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What changed in AEye, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AEye, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+436 added−371 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-16)

Top changes in AEye, Inc.'s 2023 10-K

436 paragraphs added · 371 removed · 288 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+21 added−21 removed32 unchanged
Biggest changeIndustrial We believe there are a broad range of use cases for lidar in Industrial markets, including but not limited to rail, construction, mining, agriculture, aerospace, defense, and intelligent transportation systems. • Rail — detecting and acquiring railway debris at long distances to stop the train to prevent derailment; assessing tracks for maintenance needs; and monitoring platform safety. • Construction, Mining, & Agriculture — detecting and acquiring obstacles, pedestrians, and animals in the path of large, autonomous construction and mining vehicles and agricultural equipment. • Aerospace & Defense — detecting wires or other obstacles above ground for helicopters; automating logistics vehicles for the military; enabling mid-air refueling. • Intelligent Transportation Systems (ITS) — intersection traffic management, tolling automation, smart mobility infrastructure, autonomous/smart parking, and work zone safety. 4 Commercial Overview We employ two different go-to-market models: one model addresses the traditional Automotive end market and the other model addresses the Industrial end market.
Biggest changeSuch use cases may include: • Rail — detecting and acquiring railway debris at long distances to stop the train to prevent derailment; assessing tracks for maintenance needs; and monitoring platform safety. • Construction, Mining, & Agriculture — detecting and acquiring obstacles, pedestrians, and animals in the path of large, autonomous construction and mining vehicles and agricultural equipment. • Aerospace & Defense — detecting wires or other obstacles above ground for helicopters; automating logistics vehicles for the military; enabling mid-air refueling. • Intelligent Transportation Systems (ITS) — intersection traffic management, highway monitoring, tolling automation, smart mobility infrastructure, autonomous/smart parking, and work zone safety.
Item 1. Business General We are a provider of high-performance, active lidar systems technology for vehicle autonomy, advanced driver-assistance systems, or ADAS, and robotic vision applications. We have developed an artificial intelligence technology that enables adaptive “intelligent sensing,” differentiating us in the marketplace from our competition.
Item 1. Business General We are a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems, or ADAS, and robotic vision applications. We have developed an artificial intelligence technology that enables adaptive “intelligent sensing,” differentiating us in the marketplace from our competition.
This level is particularly beneficial for repetitive motion applications, such as power line or pipeline inspection (which cameras alone cannot achieve), or robots in a closed-loop environment that is unlikely to experience anything unexpected. Through 4Sight at Design, the customers’ unique, deterministic scan pattern will give them precisely the information they need for their repetitive pattern application. 2.
This level is particularly beneficial for repetitive motion applications, such as power line or pipeline inspection (which cameras alone cannot achieve), or robots in a closed-loop environment that is unlikely to experience 6 anything unexpected. Through 4Sight at Design, the customers’ unique, deterministic scan pattern will give them precisely the information they need for their repetitive pattern application. 2.
The system is intelligent, with the ability to interrogate the scene, and perpetually optimize its own scan patterns and data collection to focus on the information that matters most and respond based on firmware feedback. 6 4. Predictive 4Sight: Predictive 4Sight (motion forecasting) can take what is offered in Responsive 4Sight but look ahead enabling even smarter interrogation.
The system is intelligent, with the ability to interrogate the scene, and perpetually optimize its own scan patterns and data collection to focus on the information that matters most and respond based on firmware feedback. 4. Predictive 4Sight: Predictive 4Sight (motion forecasting) can take what is offered in Responsive 4Sight but look ahead enabling even smarter interrogation.
Our R&D team is responsible for both developing new technology, as well as enhancing the capabilities and performance of our lidar hardware, firmware, and perception software. Our R&D team also has responsibility for identifying, defining, and prototyping advanced components that we may utilize from key suppliers, as well as for our design-for-manufacturability, or DFM, and other critical capabilities.
Our R&D team is responsible for both developing new technology, as well as enhancing the capabilities and performance of our lidar hardware, firmware, and software. Our R&D team also has responsibility for identifying, defining, and prototyping advanced components that we may utilize from key suppliers, as well as for our design-for-manufacturability, or DFM, and other critical capabilities.
The obligations of motor vehicle equipment manufacturers include regular reporting under the Transportation Recall Enhancement, Accountability and Documentation Act, or TREAD, as well as strict recall and reporting requirements for any defects related to highway safety or any non-compliance with the Federal Motor Vehicle Safety Standards. Similar such reporting and recall requirements exist in foreign markets.
The obligations of motor vehicle equipment manufacturers include regular reporting under the Transportation Recall Enhancement, Accountability and Documentation Act, or TREAD, as well as strict recall and reporting requirements 9 for any defects related to highway safety or any non-compliance with the Federal Motor Vehicle Safety Standards. Similar such reporting and recall requirements exist in foreign markets.
The 4Sight Intelligent Sensing Platform enables the integration of various types of sensor inputs, including camera, lidar, and radar. Our 4Sight products are developed on this framework and incorporate both camera and lidar sensors. 5 The 4Sight Intelligent Sensing Platform leverages a bistatic architecture, allowing for physically separated transmit and receive paths.
The 4Sight Intelligent Sensing Platform enables the integration of various types of sensor inputs, including camera, lidar, and radar. Our 4Sight products are developed on this framework and incorporate both camera and lidar sensors. The 4Sight Intelligent Sensing Platform leverages a bistatic architecture, allowing for physically separated transmit and receive paths.
We believe that our modular, patented design, our embedded artificial intelligence, which is inherently enabled by our unique product, and our strong R&D capabilities will enable us to remain a technology leader in the lidar market.
We believe that our modular, patented design, our embedded deterministic artificial intelligence, which is inherently enabled by our unique product, and our strong R&D capabilities will enable us to remain a technology leader in the lidar market.
We believe that our strategy to partner with Tier 1 automotive suppliers to produce high-quality, long-range lidar at scale will drive adoption of lidar in series production across major global OEMs. • Passenger vehicle ADAS — highway autonomy in passenger vehicles is a highly relevant use case for our technology, as passenger vehicle OEMs are actively in the process of adding new features that enhance the consumer driving experience.
We believe that our strategy to partner with Tier 1 automotive suppliers to produce high-quality, long-range lidar at scale will help drive adoption of lidar into series production across major global OEMs. • Passenger vehicle ADAS — highway autonomy in passenger vehicles is a highly relevant use case for our technology, as passenger vehicle OEMs are actively in the process of adding new features that enhance the consumer driving experience.
For vehicles to achieve greater autonomous functionality and perform those functions at higher speeds, we believe long-range lidar will be necessary. Our sensors were designed to search, detect, acquire, and track small objects at long distances. We may also introduce other mid- and short-range lidar systems based on the same 4Sight Intelligent Sensing Platform.
For vehicles to achieve greater autonomous functionality and perform those functions at higher speeds, we believe long-range lidar will be necessary. Our sensors were designed to search, detect, acquire, and track small objects at long distances. In the future, we may also introduce other mid- and short-range lidar systems based on the same 4Sight Intelligent Sensing Platform.
Our systems-based approach encourages partnership from the well-established automotive supply chain, including original equipment manufacturers, or OEMs, as well as Tier 1 and Tier 2 OEM suppliers. There is strong alignment between us and our partners given what is required to produce high-performance automotive grade products at scale, including quality, reliability, and affordability.
Our systems-based approach encourages partnerships from the well-established automotive supply chain, including original equipment manufacturers, or OEMs, as well as Tier 1 and Tier 2 OEM suppliers. There is strong alignment between us and our partners given what is required to produce high-performance automotive grade products at scale, including quality, reliability, and affordability.
Dussan’s experience developing mission-critical targeting systems for fighter jets and ground troops on behalf of the U.S. military provided him with the background to develop a differentiated approach to visual sensing.
Dussan's experience developing mission-critical targeting systems for fighter jets and ground troops on behalf of the U.S. military provided us with the background to develop a differentiated approach to visual sensing.
We expect to utilize those same components to address the Industrial market, which enables us to leverage our volume in automotive, and drive costs down for the products made by our contract manufacturing partners.
We expect to utilize those same components to be used to address the Industrial market, which enables us to leverage our volume in automotive, and drive costs down for the products made by our contract manufacturing partners.
Our modular design facilitates product hardware updates as technologies evolve, and its small size and modest heat dissipation enable very flexible placement options on the interior or exterior of a vehicle. 4Sight also leverages a common architecture to create application-specific products across the Automotive and Industrial markets.
Our modular design facilitates product hardware updates as technologies evolve, and its small size and modest heat dissipation enable very flexible placement options on the interior or exterior of a vehicle. 4Sight also leverages a common architecture to create application-specific products across different markets.
Available Information Our Annual Reports on Form 10-K, along with all other reports and amendments thereto filed with or furnished to the SEC, are publicly available free of charge on the Investors section of our website at www.aeye.ai or at www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC.
Available Information Our Annual Reports on Form 10-K, along with all other reports and amendments thereto filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at www.aeye.ai or at www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC.
In the Industrial market, we use the same supply chain to manufacture through global contract manufacturers, and we will sell our products primarily through system integrator channel partners that may integrate our lidar sensor and software as part of a larger solution for an end customer.
In the Industrial market, we anticipate using the same supply chain to manufacture through global contract manufacturers, and we will sell our products primarily through system integrator channel partners that may integrate our lidar sensor and software as part of a larger solution for an end customer.
We also use our website as a tool to disclose important information about the company and comply with our disclosure obligations under Regulation Fair Disclosure. Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the committee charters for our Board of Directors are also posted on the Investors section of our website.
We also use our website as a tool to disclose important information about the company and comply with our disclosure obligations under Regulation Fair Disclosure. Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the committee charters for our Board of Directors are also posted on the Investor Relations section of our website.
Responsive 4Sight: With Responsive 4Sight, scan patterns are created at design and run time. In this level, the entire platform is completely software-configurable and situationally aware, adjusting, in real time, how it scans the scene, where to apply density and extra power, and what scan rate to employ.
Responsive 4Sight: With Responsive 4Sight, scan patterns can be created at design and run time. In this level, the entire platform is completely software-configurable and situationally aware, adjusting, in real time, how it scans the scene, where to apply density and extra power, and what scan rate to employ.
We own a portfolio of intellectual property which includes patents (issued and pending), registered trademarks, copyrights, trade secrets, and expertise in the development of our lidar solutions. We have filed patent and trademark applications in order to further secure these rights and strengthen our ability to defend against third parties who may infringe on our rights.
We own a portfolio of intellectual property which includes 8 patents (issued and pending), registered trademarks, copyrights, trade secrets, and know-how in the development of our lidar solutions. We have filed patent and trademark applications in order to further secure these rights and strengthen our ability to defend against third parties who may infringe on our rights.
The main markets for lidar, including Automotive and Industrial, are projected to see significant growth in both the near and long term. We believe this expected growth will allow us to capture significant market share as well as pursue specialization opportunities like highway autonomous driving applications that benefit from our products.
The main markets for lidar, primarily Automotive and Industrial, are projected to see significant growth in both the near and long term. We believe this expected growth will allow us to capture market share as well as pursue specialized opportunities like highway autonomous driving applications that benefit from our products.
Our patents and patent applications cover a broad range of system level and component level aspects of our key technology including, among other things, bistatic lidar system architecture, laser, scanner, receiver, and perception technology. Sales and Marketing We utilize a combination of channel (indirect) sales and direct sales methods.
