and assesses the Company’s performance based upon consolidated financial information. All of the Company's sales were made to customers (in USD) located in the U.S., Europe, and Asia through AEye, Inc. Of the $7,665 of net property and equipment as of December 31, 2022, $7,207 is located in the United States, $108 is located in Europe, and $350 is located in Asia.
Cash, Cash Equivalents, and Marketable Securities
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.
Restricted Cash
Restricted cash of $2,150 and $2,150 as of December 31, 2022 and 2021, respectively consists of funds that are contractually restricted as to usage or withdrawal due to a contractual agreement. The Company has a letter of credit to the amount of $2,150 with Silicon Valley Bank as security for the payment of rent on its headquarters in Dublin, CA which require lease payments through 2026.
The Company determines current or non-current classification of restricted cash based on the expected duration of the restriction.
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Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and marketable securities, and accounts receivable. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, to limit the exposure of each investment. The Company’s marketable securities have investment grade ratings when purchased which mitigates risk.
The Company’s accounts receivables are derived from customers located in the U.S., Europe, and Asia. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral.
The Company’s concentration of risk related to accounts receivable and accounts payable was determined by evaluating the number of customers and vendors accounting for 10% or more of accounts receivable (“AR”) and accounts payable (“AP”). As of December 31, 2022, AEye had four customers, each accounting for 10% or more of AR and two vendors, each accounting for 10% or more of AP. As of December 31, 2021, AEye had one customer accounting for 10% or more of AR and two vendors accounting for 10% or more of AP. During the years ended December 31, 2022 and 2021, the Company did not have any write offs of accounts receivable and at December 31, 2022 and 2021, did not record an allowance for doubtful accounts as all accounts receivable amounts were expected to be collected.
For the years ended December 31, 2022 and 2021, revenue from the Company’s major customers representing 10% or more of total revenue was as follows:
Twelve months ended December 31,
Customer B 13 % *
Customer C 10 % *
*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 3.
Derivatives
The Company accounts for derivative instruments in accordance with Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging (“ASC 815”). The Company’s objectives and strategies for using derivative instruments, and how the derivative instruments and related hedged items are accounted for affect the financial statements.
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk. Terms of convertible debt instruments are reviewed to determine whether they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract and recorded on the consolidated balance sheets at fair value.
An evaluation of specifically identified conditions is made to determine whether the fair value of the derivative issued is required to be classified as equity or as a derivative liability. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. For additional discussion of derivatives, see Note 3.
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
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flows.
If necessary, accounts receivable are reduced by an allowance for doubtful accounts, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable. The Company reviews the need for an allowance for doubtful accounts quarterly based on historical experience with each customer and the specifics of each arrangement. During the years ended December 31, 2022 and 2021, the Company did not have any write-offs and at December 31, 2022 and 2021 did not record an allowance for doubtful accounts as all accounts receivable amounts are expected to be collected.
Inventories, net
Inventories consist of raw materials, work in progress, and finished goods. Inventories are stated at the lower of cost and net realizable value and costs are computed under the standard cost method. Inventories that are not expected to be consumed in the next 12 months are classified within Other noncurrent assets. Prototype inventory cost consists of the associated raw material, direct labor, indirect labor and other overhead costs. The Company evaluates the need for inventory write-downs associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis and records a provision for excess and obsolete inventory to adjust the carrying value of inventory as needed. The Company's inventory as of December 31, 2022 and 2021 was written down by $833 and $1,122, respectively, in order to record inventory at its estimated net realizable value.
Deferred Transaction Costs
The Company capitalized qualified legal, accounting, and other direct costs related to the Business Combination which were deferred until completion of the Business Combination. In August 2021, upon the completion of the Business Combination, all deferred costs were offset against proceeds from the Business Combination and the private investment in public equity (“PIPE”) financing.
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 to7 years. Leasehold improvements are amortized over the shorter of the lease term or expected useful life of the improvements. Construction in progress is the construction or development of property and equipment that have not yet been placed in service. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are impaired, 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. There are no impairment charges recorded in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021.
Warrant Liability
The company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance. The warrants assumed in connection with the 2022 convertible note are accounted for in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. The Private Placement Warrants issued in connection with the IPO are classified as liabilities. The Company adjusts the warrants to fair value at each reporting period. The warrant liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations.
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Leases
The Company determines if an arrangement is or contains a lease at inception. The Company evaluates the classification of leases at commencement, and, as necessary, at modification. Operating leases, consisting of office leases, are included in Right-of-use ("ROU") assets, Accrued expenses and other current liabilities, and Operating lease liabilities, noncurrent, on the Company's consolidated balance sheets. The Company did not have any finance leases as of December 31, 2022 and December 31, 2021. ROU assets represent the Company's right to an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made prior to lease commencement and initial direct costs and excludes lease incentives. Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. As most of the Company's leases do not include an implicit rate, the Company uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date in determining the present value of future payments. The incremental borrowing rate is a hypothetical rate based on the Company's understanding of what its credit rating would be for a secured borrowing when the lease was executed. The Company's lease term includes the noncancelable period, any rent-free periods provided by the lessor, and options to extend or terminate the lease when it is reasonably certain that it will exercise that option. At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations and comprehensive loss. The Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real estate leases.