Our patents and patent applications cover a broad range of system level and component level aspects of our key technology including, among other things, bistatic lidar system architecture, laser, scanner, receiver, and perception technology. Sales and Marketing Historically we have utilized a combination of channel (indirect) sales and direct sales methods.
Our Tier 1 partners will add value with OEM customers through industrialization, manufacturing, integration, sales, marketing, product liability, and warranty. Our Tier 2 partners will provide automotive-grade sub-components, which are used not only in automotive lidar for ADAS use cases, but also for our products to be sold in the Industrial market.
Our Tier 1 partners will add value with OEM customers through industrialization, manufacturing, integration, sales, marketing, product liability, and warranty. Our Tier 2 partners will provide automotive-grade sub-components, which are used not only in automotive lidar for ADAS use cases, but could also be used for products we may sell into the Industrial market.
As of March 1, 2023, we owned 60 U.S. and foreign issued patents and we had 83 pending U.S. and foreign patent applications, with three patent applications in the drafting stage. In addition, we have two registered and two pending trademark applications.
As of March 1, 2024, we owned 78 U.S. and foreign issued patents and we had 83 pending U.S. and foreign patent applications, with three patent applications in the drafting stage. In addition, we have two registered and one pending trademark applications.
As a result, we believe that we are able to compete favorably in the lidar market, particularly in market segments such as highway autonomous driving applications that can benefit from our active, long-range, high-resolution capabilities.
As a result, we believe that we are able to compete favorably in the lidar market, particularly in market segments such as passenger vehicle ADAS highway pilot applications that can benefit from our active, long-range, high-resolution capabilities.
The information on our website (or any webpages referenced in this Annual Report on Form 10-K) is not part of this or any other report we file with, or furnish to, the SEC. Item 1B. Unresolved Staff Comments None.
The information on our website (or any webpages referenced in this Annual Report on Form 10-K) is not part of this or any other report we file with, or furnish to, the SEC. 10
We have made substantial investments in our R&D processes and deliver value to our customers through a combination of sales and direct channels. We perform the majority of our R&D activities in our 56,549 square foot corporate headquarters in Dublin, California.
We have made substantial investments in our R&D processes and deliver value to our customers through our manufacturing partners. We perform the majority of our R&D activities in our 56,549 square foot corporate headquarters in Dublin, California.
The MEMS that we use are extremely small when compared to competing MEMS-based lidar solutions, and when coupled with the extremely high resonant frequency at which they can operate, our MEMS meet and exceed shock and vibration requirements for the Automotive and Industrial markets. The bistatic architecture that we use is key to our proprietary camera-lidar system integration.
The MEMS that we use are extremely small when compared to competing MEMS-based lidar solutions, and when coupled with the extremely high resonant frequency at which they can operate, our MEMS meet and exceed shock and vibration requirements for both the Automotive and Industrial markets.
We believe the unique combination of features of 4Sight include: • Active lidar enables user’s choice of deterministic scan patterns catered to specific use cases and applications, such as highway autopilot; • Feature-specific Fixed Regions of Interest (ROIs) designed to detect threats from various locations; • Lidar perception made available through a software reference library; • Windshield, grill, and other discreet vehicle integration options that are optimized by software configurability; • Size, Weight, and Power (“SWaP”) optimized; and • Functional Safety (“FuSa”)/Safety of the Intended Functionality (“SOTIF” or ISO 21448) compliant for signal path — providing necessary determinism for testing and validation. 4Sight for Industrial Built on our unique 4Sight Intelligent Sensing Platform, 4Sight meets the diverse array of performance and functional requirements for the Industrial market with our industry-leading lidar performance, integrated intelligence, advanced vision capabilities, and unmatched reliability and safety. 4Sight is a cost-effective, customizable perception solution that leverages the complete 4Sight software platform and includes a comprehensive software development kit for an extensible roadmap to autonomous functionality. 4Sight for the Industrial market may utilize any of the four software levels described above: 4Sight at Design, Triggered 4Sight, Responsive 4Sight, or Predictive 4Sight.
We believe the unique combination of features of 4Sight include: • Active lidar enables user’s choice of deterministic scan patterns catered to specific use cases and applications, such as highway autopilot; • Feature-specific Fixed Regions of Interest (ROIs) designed to detect objects from various locations; • Lidar perception made available through a software partner; • Windshield, grill, and other discreet vehicle integration options that are optimized by software configurability; • Size, Weight, and Power (“SWaP”) optimized; and • Functional Safety (“FuSa”)/Safety of the Intended Functionality (“SOTIF” or ISO 21448) compliant for signal path — providing necessary determinism for testing and validation. 4Sight for Industrial Built on our unique 4Sight Intelligent Sensing Platform, 4Sight meets the diverse array of performance and functional requirements for the Industrial market with our industry-leading lidar performance, integrated intelligence, advanced vision capabilities, and unmatched reliability and safety.
We are not currently a party to any actions, claims, suits, or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material effect on our business, financial condition, or results of operations. Recent Developments DGCL 205 Petition On August 12, 2021, CF Finance Acquisition Corp.
We are not currently a party to any actions, claims, suits, or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material effect on our business, financial condition, or results of operations.
In the Automotive market, we work with Tier 1 partners that are suppliers to OEMs. We intend to license our lidar designs and other intellectual property to these Tier 1 partners, who will then industrialize and sell our technology to their OEM 8 customers.
In the Automotive market, we work with Tier 1 partners that are suppliers to OEMs and leverage their sales channels which allows us to substantially reduce our investment in sales and marketing. We intend to license our lidar designs and other intellectual property to our Tier 1 partners, who will then industrialize and sell our technology to their OEM customers.
Like all companies operating in similar industries, we are subject to environmental regulation, including water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation, and disposal of hazardous materials; and the remediation of environmental contamination.
Like all companies operating in similar industries, we are subject to environmental regulation, including water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation, and disposal of hazardous materials; and the remediation of environmental contamination. Compliance with these rules may include permits, licenses, and inspections of our facilities and products.
We expect the result will be a high- 3 quality, high-performance product at the right price point, which we believe to be a key enabler in accelerating adoption of lidar across various markets in Automotive and beyond.
We expect the result 3 will be a high-quality, high-performance product at the right price point, which we believe to be a key enabler in accelerating adoption of lidar across various markets in Automotive and beyond. In pursuing this strategy, we have partnered, and will continue seeking partnerships, with leading Tier 1 automotive suppliers.
We were founded in 2013 by Luis Dussan, our Chief Technology Officer, to create a deterministic AI-driven sensing system that performs better than the human eye and visual cortex. Mr.
We were founded in 2013 by Luis Dussan, a member of our Board of Directors and our first Chief Executive Officer, with the goal of creating a deterministic AI-driven sensing system that performs better than the human eye and visual cortex. Mr.
The National Highway Traffic Safety Administration, or NHTSA, is the principal legal and regulatory authority that has oversight of vehicles equipped with our sensors as they are deployed on public roadways.
The European Union, China, and other foreign markets are also developing standards to define the requirements for deploying higher levels of autonomy. The National Highway Traffic Safety Administration, or NHTSA, is the principal legal and regulatory authority that has oversight of vehicles equipped with our sensors as they are deployed on public roadways.
We expect that lidar will be a required sensing solution across many end markets, and we intend to be the leading solutions provider in these spaces. Market Outlook/Overview We believe that lidar will be a required sensing solution across many end markets. We broadly define our two key end markets as Automotive and Industrial.
We expect that lidar will be a required sensing solution across many end markets, and we intend to be one of the leading solutions provider in these spaces.
While we intend to use Tier 1 partners as our sales channel, we also maintain direct contact with the OEMs, which better enables us to understand their specific product requirements and facilitate the implementation of our product design into their vehicles.
Our team still continues to maintain direct contact with the OEMs, which better enables us to understand their specific product requirements and facilitate the implementation of our product design into their vehicles.
The camera integration is optional, therefore, we also intend to offer lidar-only solutions to our customers. All of the data collected is processed directly on the system-on-a-chip, where our algorithms continually evaluate the certainty of object detection in order to direct system energy and focus. 4Sight Intelligent Sensing Platform 4Sight is our proprietary lidar intelligent sensing platform.
All of the data collected is processed directly on the system-on-a-chip, where our algorithms continually evaluate the certainty of object detection in order to direct system energy and focus.
While our R&D activities occur primarily at our headquarters in Dublin, California, we work with technology developers on a worldwide basis. Our engineers located in Dublin, California focus on developing sensor hardware, firmware, and perception software.
We believe that this is essential to maintain our position as a provider of one of the most advanced lidar solutions in the market. While our R&D activities occur primarily at our headquarters in Dublin, California, we work with technology developers on a worldwide basis. Our engineers located in Dublin, California focus on developing sensor hardware, firmware, and software.
Compliance with these rules may include permits, licenses, and inspections of our facilities and products. 9 Human Capital Resources We believe that our culture is one of our competitive advantages. We have emphasized a collaborative, team-oriented, performance-based culture with a strong focus on both the development of differentiated technology and the success of our customers.
Human Capital Resources We believe that our culture is one of our competitive advantages. We have emphasized a collaborative, team-oriented, performance-based culture with a strong focus on both the development of differentiated technology and the success of our customers. Our leadership team comes from sectors including automotive, aerospace and defense, semiconductors, software, and computer hardware.
In addition, we believe that our product design delivers longer range and higher resolution than many of our competitors. This is possible, in part, because we utilize 1550nm lasers that enable our lidar solutions to achieve a higher photon budget than many of our competitors that rely upon 905nm lasers.
This is possible, in part, because we utilize 1550nm lasers that enable our lidar solutions to achieve a higher photon budget than many of our competitors that rely upon 905nm lasers. While 1550nm lasers are more costly than 905nm lasers on a per unit basis, 1550nm lasers have much higher performance and our product only requires one such laser.
Contract manufacturers with whom we have agreements, assemble, test, and deliver these products. Direct sales constitute sales of units to upgrade systems or otherwise add on to an existing product, while systems integrators will build our technology into mass produced systems, such as autonomous mining haulers, locomotives, or intelligent transportation systems.
For the Industrial market, we may either sell directly to the customer or employ a licensing model through systems integrators. Contract manufacturers with whom we have agreements assemble, test, and deliver these products. Systems integrators will build our technology into mass produced systems, such as autonomous mining haulers, locomotives, or intelligent transportation systems.
Second, the unit’s power requirements and small form factor makes it easier for OEM designers to integrate our sensors into a variety of locations in a vehicle, such as behind the windshield. Competing solutions, on the other hand, may need to be integrated into the roof of the car in order to resolve challenges with excess heat or size.
Flexible sensor location within the car Our 4Sight Flex next-generation design allows for unique flexibility with respect to sensor placement. The unit’s power requirements and small form factor makes it easier for OEM designers to integrate our sensors into a variety of locations in a vehicle, such as behind the windshield, on the roof, or in the grille.
We expect that we will receive royalty payments from those Tier 1 suppliers for each unit they sell to their OEM customers. Royalties may take the form of a fixed amount per unit, a percentage of the average selling price of the sensor, profit-sharing, or some combination of these methods.
The payments may take the 5 form of a fixed amount per unit, a percentage of the average selling price of the sensor, profit-sharing, or some combination of these methods. We are currently engaged in partnership discussions with other Tier 1 suppliers.