Convertible Notes
The Company elected to early adopt Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The Company has elected to apply the fair value measurement option to the 2022 convertible note on the date that the Company first recognized the convertible note on September 15, 2022. The Company acknowledges that its election to apply the fair value option is irrevocable. The Company recognized costs incurred upon issuance of the 2022 convertible note as an expense in its consolidated income statement for the twelve months ended December 31, 2022. The 2022 convertible note is classified and presented as a current liability on the Consolidated Balance Sheet as of December 31, 2022. Changes in fair value are recorded in the consolidated statements of operations and changes in fair value related to credit risk are recorded in other comprehensive loss. The Company reports interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes in the consolidated statement of operations.
Revenue Recognition
The Company generates revenues from the sale of prototypes and from development arrangements with automakers and suppliers to automakers. Under FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company accounts for such arrangements as contracts with customers and accordingly recognizes revenue by applying the following steps:
•Identification of the contract, or contracts, with a customer
•Identification of the performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, the Company satisfies a performance obligation
Revenue from the sale of prototypes is generally recognized at a point in time when control of the goods is transferred. Certain prototype sales contracts include services to install and commission or customize the prototypes for customers. Revenues from these services are categorized as prototype revenue and recognized either over time as the services are being performed, or at a point in time, depending on the nature of the services and whether the criteria for recording revenue over time are met in accordance with ASC 606.
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Revenue from development arrangements is either recognized at a point in time or over time depending on the performance obligations in the contract. For performance obligations that are satisfied over time, such as services which require engineering and development based on customer requirements, the Company recognizes revenue using an input method based on contract costs incurred to date compared to total estimated contract costs.
See Note 18, Revenue, for additional information related to the application of ASC 606 to the Company’s primary revenue streams.
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 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 10 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. The Company did not have any contract assets as of December 31, 2022. 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.
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.
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.
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Judgments and estimates. Accounting for contracts recognized over time under ASC 606 involves the use of various techniques to estimate total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a contract will be revised in the near-term. The Company reviews and updates its contract-related estimates quarterly, and records adjustments as needed. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized in the period in which the revisions to the estimates are made.
Cost of Revenue
Cost of revenue primarily consists of costs directly associated with the production of those prototypes that are held for sale and certain costs associated with development arrangements. Such costs for prototypes are direct materials, direct labor, indirect labor, warranty expense, and allocation of overhead. Direct and indirect labor includes personnel-related costs and packaging and procurement respectively associated with the production of prototypes. Other costs such as indirect manufacturing costs are recognized in research and development and general and administrative expenses on the consolidated statements of operations and comprehensive loss. Costs associated with development arrangements include the direct costs and allocation of overhead costs involved in the execution of the contract.
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 Black-Scholes option-pricing model requires the input of subjective assumptions, including the option’s expected term and the price volatility of the underlying stock.
Stock options and RSUs for all periods prior to the Business Combination have been retroactively restated to give effect to the recapitalization. Refer to Note 2 for further discussion of the equity recapitalization resulting from the Business Combination.
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
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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 on the income tax expense line in the accompanying consolidated statements of operations and comprehensive loss. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheets. As of and for the year ended December 31, 2022 and 2021 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 Class A common stock outstanding. As the merger has been accounted for as a reverse capitalization, the consolidated financial statements of the merged entity reflects the continuation of the pre-merger AEye Technologies financial statements, which has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, CF III. As a result, net loss per share was also restated for periods ended prior to the Business Combination. See Note 2 for details on this recapitalization and Note 16 for the retroactive restatement of net loss per share.
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 Loss
Comprehensive loss includes all changes in equity (net assets) from non-owner sources during a period, changes in fair value due to instrument-specific credit risk, and net unrealized gains (losses) on available-for-sale debt securities.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which has subsequently been amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, and ASU No. 2019-11. The objective of the guidance in ASU 2016-13 is to allow entities to recognize estimated credit losses in the period that the change in valuation occurs. ASU 2016-13 requires an entity to present financial assets measured on an amortized cost basis on the balance sheet net of an allowance for credit losses. Available-for-sale and held to maturity debt securities are also required to be held net of an allowance for credit losses. For public business entities, this standard is effective for fiscal years beginning after December 15, 2019. For smaller reporting companies, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures and will adopt the guidance on January 1, 2023 as permitted for smaller reporting companies.