We believe that many of the other companies developing lidar solutions are focused on shorter-range sensors that passively collect data, and most of these sensors utilize 905nm lasers that limit their performance. We believe that we are differentiated from competitors by virtue of our active, embedded artificial intelligence approach that enables our lidar sensors to dynamically adapt to changing environments.
In addition to companies focused specifically on developing lidar solutions, we also face competition from current or potential partners and customers that may be developing lidar solutions internally. We believe that many of the other companies developing lidar solutions are focused on shorter-range sensors that passively collect data, and most of these sensors utilize 905nm lasers that limit their performance.
Automotive We believe that lidar will be a critical component of ADAS and fully autonomous driving or self-driving systems. Applications for the Automotive end market include lidar sensors and software for passenger and commercial vehicles. Automotive and commercial vehicle OEMs are expected to introduce lidar sensors to add ADAS features and improve safety for passengers and pedestrians.
Final rules are expected soon, and these may require additional hardware and software to meet performance requirements. With that in mind, passenger and commercial vehicle OEMs are expected to introduce lidar sensors to add ADAS features and improve safety for passengers and pedestrians. Applications for the Automotive end market include lidar sensors and software for passenger and commercial vehicles.
While 1550nm lasers are more costly than 905nm lasers on a per unit basis, 1550nm lasers have much higher performance and our product only requires one such laser. Some 905nm systems utilize up to 128 lasers and still don’t attain the performance results we achieve with a single 1550 nm laser.
Some 905nm systems utilize up to 128 lasers and still do not attain the performance results we achieve with a single 1550 nm laser.
None of our employees are represented by a labor union, and we consider our employee relations to be good. To date, we have not experienced any work stoppages. Facilities Our corporate headquarters is located in Dublin, California, where we lease 56,549 square feet pursuant to a lease that expires on December 1, 2026.
To date, we have not experienced any work stoppages. Facilities Our corporate headquarters is located in Dublin, California, where we lease 56,549 square feet pursuant to a lease that initially expires on December 1, 2026 unless we choose to exercise a five year renewal option. The Dublin facility contains engineering, R&D, operations, customer support, marketing, and administrative functions.
The states of California and New York, however, do enforce operational or registration requirements for some autonomous functions. U.S. federal regulations generally allow higher levels of safe and responsible autonomous functionality to be deployed. The European Union, China, and other foreign markets are also developing standards to define the requirements for deploying higher levels of autonomy.
We do not expect any federal rules or regulations in the near future that would impact the use or demand for our lidar technology. Some states, such as California and New York, do enforce operational or registration requirements for some autonomous functions. U.S. federal regulations generally allow higher levels of safe and responsible autonomous functionality to be deployed.
We employ a channel model in the traditional Automotive market by working through Tier 1 suppliers that sell products to OEM customers. Those Tier 1 suppliers will industrialize, manufacture, and sell lidar sensor solution units to OEMs that incorporate our proprietary design and software.
Those Tier 1 suppliers will industrialize, manufacture, and sell lidar sensor solution units to OEMs that incorporate our proprietary design and software. We expect that we will receive royalty or other payments from those Tier 1 suppliers for each unit they sell to their OEM customers.
We face competition from numerous companies worldwide that are developing lidar solutions, and some of these solutions may use a similar wavelength or scanning methodology. 7 For example, we and at least one of our major competitors both use lasers that have a 1550nm wavelength.
Competition Lidar-based perception solutions for autonomous applications is an emerging market with a wide variety of possible applications across many different markets. We face competition from numerous companies worldwide that are developing lidar solutions, and some of these solutions may use a similar wavelength or scanning methodology.
Our leadership team has come from sectors including aerospace and defense, semiconductors, software, computer hardware, management consulting, and private equity. As of December 31, 2022, we had over 160 employees worldwide. The majority of our employees are in the R&D function. We also engage numerous consultants and contractors to supplement our regular full-time workforce.
As of December 31, 2023, we had over 60 employees worldwide. The majority of our employees are in the R&D function. We also engage consultants and contractors to supplement our regular full-time workforce. None of our employees are represented by a labor union, and we consider our employee relations to be good.
In addition, we also lease office/building space around the world, primarily in North America, Europe, and Asia. We believe our existing facilities are in good condition and suitable for the conduct of our business.
We believe our existing facility is in good condition and suitable for the conduct of our business.
In pursuing this strategy, we have partnered with leading Tier 1 automotive suppliers, including Continental, who is in the process of bidding for long range lidar series production awards with OEMs that are expected to represent a substantial portion of our future revenues.
It is anticipated that our Tier 1 partners will bid for long range lidar series production awards with OEMs and that these awards will represent a substantial portion of our future revenues, however, there is no guarantee that this Tier 1 partnership strategy will be successful.
Our sales and marketing team works with industry analysts, universities, and independent labs to conduct studies and performance tests, which provides third-party validation of our solutions to current and potential customers and partners. Our marketing team also drives our brand management and increases our public visibility through news releases, advertising campaigns, events, industry panels, and other public relations programs.
We solicit feedback directly from partners and customers in order to identify opportunities to improve our product design. We work with industry analysts, universities, and independent labs to conduct studies and performance tests, which provides third-party validation of our solutions to current and potential customers and partners.
Other competitors use MEMS-based scanning technologies, but we believe our MEMS solution is uniquely robust due its small size and high resonant frequency. In addition to companies focused specifically on developing lidar solutions, we also face competition from current or potential partners and customers that may be developing lidar solutions internally.
For example, we and at least two of our major competitors use lasers that have a 1550nm wavelength. Other competitors use MEMS-based scanning technologies, but we believe our MEMS solution is uniquely robust due its very small size and high resonant frequency.
As a result, OEMs that install competing products may need to substantially alter the physical appearance of their vehicles to accommodate those products. Competition Lidar-based perception solutions for autonomous applications is an emerging market with a wide variety of possible applications across many different markets.
Competing solutions, on the other hand, may need to be integrated into the roof of the car in order to resolve challenges with excess heat or size. As a result, OEMs that install competing products may need to substantially alter the physical appearance of their vehicles to accommodate those products.
Government Regulation We believe that the U.S. has provided a constructive legal environment to enable the testing and development of autonomous capabilities. We do not expect any federal rules or regulations in the near future that would impact the use or demand for our lidar technology.
We also drive our brand management and increase our public visibility through news releases, advertising campaigns, events, industry panels, and other public relations programs. Government Regulation We believe that the U.S. has provided a constructive legal environment to enable the testing and development of autonomous capabilities.
Research and Development We have made substantial investments into our R&D efforts historically, and we expect to substantially increase our investments in this area in the future. We believe that this is essential to maintain our position as a provider of one of the most advanced lidar solutions in the market.
Research and Development We have made substantial investments into our R&D efforts historically, but we expect these investments to be reduced as a result of our revised strategic plan. With a reduced workforce and consolidated global footprint, we plan to be more focused on investments that support our strategy and product development goals in the near-term.
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We work alongside our Tier 1 supplier partners to quote new business according to the OEM’s specifications. Our announced Tier 1 supplier engagements include Continental. We are also currently engaged in partnership discussions with other Tier 1 suppliers. For the Industrial market, we either sell directly to the customer or through systems integrators.
Added
For example, in late 2023, Continental informed us that they intended to discontinue our joint lidar development program due to corporatewide restructuring and expense reduction efforts.
Removed
Relationship with Continental Continental, which refers to Continental AG together with its subsidiaries, is one of the largest Tier 1 automotive suppliers globally as measured by revenue.
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If we fail to find a replacement Tier 1 automotive supplier, it will have a material and adverse effect on our business, which is predicated on licensing our lidar designs and other intellectual property to our Tier 1 partners.
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Continental is also a leading provider of ADAS products, supplying more than 25 OEMs, 50 brands, and 300 vehicle models globally, having shipped over 100 million ADAS products over the last three years, including radar, camera, autonomous driving compute units, and complementary flash lidar for short-range applications.
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As is common in early-stage companies with limited operating histories, we are subject to risks and uncertainties such as our ability to develop and commercialize our products; produce and deliver lidar and software products meeting acceptable performance metrics; attract new and retain existing customers; develop, obtain, or progress strategic partnerships; secure an automotive OEM design win; secure additional capital to support the business plan; and other risks and uncertainties such as those described in Part I, Item 1A of this Form 10-K.
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In October 2020, we and Continental publicly announced a strategic partnership whereby Continental will manufacture and integrate our lidar products into OEM model lines through long-term series production contracts with OEMs. Continental, after evaluating a wide range of competing solutions, entered into a Joint Development Agreement in 2021 with us setting forth the basis for a long-range lidar technology partnership.
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Since inception, we have incurred net losses and negative cash flows from operations and expect to continue incurring losses in the near-term. We plan to improve our liquidity position through securing additional financing and finding a replacement Tier 1 partner.
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Continental is currently engaged in multiple OEM purchasing processes using us as its technology design partner. Continental is planning a manufacturing facility with a 2024 anticipated start of production. It is expected that the full production line capacity will be contractually committed through Continental for various series production car models over the next few years.
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Should we not be able to achieve these goals, we have a plan to further reduce operating expenses and cash outlays. The Company believes that these plans are probable of being successfully implemented, which will result in adequate cash flows to support our ongoing operations for at least one year following the date these financial statements are issued.
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For production lines that utilize our product design, Continental will purchase the hardware components from a group of approved automotive-grade Tier 2 suppliers manufacturing our component designs. We expect that for each unit that Continental sells based upon our licensed product design, Continental will pay us a royalty.
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Reverse Stock Split On December 27, 2023, we effected a 1-for-30 reverse stock split of its issued and outstanding shares of common stock (the "Reverse Stock Split"). Pursuant to the Reverse Stock Split, every thirty (30) shares of issued and outstanding shares of common stock were combined into one (1) share of common stock.
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By separating the send and receive paths, we can boresight align a camera imager with the laser transmitter. While the lidar delivers deterministic 3D data, the camera is additive for interpreting human-designed contextual clues, such as the color of stop lights or the words on a road sign.
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We did not issue fractional shares in connection with the Reverse Stock Split. Stockholders who were otherwise entitled to fractional shares of common stock were instead entitled to receive a proportional cash payment. The number of shares of common stock issuable under our equity incentive plans and exercisable under the outstanding warrants were also proportionately adjusted.
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Flexible sensor location within the car Our design allows for unique flexibility with respect to sensor placement for two key reasons. First, our performance is not significantly impaired by first surfaces, such as stray light reflected off of a windshield or the plastic used in the fascia or headlight.
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In connection with the Reverse Stock Split, there was no change to the shares authorized or in the par value per share of common stock of $0.0001.
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We also intend to sell directly to certain customers for situations in which a system integrator relationship is either not present or not required. We solicit feedback directly from partners and customers in order to identify opportunities to improve our product design.
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Accordingly, unless we indicate otherwise, all historical per share data, number of shares issued and outstanding, stock awards, and other common stock equivalents for the periods presented in this Annual Report on Form 10-K have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.
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The Dublin facility contains engineering, R&D, operations, customer support, marketing, and administrative functions. We also lease 10,198 square feet of office space in a facility in Palm Bay, Florida pursuant to a lease which expires on August 14, 2027. The Florida facility contains R&D functions.
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Market Outlook/Overview We believe that lidar will be a required sensing solution across many end markets. We broadly define our two key end markets as Automotive and Industrial, although at the current time we are almost exclusively focused on the Automotive market.
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III, or the Pre-Merger Company, our predecessor, held a special meeting of stockholders to approve certain matters related to the business combination between the Pre-Merger Company and AEye Technologies, Inc.
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Automotive According to the World Health Organization, the number of fatalities globally on roadways exceeds one million annually, road traffic injuries are the leading cause of death for children and young adults aged 5 to 29 years and in the U.S. pedestrian fatalities have increased by over 80% in the last ten years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch risks include, but are not limited to: • We are an early stage company with a history of losses and we expect to incur significant expenses and continuing losses for at least the next several years. • Our limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter. 11 • We continue to implement strategic initiatives designed to grow our business.
Biggest changeSuch risks include, but are not limited to: • We are an early stage company with a history of losses and we expect to incur significant expenses and continuing losses for at least the next several years. • We substantially rely on relationships with Tier 1 automotive suppliers and our business could be materially and adversely affected if we cannot establish or maintain relationships with one or more Tier 1 partners, or if we, through our relationship with various Tier 1 partners, are unable to obtain a sufficient number of design wins and successfully enter into definitive agreements or other commercial arrangements with automotive OEMs with respect to such design wins. • We intend to raise additional capital in order to execute our business plan and to respond to changing market conditions, which additional capital may not be available on terms acceptable to us, or at all. • Any restructuring actions and cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business. • Our financial results could vary significantly from quarter to quarter and are difficult to predict, particularly in light of the current economic environment, which in turn could cause volatility in our stock price. • Our limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter. • We continue to implement strategic initiatives designed to grow our business.
If we or our licensees or contract manufacturers are unable to adequately reduce and control the costs of such key components, they will be unable to realize manufacturing costs targets, which could reduce the market adoption of our products, damage our reputation with current or prospective customers, and have an adverse effect on our brand, business, prospects, financial condition, and operating results.
If we or our licensees or contract manufacturers are unable to adequately reduce and control the costs of such key components, we or they will be unable to realize manufacturing costs targets, which could reduce the market adoption of our products, damage our reputation with current or prospective customers, and have an adverse effect on our brand, business, prospects, financial condition, and operating results.
Adoption of lidar products, including our products, will depend on numerous factors, including whether the technological capabilities of lidar and lidar-based products meet users’ current or anticipated needs, whether the benefits associated with designing lidar into larger sensing systems outweighs the costs, complexity, and time needed to deploy such technology or replace or modify existing systems that may have used other modalities, such as cameras and radar, whether users in other applications can move beyond the testing and development phases and proceed to commercializing systems supported by lidar technology and whether lidar developers such as us can keep pace with the expected rapid technological change in certain developing markets, and the global response to the lingering effects of the COVID-19 pandemic, and other macroeconomic factors, and the length of any associated economic recovery.
Adoption of lidar products, including our products, will depend on numerous factors, including whether the technological capabilities of lidar and lidar-based products meet users’ current or anticipated needs, whether the benefits associated with designing lidar into larger sensing systems outweighs the costs, complexity, and time needed to deploy such technology or replace or modify existing systems that may have used other modalities, such as cameras and radar, whether users in other applications can move beyond the testing and development phases and proceed to commercializing systems supported by lidar technology and whether lidar developers such as us can keep pace with the expected rapid technological change in certain developing markets, and the global response to the 19 lingering effects of the COVID-19 pandemic, and other macroeconomic factors, and the length of any associated economic recovery.
Should decide to sell our common stock to Tumim Stone, stockholders will experience dilution of their interest in us, which dilution will be heightened if the price at which we sell common stock is low, as there is no minimum price at which we can sell our common stock under the CSPA.
Should we decide to sell our common stock to Tumim Stone, stockholders will experience dilution of their interest in us, which dilution will be heightened if the price at which we sell common stock is low, as there is no minimum price at which we can sell our common stock under the CSPA.
TREAD imposes criminal liability for violating such requirements if a defect subsequently causes death or bodily injury. In addition, the Vehicle Safety Act authorizes the NHTSA to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with U.S. federal motor vehicle safety standards. Sales into foreign countries may be subject to similar regulations.
TREAD imposes criminal liability for violating such requirements if a defect subsequently causes death or bodily injury. In addition, the Vehicle Safety Act authorizes NHTSA to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with U.S. federal motor vehicle safety standards. Sales into foreign countries may be subject to similar regulations.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our competitors, or our market.
These factors include, without limitation: • the extent to which we meet contractual terms and conditions; • the extent to which our technology is successfully integrated into our customers’ vehicles; • the timing of when our customers adopt our technology into their vehicles on a commercial basis which could be delayed for regulatory, safety or reliability issues unrelated to our technology; • undetected or unknown errors, defects or reliability issues in our hardware or software which could reduce the market adoption of our new products; • loss of business with respect to, the failure or lack of commercial success of a vehicle model for which we are a significant supplier for reasons unrelated to our technology; • a decline, for any reason, in the production levels of our customers, particularly with respect to models which incorporate our technology; • customer cancellations of their contracts; • if our products are included as part of a vehicle option package, the extent to which end customers select it; and • other risk factors set forth in this Annual Report.
These factors include, without limitation: • the extent to which we meet contractual terms and conditions; • the extent to which our technology is successfully integrated into our customers’ vehicles; • the timing of when our customers adopt our technology into their vehicles on a commercial basis which could be delayed for regulatory, safety, or reliability issues unrelated to our technology; • undetected or unknown errors, defects, or reliability issues in our hardware or software which could reduce the market adoption of our existing or new products; 17 • loss of business with respect to, the failure or lack of commercial success of a vehicle model for which we are a significant supplier for reasons unrelated to our technology; • a decline, for any reason, in the production levels of our customers, particularly with respect to models which incorporate our technology; • customer cancellations of their contracts; • if our products are included as part of a vehicle option package, the extent to which end customers select it; and • other risk factors set forth in this Annual Report.
We have spent, and will continue to spend significant time and resources to have our products selected by automotive OEMs and their suppliers, which we refer to as a “design win.” In the case of autonomous driving and ADAS technology, a design win means our active lidar product has been selected for use in a particular vehicle model or models.
We have spent, and will continue to spend, significant time and resources to have our products selected by automotive OEMs and their suppliers, which we refer to as a “design win.” In the case of autonomous driving and ADAS technology, a design win means our lidar product has been selected for use in a particular vehicle model or models.
These risks are particularly prevalent in the highly competitive autonomous driving and ADAS markets. Some errors or defects in our products may only be discovered after they have been tested, commercialized, and deployed by customers. If that is the case, we may incur significant additional development costs and product recall, repair, or replacement costs.
These risks are 22 particularly prevalent in the highly competitive autonomous driving and ADAS markets. Some errors or defects in our products may only be discovered after they have been tested, commercialized, and deployed by customers. If that is the case, we may incur significant additional development costs and product recall, repair, or replacement costs.
Despite careful security and controls design, our information technology systems and the systems used by our third-party vendors, may be subject to security breaches and cyberattacks the result of which could include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation, and damage to business relationships.
Despite careful security and controls design, our information technology systems and the systems used by our third-party vendors, may be subject to security breaches and cyberattacks the result of which could include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity 31 protection and insurance costs, litigation, and damage to business relationships.
However, given the unpredictable nature of COVID-19 and its variants, it is difficult, if not impossible, to predict, whether any government-imposed restrictions will be reimposed at previous levels or enhanced in one or more ways impacting our business operations or those of third parties upon which we rely.
Given the unpredictable nature of COVID-19 and its variants, it is difficult, if not impossible, to predict, whether any government-imposed restrictions will be reimposed at previous levels or enhanced in one or more ways impacting our business operations or those of third parties upon which we rely.
While this matter has been resolved, we cannot provide assurances that other matters similar in nature may not arise in the future. We could face in the future, a variety of labor and employment claims against us, which could include, but is not limited to, general discrimination, wage and hour, privacy, ERISA, or disability claims.
While this matter has been fully resolved, we cannot provide assurances that other matters similar in nature may not arise in the future. We could face in the future, a variety of labor and employment claims against us, which could include, but is not limited to, general discrimination, wage and hour, privacy, ERISA, or disability claims.
We risk negative stockholder reaction, including from proxy advisory services, as well as damage to our brand and reputation, if we do not act responsibly in a number of key areas, including diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency, and considering ESG and human capital factors in our operations.
We risk negative stockholder reaction, including from proxy advisory services, as well as damage to our brand and reputation, if we do not act responsibly in a number of key 39 areas, including diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency, and considering ESG and human capital factors in our operations.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, and fines, which may be imposed on us and the employees or officers responsible to prohibit such shipments and, in extreme cases, the 32 incarceration of the employees or officers responsible.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, and fines, which may be imposed on us and the employees or officers responsible to prohibit such shipments and, in extreme cases, the incarceration of the employees or officers responsible.
No assurances can be given that any proceedings or claims will not have a material adverse impact on our operating results and consolidated financial position or that our established reserves or our available insurance will mitigate this impact. Unforeseen issues could result in damage to certain property which could result in adverse effects on our business and reputation.
No assurances can be given that any proceedings or claims will not have a material adverse impact on our operating results and consolidated financial position or that our established reserves or our available insurance will mitigate this impact. 33 Unforeseen issues could result in damage to certain property which could result in adverse effects on our business and reputation.
In regard to any action arising under the Securities Act or the rules and regulations promulgated thereunder, our Charter provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum.
In regard to any action arising under the Securities Act or the rules and regulations promulgated thereunder, our Charter provides 40 that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum.
In mid-2022, our partner, Continental, experienced a cyberattack in which data was improperly taken from their servers. To date, Continental has not notified us that any data belonging to us was compromised. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources.
In mid-2022, our previous partner, Continental, experienced a cyberattack in which data was improperly taken from their servers. To date, Continental has not notified us that any data belonging to us was compromised. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources.
The stock markets, including Nasdaq on which we list our shares of common stock, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid, and orderly trading market develops and is sustained for our common stock, the market price of our common stock may continue to be volatile and could 14 decline significantly.
The stock markets, including Nasdaq on which we list our shares of common stock, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid, and orderly trading market develops and is sustained for our common stock, the market price of our common stock may continue to be volatile and could decline significantly.
These automotive OEMs and suppliers undertake extensive testing or qualification processes prior to placing orders for large quantities of products, such as our active lidar products, because such products will function as part of a larger system or platform and must meet specifications that we do not control or dictate.
These automotive OEMs and suppliers undertake extensive testing or qualification processes prior to placing orders for large quantities of products, such as our lidar products, because such products will function as part of a larger system or platform and must meet specifications that we do not control or dictate.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected. We are subject to the reporting requirements of the Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, and the rules and regulations of Nasdaq.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected. We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, and the rules and regulations of Nasdaq.
Additionally, the Internal Revenue Service, or IRS, and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with our future intercompany charges, cross-jurisdictional transfer pricing, or other matters and assess additional taxes.
Additionally, the Internal Revenue Service, or IRS, and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the 29 use of intangibles. Tax authorities could disagree with our future intercompany charges, cross-jurisdictional transfer pricing, or other matters and assess additional taxes.
We currently have a number of agreements in effect pursuant to which we have agreed to defend, indemnify, and hold harmless our customers, suppliers, and channel partners and other partners from damages and costs which may arise from the infringement of our products by third-party patents or other intellectual property rights.
We currently have a number of agreements in effect pursuant to which we have agreed to defend, 37 indemnify, and hold harmless our customers, suppliers, and channel partners and other partners from damages and costs which may arise from the infringement of our products by third-party patents or other intellectual property rights.