Recently Adopted Accounting Guidance
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02. FASB ASC Topic 842, Leases (“ASC 842”) supersedes the previous accounting guidance for leases included within ASC 840. The new guidance generally requires an entity to recognize operating and financing lease liabilities and corresponding right-of-use assets on its balance sheet, as well as recognize the associated lease expenses on its statements of operations in a manner similar to that required under current accounting rules. The guidance requires a
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modified retrospective transition approach with application in all comparative periods presented (the “Comparative Method”), or alternatively, as of the effective date as the date of initial application without restating comparative period financial statements (the “Effective Date Method”).
The Company adopted the new standard on January 1, 2022 using the Effective Date Method. Upon adoption, the Company recorded net ROU assets and lease liabilities totaling approximately $16,284 and $19,921, respectively, and a reversal of deferred rent of $3,032; there were no cumulative effect adjustments as of January 1, 2022. The standard did not have a material effect on the Company's consolidated statements of operations and comprehensive loss and the consolidated statement of cash flows. The Company elected the transition practical expedient package which, among other things, allows the carryforward of historical lease classifications. The Company will continue to apply Topic 840 prior to January 1, 2022, including Topic 840 disclosure requirements, in the comparative periods presented. The company did not elect to apply the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment of right-of-use assets.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by, among other things, eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2021. The Company adopted ASU 2019-12 as of January 1, 2022, and the Company's adoption did not have a material impact on the consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023 for smaller reporting companies, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company adopted this standard using the modified retrospective method, effective January 1, 2022, and the Company's adoption did not have a material impact on the consolidated financial statements.
2.RECAPITALIZATION
As discussed in Note 1, on August 16, 2021, AEye Technologies and CF III closed the Business Combination, with AEye Technologies surviving the Business Combination as a wholly owned subsidiary of CF III. As part of the closing of the Business Combination, CF III changed its name to AEye, Inc. (the “Combined Entity”).
Immediately prior to the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 301,000,000 shares, of which 300,000,000 shares were designated common stock, $0.0001 par value per share, and of which 1,000,000 shares were designated preferred stock, $0.0001 par value per share.
The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with US GAAP. Under this method of accounting, AEye Technologies was treated as the accounting acquirer and CF III was treated as the acquired company for financial reporting purposes under FASB ASC Topic 805, Business Combinations (“ASC 805”). This determination is primarily based on AEye Technologies’ stockholders comprising a majority of the voting power of the Combined Entity, and having the ability to nominate the majority of the governing body of the Combined Entity, AEye Technologies’ senior management comprising the senior management of the Combined Entity and AEye Technologies’ operations comprising the ongoing operations of the Combined Entity. Accordingly, for accounting purposes, the financial statements of the Combined Entity represented a continuation of the financial statements of AEye Technologies and the Business Combination was treated as the equivalent of AEye Technologies issuing stock for the net assets of CF III, accompanied by a recapitalization. The net assets of CF III are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of AEye Technologies in future reports of the Combined Entity. Loss per share and stockholders’ equity (deficit), prior to the Business Combination, have been retroactively converted into 3.7208 shares (the “Exchange Ratio”).
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Immediately prior to the closing of the Business Combination, all outstanding principal and unpaid accrued interest of the 2020 Notes were ultimately converted into 5,584,308 shares of AEye Technologies’ common stock and subsequently converted to Class A common stock of the Company (see Note 14). Separately, each issued and outstanding share of AEye Technologies’ 16,383,725 redeemable convertible preferred stock was converted into shares of AEye Technologies’ common stock based on a one-to-one ratio. The consolidated financial statements are accounted for with a retrospective application of the Business Combination that results in 16,383,725 shares of redeemable convertible preferred stock converting into common stock of the Company. Upon the closing of the Business Combination, each share of AEye Technologies common stock issued and outstanding was canceled and converted into the right to receive 3.7208 shares of CF III’s common stock (the “Per Share Merger Consideration”).
Immediately prior to the closing of the Business Combination, the Board approved the net-exercise of common stock warrants and Series A preferred warrants which provides for the cashless exercise of 61,612 common stock warrants into 57,770 shares of AEye Technologies common stock and 7,353 Series A preferred warrants into 6,949 shares of AEye Technologies common stock at the Transaction Price of 37.21 per share. Upon the Closing, the combined 64,719 shares were cancelled and exchanged for 240,806 shares of the Company’s Class A common stock, after giving effect to the Exchange Ratio.
Immediately prior to the closing of the Business Combination, CF III’s amended and restated certificate of incorporation, dated November 12, 2020 (the “Charter”), was further amended and restated to eliminate the Class B common stock (after giving effect to the conversion of each outstanding share of Class B common stock immediately prior to the closing of the Business Combination into one share of Class A common stock).