These problems may also result in claims, including class actions, against us. Our reputation or brand may be 22 damaged as a result of these problems and customers may be reluctant to buy our products thereafter, which could adversely affect our ability to retain existing customers and attract new customers, and could adversely affect our financial results.
These problems may also result in claims, including class actions, against us. Our reputation or brand may be damaged as a result of these problems and customers may be reluctant to buy our products thereafter, which could adversely affect our ability to retain existing customers and attract new customers, and could adversely affect our financial results.
We may face unexpected delays in obtaining the requisite permit and approvals in connection with our planned production facilities that could require significant time and financial resources and delay our ability to operate these facilities, which would adversely impact our business, prospects, financial condition, and operating results.
We may face unexpected delays in obtaining the requisite permit and 34 approvals in connection with our planned production facilities that could require significant time and financial resources and delay our ability to operate these facilities, which would adversely impact our business, prospects, financial condition, and operating results.
Long development cycles and product cancellations or postponements may adversely affect our business, results of operations, and financial condition. 16 Our products require key components and critical raw materials and our inability to reduce and control the cost of such components and raw materials could negatively impact the adoption of our products and accordingly, our financial condition and operating results.
Long development cycles and product cancellations or postponements may adversely affect our business, results of operations, and financial condition. Our products require key components and critical raw materials and our inability to reduce and control the cost of such components and raw materials could negatively impact the adoption of our products and accordingly, our financial condition and operating results.
The overall impact of this tax reform is uncertain, and our business and financial condition, including with respect to our non-U.S. operations, could be adversely affected. 29 In addition to the impact of the Tax Act on our federal taxes, the Tax Act may impact our taxation in other jurisdictions, including with respect to state income taxes.
The overall impact of this tax reform is uncertain, and our business and financial condition, including with respect to our non-U.S. operations, could be adversely affected. In addition to the impact of the Tax Act on our federal taxes, the Tax Act may impact our taxation in other jurisdictions, including with respect to state income taxes.
A significant natural disaster, such as an earthquake, fire, flood, hurricane, or significant power outage or other similar events, such as infectious disease outbreaks or pandemic events, including the lingering effects of the COVID-19 pandemic, could have an adverse effect on our business and operating results.
A significant natural disaster, such as an earthquake, fire, flood, hurricane, or significant power outage or 30 other similar events, such as infectious disease outbreaks or pandemic events, including the lingering effects of the COVID-19 pandemic, could have an adverse effect on our business and operating results.
While, generally, we do not have access to, collect, store, process, or share information collected by our solutions, unless our customers choose to proactively provide such information to us, 35 our products may evolve both to address potential customer requirements or to add new features and functionality.
While, generally, we do not have access to, collect, store, process, or share information collected by our solutions, unless our customers choose to proactively provide such information to us, our products may evolve both to address potential customer requirements or to add new features and functionality.
While we monitor the use of open source software and attempt to ensure that open source software is not used in a manner that would require us to disclose our internally developed source code or 38 that would otherwise breach the terms of an open source agreement, such use could inadvertently occur.
While we monitor the use of open source software and attempt to ensure that open source software is not used in a manner that would require us to disclose our internally developed source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur.
Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources. Risks Related to Being a Public Company We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives.
Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources. Risks Related to Being a Public Company We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to compliance initiatives.
To date, we have very limited experience with acquisitions and the integration of acquired technology and personnel. Failure to successfully identify, complete, manage, and integrate acquisitions could materially and adversely affect our business, financial condition, and results of operations and could cause our stock price to decline.
To date, we have very limited experience with acquisitions and the integration of acquired technology and 32 personnel. Failure to successfully identify, complete, manage, and integrate acquisitions could materially and adversely affect our business, financial condition, and results of operations and could cause our stock price to decline.
Since we operate on a global basis, ensuring simultaneous compliance in multiple 33 jurisdictions is a complex process which requires continual monitoring of regulations and an ongoing compliance process to ensure we and our suppliers are in compliance with existing regulations in each market where we operate.
Since we operate on a global basis, ensuring simultaneous compliance in multiple jurisdictions is a complex process which requires continual monitoring of regulations and an ongoing compliance process to ensure we and our suppliers are in compliance with existing regulations in each market where we operate.
We may be subject to claims if a product using our active lidar technology is involved in an accident and persons are injured or purport to be injured. Any insurance that we carry may not be sufficient or it may not apply to all situations.
We may be subject to claims if a product using our lidar technology is involved in an accident and persons are injured or purport to be injured. Any insurance that we carry may not be sufficient or it may not apply to all situations.
The risks of a cybersecurity 31 breach against companies based in the U.S., like us, may be enhanced as a byproduct of the on-going war in Ukraine, or by state-sponsored actors, primarily located in, or sponsored by, China, Russia, or North Korea.
The risks of a cybersecurity breach against companies based in the U.S., like us, may be enhanced as a byproduct of the on-going war in Ukraine, or by state-sponsored actors, primarily located in, or sponsored by, China, Russia, or North Korea.
Our future success will depend on our ability to achieve a leadership position in our targeted markets by continuing to develop, and protect from infringement, advanced lidar technology in a timely manner and to stay ahead of existing and new competitors.
Our future success will depend on our ability to achieve a leadership position in our targeted 26 markets by continuing to develop, and protect from infringement, advanced lidar technology in a timely manner and to stay ahead of existing and new competitors.
We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to us or infringe our 36 intellectual property.
We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to us or infringe our intellectual property.
These initiatives may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue, if at all, in an amount sufficient to offset these higher expenses and to achieve and maintain profitability.
These initiatives may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue, if at all, in an amount sufficient to offset these higher expenses or to achieve and maintain profitability.
Our ability to accurately forecast demand for our products could be affected by many factors, including the accuracy of the forecasts that we receive from our customers, the rapidly changing nature of the autonomous driving and ADAS markets in which we operate, the uncertainty surrounding the market acceptance and commercialization of lidar technology, the emergence of new markets, an increase or decrease in customer demand for our products or for products and services of our competitors, product introductions by competitors, the lingering effects of the COVID-19 pandemic, other epidemics or outbreaks of other contagions should they materialize, any work stoppages or interruptions, unanticipated changes in general market conditions, and the general weakening of economic conditions or consumer confidence, which may be exacerbated by the on-going military actions in Ukraine.
Our ability to accurately forecast demand for our products could be affected by many factors, including the accuracy of the forecasts that we receive from our customers, the rapidly changing nature of the autonomous driving and ADAS markets in which we operate, the uncertainty surrounding the market acceptance and commercialization of lidar technology, the emergence of new markets, an increase or decrease in customer demand for our products or for products and services of our competitors, product introductions by competitors, the lingering effects of the COVID-19 pandemic, 23 other epidemics or outbreaks of other contagions should they materialize, any work stoppages or interruptions, unanticipated changes in general market conditions, and the general weakening of economic conditions or consumer confidence, which may be exacerbated by the on-going military actions in Ukraine and the Middle East.
This relatively limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter, which include our ability to: • develop and commercialize our products; • produce and deliver lidar and software products meeting acceptable performance metrics; • forecast our revenue and budget for and manage our expenses; • attract new customers and retain existing customers; • develop, obtain, or progress strategic partnerships; • comply with existing and new or modified laws and regulations applicable to our business; • plan for and manage capital expenditures for our current and future products, and manage our supply chain and supplier relationships related to our current and future products; • anticipate and respond to macroeconomic changes as well as changes in the markets in which we operate; • maintain and enhance the value of our reputation and brand; • effectively manage our growth and business operations, including the lingering impacts of the COVID-19 pandemic on our business as well as other macroeconomic factors, such as the war in Ukraine; • develop and protect our intellectual property; • hire, integrate, and retain talented people at all levels of our organization; and • successfully develop new solutions to enhance the experience of customers.
This relatively limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter, which include our ability to: • develop and commercialize our products; • produce and deliver lidar and software products meeting acceptable performance metrics; • forecast our revenue and budget for and manage our expenses; • attract new customers and retain existing customers; • develop, obtain, or progress strategic partnerships; • comply with existing and new or modified laws and regulations applicable to our business; • plan for and manage capital expenditures for our current and future products, and manage our supply chain and supplier relationships related to our current and future products; • anticipate and respond to macroeconomic changes as well as changes in the markets in which we operate; • maintain and enhance the value of our reputation and brand; • effectively manage our growth and business operations, including the lingering impacts of the COVID-19 pandemic on our business as well as other macroeconomic factors, such as the wars in Ukraine and in the Middle East; • develop and protect our intellectual property; • hire, integrate, and retain talented people at all levels of our organization; and • successfully develop new solutions to enhance the experience of customers.
This could adversely affect our relationships with our customers and channel partners and could cause delays in shipment of our products and adversely affect our operating results. In addition, increased component costs could result in lower gross margins.
This could adversely affect our relationships with our customers and partners and could cause delays in shipment of our products and adversely affect our operating results. In addition, increased component costs could result in lower gross margins.
These arrangements can have short terms, be subject to renegotiation, or may be reduced or 24 otherwise terminated, the occurrence of any of which may affect product pricing and future profitability.
These arrangements can have short terms, be subject to renegotiation, or may be reduced or otherwise terminated, the occurrence of any of which may affect product pricing and future profitability.
International operations are subject to a number of other risks, including: • exchange rate fluctuations; • political and economic instability, international terrorism, and anti-American sentiment, particularly in emerging markets; • global or regional health crises, such as the lingering effects of the COVID-19 pandemic or other epidemics or outbreaks of other contagions; • increasing military conflicts in Eastern Europe; • potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud; • preference for locally branded products, and laws and business practices favoring local competition; • potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there; • increased difficulty in managing inventory; • delayed revenue recognition; • the potential for less effective protection of intellectual property; • stringent regulation of the autonomous or other systems or products using our products and stringent consumer protection and product compliance regulations, including, but not limited, to the General Data Protection Regulation, or GDPR, in the European Union, European competition law, the Restriction of Hazardous Substances Directive, or RoHS, the Waste Electrical and Electronic Equipment Directive, or WEEE, and the European Ecodesign Directive, all of which are costly to comply with and may vary from country to country; • difficulties and costs of staffing and managing foreign operations; • import and export laws and the impact of tariffs; • changes in local tax and customs duty laws or changes in the enforcement, application, or interpretation of such laws; and • the U.S. government’s restrictions on technology transfers to certain countries.
International operations are subject to a number of other risks, including: • exchange rate fluctuations; • political and economic instability, international terrorism, and anti-American sentiment, particularly in emerging markets; • global or regional health crises, such as the lingering effects of the COVID-19 pandemic or other epidemics or outbreaks of other contagions; • increasing military conflicts in Ukraine and the Middle East; • potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud; • preference for locally branded products, and laws and business practices favoring local competition; • potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there; • increased difficulty in managing inventory; • delayed revenue recognition; • the potential for less effective protection of intellectual property; • stringent regulation of autonomous driving or other systems or products using our products and stringent consumer protection and product compliance regulations, including, but not limited, to the General Data Protection Regulation, or GDPR, in the European Union, European competition law, the Restriction of Hazardous Substances Directive, or RoHS, the Waste Electrical and Electronic Equipment Directive, or WEEE, and the European Ecodesign Directive, all of which are costly to comply with and may vary from country to country; • difficulties and costs of staffing and managing foreign operations; • import and export laws and the impact of tariffs; • changes in local tax and customs duty laws or changes in the enforcement, application, or interpretation of such laws; and • the U.S. government’s restrictions on technology transfers to certain countries.