PIPE Subscription Agreement
Contemporaneously with the execution of the Merger Agreement, CF III entered into separate PIPE Subscription Agreements in a private placement with a number of PIPE investors, pursuant to which the PIPE Investors agreed to purchase, and CF III agreed to sell to the PIPE Investors, an aggregate of 22,000,000 shares of common stock, for a purchase price of $10.00 per share and an aggregate purchase price of $220,000. CF III also entered into a PIPE Subscription Agreement for 500,000 shares of common stock, for a purchase price of $10.00 per share and an aggregate purchase price of $5,000 with an investor who defaulted on the Closing under the PIPE Subscription Agreement. The Company has initiated litigation to enforce the terms of that investor's PIPE Subscription Agreement.
Redemption
Certain CF III shareholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 19,355,365 shares of CF III Class A common stock for an aggregate payment of $195,498, at a redemption price of $10.10per share based on the Trust Account balance as of August 11, 2021.
Public and Private Placement Warrants
CF III Warrants issued in connection with the IPO (“Public Warrants”) and in connection with the private placement units held by the Sponsor (“Private Placement Warrants”) to purchase shares of the Company’s common stock, at an exercise price of $11.50 per share, remained outstanding after the closing of the Business Combination. The warrants became exercisable 30 days after the completion of the Business Combination, subject to other conditions, including with respect to the effectiveness of a registration statement covering the shares of common stock underlying such warrants, and will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation. The Public Warrants are classified as equity and valued based on the instrument’s publicly listed trading price. The Private Placement Warrants are classified as liabilities and measured at fair value, with changes in fair value each period reported in the consolidated statements of operations and comprehensive loss. The Company uses the Public Warrants listed trading price to value the Private Placement Warrants each reporting period.
Transaction Costs
In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $52,661 related to the equity issuance, consisting primarily of investment banking, legal, accounting, and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds upon the closing of the Business Combination. Transaction costs that were not directly related to the Business Combination of approximately $2,198 were expensed.
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Transaction Proceeds
Upon closing of the Business Combination, the Company received gross proceeds of $256,811 from the Business Combination and PIPE financing, offset by offerings costs of $52,661. The following table reconciles the elements of the Business Combination to the consolidated statements of cash flows and the consolidated statements of changes in stockholders’ deficit for period ended December 31, 2021 (in thousands, except share data):
Cash - CF III's trust and cash (net of redemption) $ 36,811
Cash - Private offering 220,000
Less: transaction costs and advisory fees paid (52,661)
Net Business Combination and private offering $ 204,150
The number of shares of common stock issued immediately following the closing of the Business Combination were:
Less: redemption of CF III Class A common stock 19,355,365
Class A common stock of CF III 3,644,635
CF III Private Placement shares 500,000
Business Combination and PIPE shares 31,894,635
The number of Legacy AEye shares was determined as follows:
AEye shares AEye shares, effected for Exchange Ratio
3.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:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—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.
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
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The Company's financial instruments that are not re-measured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses and other current liabilities, 2020 convertible notes, and long-term debt. The carrying values of these financial instruments approximate their fair values.
The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
Fair Value Measured as of December 31, 2022 Using:
Assets
Level 1
Level 2
Liabilities
Level 2
Private placement warrant liability $ — $ — $ 7 $ — $ —
Level 3
Convertible notes — — 8,594 — —
Derivative warrant liability — — 119 — —
Total financial liabilities $ — $ — $ 9,200 $ — $ —
Fair Value Measured as of December 31, 2021 Using:
Assets
Level 1
Level 2
Liabilities
Level 2
Private placement warrant liability $ — $ — $ 155 $ — $ —
Total financial liabilities $ — $ — $ 155 $ — $ —
As of December 31, 2022, 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
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securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Marketable Securities: The Company holds financial assets consisting of fixed-income U.S. government agency securities, corporate bonds, commercial paper 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 marketsare used to value marketable securities.
2022 Convertible Note: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $10,500,000 (the "2022 Note"). The Company elected the fair value option to account for the 2022 Note. The fair value estimate of the 2022 Note was based on a binomial lattice model, which represents Level 3 measurements. Significant assumptions include the discount rate used in the model, remaining term, stock price, and volatility. The discount rate is derived from the estimated credit spread and the risk-free interest rate, which is based on interpolated U.S. Treasury rates, commensurate with a similar term to the Note. The remaining term is calculated as the remaining contractual term of the Note. The stock price is based on the publicly traded price of our Common Stock as of the measurement date. The Company estimated the volatility for the Note based on the historical and implied volatilities of the Company's publicly traded common stock under the symbol "LIDR." The changes in fair value are recognized in other income (expense) for each reporting period. Refer to Note 12 for details of the terms and conditions of the 2022 Note.
Derivative Warrant Liability: The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note. The warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of our Common Stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock under the symbol "LIDR." The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. The term to expiration was calculated as the contractual term of the warrants of 4 years. Finally, the Company does not anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the consolidated balance sheets.