We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights.
We may not be able to detect or prevent the unauthorized use of such information or take 38 appropriate and timely steps to enforce our intellectual property rights.
If we are unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with alternatives, our products could lose market share, our revenue will decline, we may experience operating losses, and our business and prospects will be adversely affected.
If we are unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with alternatives, our products will lose market share, our revenue will decline, we will experience operating losses, and our business and prospects will be adversely affected.
The new legislation had no effect on our 2022 or 2021 provision for income taxes because we generated net tax losses and offset our deferred tax assets on the consolidated balance sheets with a full valuation allowance due to our current loss position and forecasted losses for the near future.
The new legislation had no effect on our 2023 or 2022 provision for income taxes because we generated net tax losses and offset our deferred tax assets on the consolidated balance sheets with a full valuation allowance due to our current loss position and forecasted losses for the near future.
If we fail to attract new personnel or we fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected. 30 Our business is subject to the risks of earthquakes, fires, floods, and other natural catastrophic events, pandemics, and interruptions by manufactured problems, such as terrorism.
If we fail to attract new personnel or we fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected. Our business is subject to the risks of earthquakes, fires, floods, and other natural catastrophic events, pandemics, and interruptions by manufactured events, such as terrorism.
Continued pricing pressures, automotive OEM and Tier 1 supplier cost reduction initiatives, and the ability of automotive OEMs and Tier 1 suppliers to re-source or cancel vehicle or technology programs may result in lower than anticipated revenues, or cause substantial losses, which may adversely affect our business.
Continued pricing pressures, automotive OEM and Tier 1 supplier cost reduction initiatives, and the ability of automotive OEMs and Tier 1 suppliers to source alternatives or cancel vehicle or technology programs may result in lower than anticipated revenues, or cause substantial losses, which may adversely affect our business.
In addition to possible stockholder approval, we may need approvals and licenses from relevant governmental authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail to obtain such required approvals.
In addition to possible stockholder approval, we may need approvals and licenses from relevant governmental authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delays and costs, and may disrupt our business strategy if we fail to obtain such required approvals.
Any requirement to disclose our internally developed source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition, and results of operations and could help our competitors develop services that are similar to or better than ours.
Any requirement to disclose our internally developed source code or pay damages for breach of contract or copyright infringement could have a material adverse effect on our business, financial condition, and results of operations and could help our competitors develop services that are similar to or better than ours.
Risk Factors Relating to Our Business and Industry We are an early stage company with a history of losses and we expect to incur significant expenses and continuing losses for at least the next several years. We have incurred net losses in each year since our inception.
Risk Factors Relating to Our Business and Industry We are an early stage company with a history of losses and we expect to incur significant expenses and continuing losses for at least the next few years. We have incurred net losses in each year since our inception.
Any disruption to our communications, whether caused by a natural disaster or by manufactured problems, such as power disruptions, could adversely affect our business. We do not have a formal disaster recovery plan or policy in place and do not currently require that our suppliers have such plans or policies in place.
Any disruption to our communications, whether caused by a natural disaster or by manufactured events, such as power disruptions, could adversely affect our business. We do not have a formal disaster recovery plan or policy in place and do not currently require that our suppliers have such plans or policies in place.
Our business may be adversely affected by changes in automotive and laser regulations or concerns that drive 34 further regulation of the automotive and laser markets. Government product safety regulations are an important factor for our business. Historically, these regulations imposed ever-more stringent safety regulations for automobiles and laser products.
Our business may be adversely affected by changes in regulations of automobiles and lasers or concerns that drive further regulation of the automotive and laser markets. Government product safety regulations are an important factor for our business. Historically, these regulations imposed ever-more stringent safety regulations for automobiles and laser products.
Our revenue may be adversely affected for a number of reasons, including the development and/or market acceptance of new technology that competes with our products, if automotive original equipment manufacturers, or automotive OEMs, Tier 1 automotive suppliers, or other market participants change their view towards autonomous vehicles or ADAS technologies or strategies, the failure of our customers to commercialize autonomous systems that include our solutions, our inability to effectively manage or outsource the management of our inventory, manufacturing, or contract manufacturing of products at scale, our inability to enter new markets or to help our customers adapt our products for new applications, or our failure to attract new customers or secure production orders from existing customers currently analyzing our solutions, or increasing competition.
Our revenue may be adversely affected for a number of reasons, including the development and/or market acceptance of new technology that competes with our products, if automotive original equipment manufacturers, or automotive OEMs, Tier 1 automotive suppliers, or other market participants change their view towards autonomous vehicles or ADAS technologies or strategies (as Continental did at the end of 2023), the failure of our customers to commercialize autonomous systems that include our solutions, our inability to effectively manage or outsource the management of our inventory, manufacturing, or contract manufacturing of products at scale, our inability to enter new markets or to help our customers adapt our products for new applications, or our failure to attract new customers or secure production orders from existing customers currently analyzing our solutions, or increasing competition.
The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Continental, for example, failed to notice the mid-2022 breach for about one month.
The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Continental, for example, failed to provide notice of the mid-2022 breach to us for about one month.
In addition, our automotive OEM and Tier 1 suppliers often reserve the right to terminate their supply contracts for convenience, which enhances their ability to obtain price reductions.
In addition, our automotive OEM and Tier 1 suppliers often reserve the right to terminate their supply contracts for convenience, which enhances their ability to obtain price concessions.
If our third-party manufacturers experience financial, operational, manufacturing capacity, or other difficulties, or experience shortages in required components, or if they are otherwise unable or unwilling to continue to manufacture our products in required volumes or at all, our supply may be disrupted, we may be required to seek alternate manufacturers, and we may be required to re-design our products.
If our third-party manufacturers experience financial, operational, manufacturing capacity, or other difficulties, or experience shortages in required components, or if they are otherwise unable or unwilling to continue to manufacture our products in required volumes or at all, our supply may be disrupted, we may be required to seek alternate manufacturers, and we may be required to redesign our products.
Despite the fact that the automotive industry has expended considerable effort to research and test lidar products for ADAS and autonomous driving applications, the automotive industry may not introduce lidar products in commercially available vehicles on a timeframe that matches our expectations, or at all.
Despite the fact that the automotive industry has expended considerable effort to research and test lidar products for ADAS and autonomous driving applications, the automotive industry may not introduce lidar products in commercially available vehicles on a time frame that matches our expectations, or at all.
Additionally, there continues to be public interest and increased legislative pressure related to environmental, social, and governance, or ESG, activities of public companies. For example, there is a growing number of states requiring organizations to report their board composition as well as mandating gender diversity and representation from underrepresented communities, including New York and California.
Additionally, there continues to be public interest and increased legislative pressure related to environmental, social, and governance, or ESG, activities of public companies. For example, there is a growing number of states requiring organizations to report their board composition as well as mandating gender diversity and representation from underrepresented communities.
Although we have and continue to pursue a broad customer base, we are dependent on a collection of customer relationships which are currently in development with strong purchasing power. Continental AG accounted for approximately 51% and 55% of our annual revenue in the years ended December 31, 2022 and 2021, respectively.
Although we have and continue to pursue a broad customer base, we are dependent on a collection of customer relationships which are currently in development with strong purchasing power. Continental AG accounted for approximately 70% and 51% of our annual revenue in the years ended December 31, 2023 and 2022, respectively.
Most recently, since December 6, 2022, our stock has closed below $1.00 per share. As previously disclosed, on January 20, 2023, we received notice from Nasdaq that we were no longer in compliance with the $1.00 per share minimum bid price requirement for continued listing on Nasdaq.
Since December 6, 2022, our stock had closed below $1.00 per share. As previously disclosed, on January 20, 2023, we received notice from Nasdaq that we were no longer in compliance with the $1.00 per share minimum bid price requirement for continued listing on Nasdaq.
We may also experience shipment delays caused by shipping port constraints, labor strikes, work stoppages, acts of war, including the current conflict in Ukraine, and terrorism, or other supply chain disruptions, including those caused by extreme weather, natural disasters, and pandemics or other public health concerns.
We may also experience shipment delays caused by shipping port constraints, labor strikes, work stoppages, acts of war, including the current conflicts in Ukraine and in the Middle East, and terrorism, or other supply chain disruptions, including those caused by extreme weather, natural disasters, and pandemics or other public health concerns.
In addition, our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms, or at all. These product-related issues could result in claims against us and our business could be adversely affected.
In addition, any insurance coverage we may have could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms, or at all. These product-related issues could result in claims against us and our business could be adversely affected.
Recently, we discovered that there may have been some uncertainty with respect to the validity of our Second Amended and Restated Certificate of Incorporation, which was approved by our stockholders at the special meeting of stockholders held on August 12, 2021.
In early 2023, we discovered that there may have been some uncertainty with respect to the validity of our Second Amended and Restated Certificate of Incorporation, which was approved by our stockholders at the special meeting of stockholders held on August 12, 2021.
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history, customer familiarity with our lidar solutions, any delays in scaling production, delivery, and service operations to meet demand, competition, uncertainty regarding the future of autonomous vehicles, and our production and sales performance compared with market expectations.
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history, our ability to continue funding the business through to profitability, customer familiarity with our lidar solutions, any delays in scaling production, delivery, and service operations to meet demand, competition, uncertainty regarding the future of autonomous vehicles, and our production and sales performance compared with market expectations.
Factors that may cause these quarterly fluctuations include, without limitation, those listed below: • the timing and magnitude of orders and shipments of our products in any quarter; • decreases in pricing we may adopt to drive market adoption or in response to competitive pressure; • our ability to retain our existing customers and strategic partners and attract new customers and strategic partners; • our ability to develop, introduce, manufacture, and ship, in a timely manner, products that meet customer requirements; • disruptions in our sales channels or termination of our relationships with important channel partners; • delays in customers’ purchasing cycles or deferments of customers’ purchases in anticipation of new products or updates from us or our competitors; • fluctuations in demand for our products; • the mix of products sold or licensed by us in any given quarter; • the duration of the lingering effects of the global COVID-19 pandemic and the time it takes for economic recovery; • the duration or worsening of the military conflict in Ukraine and the time it will take for the economic recovery for such impact to occur; • the timing and rate of broader market adoption of ADAS or autonomous systems utilizing our solutions across the automotive and other market sectors; • the timing and scale of the market acceptance of lidar generally; • further technological advancements by our competitors and other market participants; 19 • the ability of our customers and strategic partners to commercialize systems that incorporate our products; • any change in the competitive dynamics of our markets, including consolidation of competitors, regulatory developments, and new market entrants; • our ability to effectively manage or outsource management of our inventory; • changes in the source, cost, availability of, and regulations pertaining to components and materials we use in our products; • adverse litigation, judgments, settlements, or other litigation-related costs, or claims that may give rise to such costs; and • general economic, industry, and market conditions, including trade disputes.
Factors that may cause these quarterly fluctuations include, without limitation, those listed below: • the timing and magnitude of orders and shipments of our products in any quarter; • decreases in pricing we may adopt to drive market adoption or in response to competitive pressure; • our ability to retain our existing customers and strategic partners and attract new customers and strategic partners; • our ability to develop, introduce, manufacture, and ship, in a timely manner, products that meet customer requirements; • disruptions in our sales channels or termination of our relationships with important channel partners; • delays in customers’ purchasing cycles or deferments of customers’ purchases in anticipation of new products or updates from us or our competitors; • the timing of charges related to impairments of long-lived assets; • non-routine write-downs of inventory; • one time termination benefits and other restructuring costs; • fluctuations in demand for our products; • the mix of products sold or licensed by us in any given quarter; • the duration of the lingering effects of the global COVID-19 pandemic and the time it takes for economic recovery; • the duration or worsening of the military conflicts in Ukraine and the Middle East, and the time it will take for the economic recovery for such impact to occur; • the timing and rate of broader market adoption of ADAS or autonomous systems utilizing our solutions across the automotive and other market sectors; • the timing and scale of the market acceptance of lidar generally; • further technological advancements by our competitors and other market participants; • the ability of our customers and strategic partners to commercialize systems that incorporate our products; • any change in the competitive dynamics of our markets, including consolidation of competitors, regulatory developments, and new market entrants; • our ability to effectively manage or outsource management of our inventory; 14 • changes in the source, cost, availability of, and regulations pertaining to components and materials we use in our products; • impact of foreign currency fluctuations; • adverse litigation, judgments, settlements, or other litigation-related costs, or claims that may give rise to such costs; and • general economic, industry, and market conditions, including trade disputes.
If any of our third-party manufacturers experience interruptions, delays, or disruptions in supplying our products, including by natural disasters, the lingering effects of the global COVID-19 pandemic, or if other epidemics or outbreaks of other contagions materialize, increased military conflict, especially in Eastern Europe, or work stoppages or capacity constraints, our ability to ship products would be delayed.
If any of our third-party manufacturers experience interruptions, delays, or disruptions in supplying our products, including by natural disasters, the lingering effects of the global COVID-19 pandemic, or if other epidemics or outbreaks of other contagions materialize, increased military conflict, especially in Ukraine and the Middle East, or work stoppages or capacity constraints, our ability to ship products would be delayed.
If we do not prevail in any such disagreements, our profitability may be affected. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. As of December 31, 2022, we had approximately $184 million of U.S. federal, and approximately $128 million of state net operating loss carryforwards available to reduce future taxable income.
If we do not prevail in any such disagreements, our profitability may be affected. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. As of December 31, 2023, we had approximately $248 million of U.S. federal, and approximately $203 million of state net operating loss carryforwards available to reduce future taxable income.
In addition, the recent outbreak of hostilities between Russia and Ukraine and global reactions thereto have increased U.S. domestic and global energy prices.
In addition, the recent outbreak of hostilities between Russia and Ukraine, the war in the Middle East, and global reactions thereto have increased U.S. domestic and global energy prices.
While our artificial intelligence-driven lidar-based sensing system can be applied to different use cases across end markets, approximately 52% and 76% of our revenue during the twelve months ended December 31, 2022 and 2021, respectively, was generated from automotive applications with other customers in the aerospace, delivery, shuttle, railway, mining, toll, and aviation sectors.
While our artificial intelligence-driven lidar-based sensing system can be applied to different use cases across end markets, approximately 70% and 52% of our revenue during the twelve months ended December 31, 2023 and 2022, respectively, was generated from automotive applications with few customers in the aerospace, delivery, shuttle, railway, mining, and aviation sectors.
Should such operational risks materialize, it may result in personal injury to or death of workers, loss of production equipment, damage to production facilities, monetary losses, delays, and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, some of which may be the responsibility of our outsourcing partners and suppliers, but could have a material adverse effect on our business, prospects, financial condition, or operating results.
Should such operational risks materialize, it may result in personal injury to or death of workers, loss of production equipment, damage to production facilities, monetary losses, delays, and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, some of which may be the responsibility of our outsourcing partners and suppliers, but could have a material adverse effect on our business, prospects, financial condition, or operating results. 21 Our sales and operations in international markets expose us to associated operational, financial, and regulatory risks.
If we are unable to maintain or progress our relationship with Continental, or if Continental is unable to secure a sufficient number of design wins and successfully enter into definitive agreements or other commercial arrangements with automotive OEMs, then our business could be materially and adversely affected.
If we are unable to maintain or progress our relationship with a Tier 1 automotive supplier, or if any Tier 1 automotive supplier is unable to secure a sufficient number of design wins and enter into definitive agreements or other commercial arrangements with automotive OEMs, then our business could be materially and adversely affected.
The COVID-19 pandemic, including associated business interruptions and recovery, as well as other possible epidemics or outbreaks of other contagions could result in a material adverse impact on our or our current or anticipated customers’ or suppliers’ business operations, including reduction or suspension of operations in the U.S. or other parts of the world.
The lingering effects of the COVID-19 pandemic, including associated business interruptions and recovery, as well as other possible epidemics or outbreaks of other contagions could result in a material adverse impact on our or our business operations, or the business operations of our current or anticipated customers and suppliers, including the potential reduction or suspension of operations in the U.S. or other parts of the world.
As of December 31, 2022, we had an accumulated deficit of approximately $250.5 million. Even if we are able to increase sales or licensing of our products, there can be no assurance that we will be commercially successful.
As of December 31, 2023, we had an accumulated deficit of approximately $337.6 million. Even if we are able to increase sales or licensing of our products, there can be no assurance that we will be commercially successful.
Of the approximately $184 million in U.S. federal operating loss carryforwards, approximately $172 million will be carried forward indefinitely for U.S. federal tax purposes and approximately $12 million will begin to expire in 2033. All of our U.S. state net operating loss carryforwards will expire between 2029 and 2042.
Of the approximately $248 million in U.S. federal operating loss carryforwards, approximately $236 million will be carried forward indefinitely for U.S. federal tax purposes and approximately $12 million will begin to expire in 2033. All of our U.S. state net operating loss carryforwards will begin to expire in 2029.
We continue to implement strategic initiatives designed to grow our business. These initiatives may prove more costly than we currently anticipate and we may not succeed in increasing our revenue in an amount sufficient to offset the costs of these initiatives or to achieve and maintain profitability.
These initiatives may prove more costly than we currently anticipate and we may not succeed in increasing our revenue in an amount sufficient to offset the costs of these initiatives or to achieve and maintain profitability.
If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or 13 change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, and results of operations could be adversely affected.
If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, and results of operations could be adversely affected. 15 We continue to implement strategic initiatives designed to grow our business.
Relaying on foreign-produced products subjects us to risks relating to changes in import duties, quotas, the potential for introduction of U.S. taxes on imported goods, the potential loss of “most favored nation” status with the U.S., and freight cost increases, as well as economic and political uncertainties.
Most of our products, and the components thereof, are manufactured abroad. Relying on foreign-produced products subjects us to risks relating to changes in import duties, quotas, the potential for introduction of U.S. taxes on imported goods, the potential loss of “most favored nation” status with the U.S., and freight cost increases, as well as economic and political uncertainties.
If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline.
If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. In the past, analysts that previously covered us, stopped their coverage of us.
We may face risks associated with our reliance on certain artificial intelligence and machine learning models. We rely on artificial intelligence and machine learning models in the development of our solutions for vehicle autonomy, ADAS, and industrial applications. The models that we use are developed or trained using various data sets.
We rely on deterministic artificial intelligence and machine learning models in the development of our solutions for vehicle autonomy, ADAS, and industrial applications. The models that we use are developed or trained using various data sets.
On May 6, 2022, we filed a Registration Statement on Form S-1, which relates 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.
On May 6, 2022, we filed a Registration Statement on Form S-1, which originally related to the offer and resale of up to 30,865,419 shares of our common stock, or 1,028,847 shares of our common stock following the Reverse Stock Split, to be purchased by Tumim Stone, pursuant to the CSPA.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in Dublin, California, where we lease 56,549 square feet pursuant to a lease that expires on December 1, 2026. The Dublin facility contains engineering, R&D, operations, customer support, marketing, and administrative functions.
Biggest changeItem 2. Properties Our corporate headquarters is located in Dublin, California, where we lease 56,549 square feet pursuant to a lease that initially expires on December 1, 2026, unless we choose to exercise a five-year renewal option. The Dublin facility contains engineering, R&D, operations, customer support, marketing, and administrative functions.
We believe our existing facilities are in good condition and suitable for the conduct of our business.
We believe our existing facility is in good condition and suitable for the conduct of our business.
Removed
We also lease 10,198 square feet of office space in a facility in Palm Bay, Florida pursuant to a lease which expires on August 14, 2027. The Florida facility contains R&D functions. In addition, we also lease office/building space around the world, primarily in North America, Europe and Asia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material effect on our business, financial condition, and results of operations. On August 12, 2021, CF Finance Acquisition Corp.
Biggest changeWe are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material effect on our business, financial condition, and results of operations.
Removed
III, or the Pre-Merger Company, our predecessor, held a special meeting of stockholders to approve certain matters related to the business combination between the Pre-Merger Company and AEye Technologies, Inc.
Removed
Among the proposals presented to the Pre-Merger Company stockholders were proposals to (i) adopt a certificate of amendment to the Pre-Merger Company’s amended and restated certificate of incorporation to increase the number of authorized shares of its Class A Common Stock from 200,000,000 to 300,000,000, or the Authorized Share Amendment, and (ii) amend and restate the charter in connection with the business combination, which included eliminating its Class B Common Stock immediately prior to the closing of the business combination after giving effect to the conversion of each outstanding share of Class B Common Stock into one share of its Class A Common Stock, or the Class B Elimination Amendment.
Removed
The proposals each received approval from the holders of a majority of the Pre-Merger Company’s outstanding shares of Class A Common Stock and Class B Common Stock, voting together as a single class, that were outstanding as of the record date for such special meeting.
Removed
Following the special meeting, the business combination was closed and the Pre-Merger Company changed its name to "AEye, Inc." A recent ruling by the Court of Chancery of the State of Delaware, or Chancery Court, introduced uncertainty as to whether Section 242(b)(2) of the General Corporation Law of the State of Delaware, or DGCL, would have required the Authorized Share Amendment to be approved by a separate vote of the majority of the Pre-Merger Company’s then-outstanding shares of Class A Common Stock and the Class B Elimination Amendment to be approved by a separate vote of the majority of the Pre-Merger Company’s then-outstanding shares of Class B Common Stock.
Removed
Although we received no demands or inquiries from our stockholders regarding the potential uncertainty surrounding our Second Amended and Restated Certificate of Incorporation, or our Charter, which was adopted at the special meeting, and our own analysis determined that a separate class vote to adopt the Charter was not necessary, in light of the recent Chancery Court decision, and to resolve any potential uncertainty with respect to our Charter, or our capital structure, on February 23, 2023, we filed a petition in the Chancery Court under Section 205 of the DGCL, our Section 205 Petition, to seek validation of the Authorized Share Amendment, our Charter, and the shares we issued in reliance thereon.
Removed
Section 205 permits the Chancery Court, in its discretion, to validate potentially defective corporate acts after considering a variety of factors. Concurrently with the filing of our Section 205 Petition, we filed a motion to expedite the hearing, which was granted. The hearing was set for March 14, 2023.
Removed
At the March 14, 2023 hearing on our Section 205 Petition, no objections were filed and the court granted our petition.