Private Placement Warrant Liability: The Private Placement Warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of AEye public warrants traded under the symbol "LIDRW". Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the consolidated balance sheets.
For the years ended December 31, 2022 and 2021, there were no transfers between Level 1 and Level 2 inputs.
The following table presents a summary of the changes in fair value of the Company’s Level 3 financial
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instruments for the year ended December 31, 2022:
2022 Convertible Note Derivative Warrant Liability Total
Balance at December 31, 2021 $ — $ — $ —
Payments or conversions (1,474) — (1,474)
Change in fair value included in other income (expense) 531 (369) 162
The key inputs into the binomial-lattice model for the convertible note valued at December 31, 2022 are as follows:
Remaining term (years) 1.2
Expected volatility 90.4 %
Risk-free interest rate 4.6 %
Dividend yield — %
Estimated credit spread 37.7 %
The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at December 31, 2022 are as follows:
Expected term (years) 3.7
Expected volatility 90.4 %
Risk-free interest rate 4.1 %
Dividend yield — %
Exercise price $ 3.50
If factors or assumptions change, the estimated fair values could be materially different. The value of the Company’s derivative warrant liability would increase if a higher risk-free interest rate was used, and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the liability, and a lower volatility assumption would decrease the value of the liability. The value of the Company's convertible note liability would increase if a lower discount rate was used, and would decrease if a higher discount rate was used.
4.CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash, cash equivalents (which consists entirely of money market funds) and restricted cash as of December 31, 2022 and 2021 were as follows (in thousands):
As of December 31,
Total cash, cash equivalents, and restricted cash $ 21,214 $ 16,333
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5.INVENTORIES
Inventory, net of write-downs, as of December 31, 2022 and 2021 were as follows (in thousands):
As of December 31,
The Company also had $1,491 and $0 of non-current inventory (raw materials) classified within Other noncurrent assets on the consolidated balance sheet as of December 31, 2022 and December 31, 2021, respectively.
6.PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets as of December 31, 2022 and 2021 were as follows (in thousands):
As of December 31,
Total prepaid and other current assets $ 6,181 $ 5,051
7.LEASES
The Company primarily leases office facilities in Northern California under noncancelable operating leases expiring at various dates through November 2026. Some of the Company's leases include options to renew, with renewal terms that, if exercised by the Company, extend the lease term from two to five years. The exercise of these renewal options is at the Company's discretion. The Company's lease agreements do not contain any material terms and conditions of residual value guarantees or material restrictive covenants. The Company's short-term lease expense was determined to not be material.
The components of operating lease expenses for the twelve months ended December 31, 2022 were as follows (in thousands):
Twelve months ended
Operating lease cost $ 2,382
Variable lease cost 241
Total operating lease cost $ 2,623
Supplemental cash flow information for the twelve months ended December 31, 2022 were as follows (in thousands):
Cash paid for operating leases included in operating cash flows $ (1,341)
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Supplemental balance sheet information related to operating leases was as follows (in thousands):
Operating lease right-of-use assets $ 15,502
Operating lease liabilities:
Operating lease liabilities, current $ 2,455
Operating lease liabilities, non-current 16,681
Total operating lease liabilities $ 19,136
Weighted average remaining lease term (in years) 9.26
Weighted average discount rate 5.35 %
Maturities of lease liabilities were as follows (in thousands).
Years ended - December 31:
Total lease payments 24,146
Less amount to discount to present value (5,010)
Present value of lease liabilities $ 19,136
Disclosures under ASC 840, Leases
The company recognizes rent expense on a straight-line basis over the lease period. Rent expense is principally the leased office space and was $1,876 within operating expenses in the consolidated statements of operations and comprehensive loss for the twelve months ended December 31, 2021. Deferred rent liabilities, including unamortized leasehold improvement incentives was $3,637 as of December 31, 2021 within the consolidated balance sheet.
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Future minimum payments as of December 31, 2021 under the noncancellable operating leases are as follows (in thousands):
Operating Leases
Years ended:
Total minimum lease payments 11,970
8.PROPERTY AND EQUIPMENT, NET
Property and equipment, net as of December 31, 2022 and 2021 consists of the following (in thousands):
As of December 31,
Computers, software and related equipment 432 268
Office furniture and equipment 651 341
Less accumulated depreciation and amortization (3,023) (2,204)
Property and equipment, net $ 7,665 $ 5,129
Depreciation and amortization expense related to property and equipment amounted to $1,422 and $1,014 recognized within research and development, sales and marketing, and general and administrative expenses within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021. $604 of property and equipment was disposed in the year ended December 31, 2022. Disposals of property and equipment were not material the year ended December 31, 2021.
9.OTHER NONCURRENT ASSETS
Other noncurrent assets as of December 31, 2022 and 2021 were as follows (in thousands):
As of December 31,
Non-current inventory $ 1,491 $ —
Long-term prepaid expenses 901 1,376
Total other noncurrent assets $ 2,473 $ 1,509
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10.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of December 31, 2022 and 2021 were as follows (in thousands):
As of December 31,
Accrued purchases and other $ 4,092 $ 1,947
Operating lease liabilities - current 2,455 —
Income tax payable 41 —
Deferred rent - current — 605
Total accrued expenses and other current liabilities $ 9,764 $ 8,739
11.BORROWINGS
Silicon Valley Bank Financing Facility
On April 26, 2021, the Company entered into a loan and security agreement (the “Loan Agreement”) with an affiliate of Silicon Valley Bank (“SVB” or the “Lender”) in connection with the non-binding term sheet for a financing facility of up to $10,000 entered into on March 18, 2021. Under the Loan Agreement, the Lender was obligated to make a term loan advance to the Company of $4,000. Subject to the terms and conditions of the Loan Agreement and, upon the Company’s request, the Lender was obligated to make one term loan advance to the Company of $6,000. The interest rate on the term loan advance is calculated at 8% per annum and payable monthly, in arrears. Upon entering the Loan Agreement, $4,000 was drawn. On May 13, 2021, the additional $6,000 was drawn. The balance of $10,540 for the financing facility, including interest, was repaid on August 20, 2021.
Silicon Valley Bank Credit Facility
On August 16, 2019, the Company entered into a loan and security agreement with SVB. Borrowings under this facility are secured by substantially all the Company’s assets, excluding intellectual property. The term loan’s borrowings are subject to certain financial covenants and restrictions. The Company complied with all financial covenants and restrictions.
The balance of $2,333 for the term loan was repaid on September 7, 2021.
Paycheck Protection Program (PPP) Loan
On June 19, 2021, the Company received notice of the Paycheck Protection Program (PPP) forgiveness payment made to SVB by the Small Business Administration in the amount of $2,270 in principal and $27 in interest. This amount represents the forgiveness of the total PPP loan the Company received in 2020 under the PPP Loan provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
As of December 31, 2022 and 2021, there were no borrowings outstanding.
12.CONVERTIBLE NOTES
2020 Convertible Notes
During 2020, the Company entered into various convertible note agreements (“2020 Notes”) under which the Company may issue convertible equity instruments having an aggregate principal amount of up to $40,000, a 3% accruing dividend (“accrued interest”) and a maturity date of October 31, 2021.
In connection with the Business Combination on August 16, 2021, all outstanding principal of $38,045 and unpaid accrued interest on the 2020 Notes were converted into AEye Technologies’ preferred stock and
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subsequently were converted into 20,778,097 shares of the Company’s Class A common stock. Accordingly, at December 31, 2022 and December 31, 2021, the convertible notes balance was $0.
2022 Convertible Note
On September 14, 2022, the Company entered into a Securities Purchase Agreement with an investor allowing for the sale and issue of two convertible notes, each with a principal balance of $10,500 and cash proceeds of $10,000, for a total of $20,000 in proceeds between the two issuances (each, a "Note Closing"). The first Note Closing ("First Closing") occurred on September 15, 2022, and the Company entered into a Senior Unsecured Convertible Note with the investor pursuant to which the Company issued to the investor one convertible note ("2022 Note") with a principal balance of $10,500 for cash proceeds of $10,000. As part of the First Closing, the Company also issued warrants to the investor - see Note 14 for further details. The second Note Closing ("Second Closing") may occur, at the Company's option, no earlier than the ninetieth (90th) calendar day after the First Closing, provided that the Company meets certain equity conditions. Additional warrants would be issued to the investor upon the Second Closing.
The 2022 Note bears interest at an annual rate of 5.0%, in addition to an original issue discount of 4.76%, and has a maturity date of March 15, 2024 ("Maturity Date"). The interest may be settled in cash or shares at the option of the Company and is payable together with monthly redemptions of the outstanding principal amount of the Note.
Beginning December 15, 2022, and the first of each subsequent month (each a "Monthly Redemption Date" or an "Installment Date"), the Company shall redeem the Monthly Redemption Amount until the 2022 Note is fully redeemed, payable in cash or, so long as certain equity conditions are met, shares of Common Stock at the option of the Company. The equity conditions that must be met in order for the Company to settle the Monthly Redemption Amount in shares include requirements for the daily volume weighted average price of the Company's Common Stock to exceed $0.33 and the average daily trading volume of the Company's Common Stock to exceed $500,000 for the twenty (20) trading days prior to the applicable Installment Notice Date (which is the sixth (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 2022 Note, accrued but unpaid interest, and late fees, if any. If the Company elects to settle such redemptions in shares of Common Stock, the number of shares to be settled shall be based on an Installment Conversion Price equal to the lower of (i) $2.50 or (ii) 95% of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the applicable Monthly Redemption Date. If the Company elects to settle redemptions in cash, the Monthly Redemption Amount shall include a 5% premium.
The investor is permitted to accelerate up to four (4) Monthly Redemption Amounts in any calendar month (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price, subject to a $2,800 limit per month. The Acceleration Conversion Price shall be the lower of (i) the Installment Conversion Price for such current Installment Date or (ii) the greater of $0.30 and 95% of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the Acceleration Date.
If, at any time while the 2022 Note is outstanding, the Company carries out one or more capital raises in excess of $5,000 in gross proceeds each, the investor shall have the right to require the Company to first use up to 30% of the gross proceeds of each capital raise to redeem all or a portion of the 2022 Note for an amount in cash (such amount, the "Mandatory Redemption Amount") equal to the sum of (a) 1.05 multiplied by the sum of the principal amount subject to the Mandatory Redemption and accrued but unpaid interest and (b) 1.00 multiplied by the sum of the Make-Whole amount, if any, and any other amounts, if any, then owing to the investor in respect of the 2022 Note (a "Mandatory Redemption"). The Make-Whole amount is defined as an amount equal to the additional interest that would accrue under the 2022 Note assuming for calculation purposes that the principal of the 2022 Note remained outstanding through the Maturity Date.
The 2022 Note may not be converted into Common Stock to the extent such conversion would result in the investor and its affiliates having beneficial ownership of more than 9.99% of our then outstanding shares of Common Stock.
The Company and investor entered into a registration rights agreement (the “Registration Rights Agreement”) to which the Company is required to file a registration statement registering the resale by the investor of any shares of the Company’s common stock issuable upon conversion, including the resale of shares issuable upon exercise of the associated warrants. The Company is required to meet certain obligations with respect to the timeliness of the filing and effectiveness of the registration statement. The Company filed such registration statement on October 19, 2022, which was declared effective by the U.S. Securities and Exchange Commission on October 27, 2022.
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The Company elected to apply the fair value option to the measurement of the 2022 Note. As a result of adopting the fair value option no embedded derivatives should be bifurcated from the 2022 Note. The Company classifies the 2022 Note as a liability at fair value and will remeasure the 2022 Note to fair value at each reporting period. The total proceeds received from the investor of $10,000 should be allocated between the 2022 Note and the related warrants issued using the relative fair value method at issuance date. This resulted in an initial fair value of$9,512 being allocated to the 2022 Note, and $488 allocated to the associated warrants (see Note 3 for further details). The Company recorded total issuance costs of $474, representing placement agent and legal fees, within Interest expense and other on the consolidated statement of operations. The fair value measurement includes the assumption of accrued interest and expense and thus a separate amount is not reflected on the consolidated statement of operations.
As of December 31, 2022, the 2022 Note has outstanding principal of $9,200 and is recorded as a current liability at fair value of $8,594.
The Company evaluated the Second Closing and associated warrants to be a contingently issuable financial asset with a fair value of zero at inception in accordance with ASC 815-40 Contracts in an Entity's own Equity. The contingently issuable warrants are considered issued for accounting purposes - see Note 14 for further details.
Embedded Derivative Liability
As outlined in the indenture governing the 2020 Notes, the 2020 Notes are automatically convertible, contingent upon the occurrence of certain events, most notably a financing (a “Next Financing”), defined as the issuance and sale of additional preferred stock (“Financing Stock”). The redemption price is defined as a price per share equal to 90% of the price per share paid by the other purchasers of the Financing Stock sold in the Next Financing. The 2020 Notes are redeemable into the number of shares of Financing Stock needed to settle the aggregate amount of principal and unpaid interest owed to the holder of such notes, which is based on the ultimate price per share associated with the Financing Stock. Consequently, the 2020 Notes are considered stock settled debt.
This redemption feature embedded in the 2020 Notes is considered to be a derivative that is required to be separately accounted for at fair value and subsequently remeasured to fair value at each reporting date. Accordingly, upon issuance of the 2020 Notes, the Company recognized the fair value associated with the embedded derivative which resulted in an embedded derivative liability of approximately $1,520, with an equal and offsetting debt discount. Upon the closing of the Business Combination on August 16, 2021, the embedded derivative was settled. Accordingly, at December 31, 2022 and December 31, 2021, the fair value of the embedded derivative liability was $0.
13.INTEREST EXPENSE AND OTHER
Interest expense and other for the years ended December 31, 2022 and 2021 consisted of the following (in thousands):
Twelve months ended December 31,
Interest on term loan debt $ — $ 630
Interest on PPP loan — 11
Interest on 2020 convertible note — 700
Amortization of debt issuance costs — 725
2022 convertible note issuance costs 474 —
Amortization of debt discount — 752
Realized losses on redemptions of marketable securities 77 —
Common stock purchase agreement transaction costs 29 1,583
Interest expense and other $ 1,379 $ 4,857
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14.STOCKHOLDERS’ EQUITY
The Company is authorized to issue 300,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2022, the Company had 163,099,124 shares of common stock issued and outstanding.
Class A Common Stock —Class A common stock has the following rights:
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 Amended 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 Amended 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.
As discussed in Note 2, Recapitalization, the Company has retroactively adjusted the preferred shares issued and outstanding prior to August 16, 2021 to give effect to the Exchange Ratio established in the Merger Agreement to determine the number of shares of common stock into which they were converted.
Upon the Closing on August 16, 2021, all of the outstanding shares of preferred stock were cancelled and exchanged for shares of the surviving Company’s Class A common stock at the Exchange Ratio of 3.7208, the exchange rate established in the Merger Agreement.
Preferred stock shares Exchange ratio Common stock shares
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, 2022, no shares of preferred stock were issued and outstanding.
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Warrants —As of December 31, 2022, the Company had 166,666 Private Placement warrants and 7,666,656 Public warrants outstanding. Each warrant entitles the registered holder to purchase one share of the Company's common stock at a price of $11.50 per share.
On September 15, 2022, in connection with the issuance of the 2022 Note, the Company issued warrants to the investor. The warrants are immediately exercisable and entitle the investor to purchase up to 1,750,000 shares of Common Stock at a price of $3.50 per share, subject to a four (4) year term. As of December 31, 2022, no shares were exercised pursuant to the warrants.
Contingent Warrants - As of December 31, 2022, the Company had 1,750,000 contingently issuable warrants outstanding associated with the potential Second Closing under the Securities Purchase Agreement. These warrants will become exercisable by the investor if and when the Second Closing occurs. They will entitle the investor to purchase up to 1,750,000 shares of Common Stock at a price of $3.50 per share, subject to a four (4) year term.
Tumim Stone Common Stock Purchase Agreement — On December 8, 2021, the Company entered into a Common Stock Purchase Agreement (the “CSPA”) and a Registration Rights Agreement with Tumim Stone Capital LLC (“Tumim Stone”). Under the terms and subject to the conditions of the CSPA, the Company has the right, but not the obligation, to sell to Tumim Stone, and Tumim Stone is obligated to purchase up to the lesser of (i) $125,000 of the Company’s common stock, or (ii) the Exchange Cap equal to 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the CSPA, unless the Company’s stockholders approve the issuance of shares in excess of the Exchange Cap, or the average price of all applicable sales of common stock to Tumim Stone under the CSPA equals or exceeds $4.9485. Upon the satisfaction of various commencement conditions, such as the filing of the registration statement which provides for the resale of such shares pursuant to the Registration Rights Agreement, the Company has sole discretion to initiate such sales of common stock over the period of 36 months commencing December 8, 2021. In all instances, the Company may not sell shares of its common stock to Tumim Stone under the CSPA if doing so would result in Tumim Stone beneficially owning more than 9.99% of its common stock.
The purchase price per share to be purchased by Tumim is equal to the volume-weighted average price for common stock on the applicable purchase date multiplied by 0.9615 (to be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or similar transaction). The maximum number of shares the Company may sell to Tumim Stone on any single business day is the lesser of (i) $20,000 divided by the closing sale price of the common stock on the trading day immediately preceding the purchase date, and (ii) 0.15 multiplied by the average daily trading volume in common stock for the three trading days preceding the purchase date.
In connection with the CSPA, the Company issued to Tumim Stone 302,634 restricted common shares in the Company. At issuance, the 302,634 shares of common stock had a fair value of $1,583 and were recorded to Interest expense and other in the Company’s consolidated statements of operations and comprehensive loss. The Company determined that the right to sell additional shares represents a freestanding put option under ASC 815 Derivatives and Hedging, and as such, the financial instrument was classified as a derivative asset with a fair value of zero at inception of the CSPA on December 8, 2021.
On May 6, 2022, the Company filed a Registration Statement on Form S-1, which relates to the offer and resale of up to 30,865,419 shares of AEye's common stock by to Tumim Stone, the selling stockholder. During the twelve months ended December 31, 2022, the company issued 1,145,000 shares of its common stock under the CSPA for proceeds of $2,891.
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15.ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component for the twelve months ended December 31, 2022 and 2021 are as follows (in thousands):
Balance at December 31, 2020 $ — $ — $ —
Other comprehensive loss, net of tax (391) — (391)
Other comprehensive loss before reclassifications, net of tax (940) (25) (965)
Net other comprehensive loss (863) (25) (888)
The $77 reclassified out of accumulated other comprehensive loss in the twelve months ended December 31, 2022 is included within Interest expense and other on the consolidated statement of operations.
16.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):
Twelve months ended December 31,
Numerator:
Net loss attributable to common stockholders $ (98,714) $ (65,011)