Removed
The court order declared our Charter to be valid and effective as of the date and time it was originally filed and that all shares of our capital stock that we have issued in reliance on our Charter were valid as of the date such shares were issued, thereby eliminating any uncertainty with respect to our Charter or any shares we have issued or may issue in the future in reliance thereon.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStockholders As of March 10, 2023, we had approximately 75 holders of record of our common stock and thousands of additional beneficial holders. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Biggest changeStockholders As of March 20, 2024, we had approximately 61 holders of record of our common stock and thousands of additional beneficial holders. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe 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 2022 2021 $ % Prototype sales $ 1,743 $ 1,004 $ 739 74 % Development contracts 1,904 2,003 (99) (5) % Total revenue 3,647 3,007 640 21 % Cost of revenue 8,732 3,637 5,095 140 % Gross loss (5,085) (630) (4,455) 707 % Research and development 37,644 26,543 11,101 42 % Sales and marketing 19,317 10,548 8,769 83 % General and administrative 36,762 25,514 11,248 44 % Total operating expenses 93,723 62,605 31,118 50 % Loss from operations (98,808) (63,235) (35,573) 56 % Change in fair value of convertible note, embedded derivative liability, and warrant liabilities (14) 223 (237) (106) % Gain on PPP loan forgiveness — 2,297 (2,297) (100) % Interest income and other 1,545 561 984 175 % Interest expense and other (1,379) (4,857) 3,478 (72) % Total other income (expense), net 152 (1,776) 1,928 (109) % Provision for income tax expense 58 — 58 100 % Net loss $ (98,714) $ (65,011) $ (33,703) 52 % 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.
Biggest changeThe following table sets forth our consolidated results of operations data for the years ended December 31, 2023 and 2022 (in thousands, except for percentages): Year ended December 31, Change Change 2023 2022 $ % Prototype sales $ 477 $ 1,743 $ (1,266) (73) % Development contracts 987 1,904 (917) (48) % Total revenue 1,464 3,647 (2,183) (60) % Cost of revenue 15,319 8,732 6,587 75 % Gross loss (13,855) (5,085) (8,770) 172 % Research and development 26,171 37,644 (11,473) (30) % Sales and marketing 12,528 19,317 (6,789) (35) % General and administrative 25,234 36,762 (11,528) (31) % Impairment of long-lived assets 9,988 — 9,988 100 % Total operating expenses 73,921 93,723 (19,802) (21) % Loss from operations (87,776) (98,808) 11,032 (11) % Change in fair value of convertible note and warrant liabilities (858) (14) (844) 6,029 % Interest income and other 1,317 1,545 (228) (15) % Interest expense and other 248 (1,379) 1,627 (118) % Total other income (expense), net 707 152 555 365 % Provision for income tax expense 57 58 (1) (2) % Net loss $ (87,126) $ (98,714) $ 11,588 (12) % Revenue Prototype Sales Prototype sales decreased by $1,266, or 73%, to $477 for the year ended December 31, 2023 from $1,743 for the year ended December 31, 2022.
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.
The primary factors affecting our financing cash flows during this period were the 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.
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.
Gross Margin Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of our development contracts with customers, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features.
We believe our critical 50 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.
We believe our critical accounting policies involve the greatest degree of judgement and complexity and have the greatest potential impact on our consolidated financial statements. Revenue We recognize revenues from R&D and development arrangements with OEMs and suppliers to the OEMs and from the sale of prototype products.
Recent Accounting Pronouncements See Note 1 to our consolidated f inancial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted 51 as of the date of this Annual Report on Form 10-K.
Recent Accounting Pronouncements See Note 1 to our consolidated f inancial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K.
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.
In December 2021, we entered into a Common Stock Purchase Agreement, or CSPA, with Tumim Stone Capital LLC, or Tumim Stone, pursuant to which we have the right, but not the obligation, to issue and sell to Tumim Stone over a 36-month period up to $125,000 of our common stock.
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.
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 2023, as well as our future prospects.
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 consider design wins to be critical to our future success, although the revenue that may be generated by each design win and the time necessary to achieve such a win can vary significantly, making it difficult to predict our financial performance.
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.
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and we have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.
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 44 particular perception capabilities to meet specific customer needs. In general, development contracts that require more complex configurations have higher prices.
These development contracts primarily focus on customization of our proprietary 4Sight TM product capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of particular perception capabilities to meet specific customer needs. In general, development contracts that require more complex configurations have higher prices.
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 will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year period, or (iv) December 31, 2025.
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.
G&A expenses include: • personnel-related costs, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense for executive, finance, legal, operations, human resources, technical support, and other administrative personnel; • consulting, accounting, audit, legal, and other professional fees; • insurance premiums, software and computer equipment costs, general office expenses; and • allocated overhead expenses.
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.
When a contract involves multiple performance obligations, we account for individual products and services separately if the customer can benefit from the product or service on its own or with other resources that are readily available to the customer and the product or service is separately identifiable from other promises in the arrangement.
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.
In the Automotive market for example, which accounted for 70% and 52% of revenue in 2023 and 2022, 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.
R&D expenses include: • personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation expense; • third-party engineering and contractor costs; 45 • 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.
R&D expenses include: • personnel-related expenses, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense; • third-party engineering and contractor costs; • lab equipment; • engineering parts and test units; • new hardware and software expenses; and • allocated overhead expenses. R&D costs are expensed as they are incurred.
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.
For additional information regarding our cash requirements from lease obligations and contractual obligations, see Notes 6 and 20 in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
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.
S&M expenses include: • personnel-related expenses, including salaries, benefits, bonuses, one time termination benefits, and stock-based compensation expense; • demonstration equipment; • trade shows expenses, advertising, and promotions expenses for press releases and other public relations services; and 48 • allocated overhead expenses.
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.
We believe our revenue and profitability will also be dependent upon our success in licensing our technology to Tier 1 automotive suppliers, such as our previous partner Continental, which represented 70% and 51% of 2023 and 2022 revenue, respectively, that intend to use our technology in volume production of lidar sensors for OEMs.
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 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. 53 Financing Activities For the year ended December 31, 2023, net cash used in financing activities was $6,758.
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.
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. Investing Activities For the year ended December 31, 2023, net cash provided by investing activities was $55,351.
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.
The 2022 Note and warrant liabilities are recorded at fair value for each reporting period, and the changes in fair value are reported within other income (expense), net during the period. We also elected to record interest expense on the 2022 Note as changes in fair value.
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.
In 2023 and 2022, our prototype sales revenue primarily related to unit sales of our 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 2023 and 2022.
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.
Change in Fair Value of Convertible Note and Warrant Liabilities Changes in fair value of the 2022 Note and warrant liabilities are the result of the change in fair value at each reporting date.
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.
In the Industrial market, our strategy has been to sell our lidar solutions to customers utilizing components that are sourced, in part, from the Tier 2 automotive supply chain and assembled by our contract manufacturing partners.
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 43 experience of, and deliver value to, our customers.
Key Factors Affecting AEye’s Operating Results We believe that our future performance and success depends to a substantial extent on our ability to capitalize on the opportunities described herein, which in turn are subject to significant risks and challenges, including those discussed below and the risk factors described in the section of this 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; • securing additional capital in a timely manner in order to meet operating cash flow needs; doing so on terms that are favorable to us, or at all, may be challenging given the current capital markets and overall macroeconomic conditions; • maintain and establish relationships with one or more Tier 1 automotive suppliers to facilitate "design wins" with potential end customers, which in our case are automotive OEMs; • develop and protect our intellectual property; • comply with existing and new or modified laws and regulations applicable to our business; • maintain and enhance the value of our reputation and brand; • hire, integrate, and retain talented people at all levels of our organization; and • successfully develop new solutions to enhance the experience of, and deliver value to, our customers.
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.
We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position. This is further dependent on the investments we make in research and development and our ability to commercialize our products.
We 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 development contracts to remain a significant part of our business in the near-term, but represent a smaller share of our total revenue over time, as we increase our focus on technology licensing in the Automotive market and over time leverage the economies of scale we achieve to move into other markets.
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.
On May 6, 2022, we filed a Registration Statement on Form S-1, which related to the offer and resale of up to 1,028,847 shares of our common stock to be purchased by Tumim Stone, pursuant to the CSPA. As of December 31, 2023, 67,754 shares have been issued under this CSPA.
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.
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.
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.
Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers. The time to achieve a design wins varies based on the market and application.
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.
General and Administrative Total general and administrative expenses decreased by $11,528, or 31%, to $25,234 for the year ended December 31, 2023, from $36,762 for the year ended December 31, 2022.
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.
In the future, we expect to generate attractive gross margins from licensing our lidar technology and software to our Tier 1 partners in the Automotive market. We also anticipate being able to leverage on our foundation in the Automotive market to move to other markets.
For the year ended December 31, 2021, net cash provided by financing activities was $207,084.
For the year ended December 31, 2022, net cash provided by financing activities was $8,067.
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.
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.
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.
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.
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.
Our plans for the use of cash in the long-term (beyond twelve months from this Annual Report) are primarily related to funding operating expenses to support the commercialization of our products.
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.
Change in Fair Value of Convertible Note and Warrant Liabilities Change in fair value of convertible note and warrant liabilities decreased by $844, or 6,029%, to a loss of $858 for the year ended December 31, 2023, from a loss of $14 for the year ended December 31, 2022.
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.
This provides us with multiple opportunities for sustained growth by enabling new applications and product features across these market segments. However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end markets and customer adoption.
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.
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.
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.
All dollar amounts expressed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands of dollars, except for per share amounts and unless otherwise specified. Reverse Stock Split On December 27, 2023, we effected a 1-for-30 reverse stock split of its issued and outstanding shares of common stock (the "Reverse Stock Split").
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.
On March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or FDIC, was appointed as receiver. On March 27, 2023, First Citizens Bank entered into a whole bank purchase of SVB. We had and continue to have deposit accounts at SVB.
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.
It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products, lower BOM costs, industrialize, and generate strong market demand for our products.
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.
Sales and Marketing Total sales and marketing expenses decreased by $6,789, or 35%, to $12,528 for the year ended December 31, 2023, from $19,317 for the year ended December 31, 2022.
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.
III and PIPE financing,, CSPA, SPA, and Shelf Registration, together with our existing cash, cash equivalents, and marketable securities and implementation of our plans should we not be able to secure additional financing in 2024 will sufficiently alleviate the risk of substantial doubt about our ability to continue as a going concern and will enable us to fund our operating expenses, working capital, and capital expenditure requirements for a period of at least twelve months from the date of this Annual Report on Form 10-K.
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.
Until we can generate sufficient revenue from the sale of our products to cover operating expenses, working capital, and capital expenditures, we expect the funds raised in the business combination with CF Finance Acquisition Corp.
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.
Such costs for prototypes include direct materials, direct labor, indirect labor, inventory write downs, losses on purchase commitments, warranty expense, and allocation of overhead. Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts. We expect our 2024 costs of revenue to fluctuate in line with 2024 revenues.
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.
To date, our principal sources of liquidity have been proceeds received from the issuance of equity.
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.
Provision for Income Tax Expense Provision for income tax expenses decreased to $57 for the year ended December 31, 2023, from $58 for 51 the year ended December 31, 2022. This change is due to changes in pretax income (loss) in the U.S. and certain foreign entities and changes in tax rates.
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.
Because of the size and complexity of these OEM programs, having Tier 1 partnerships would provide a substantial competitive advantage over our competitors given their large scale, mass-production capabilities, and existing OEM customer relationships.
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.
If we fail to do this, our market position and revenue may be adversely affected, and our investments in that area will not be recovered. Basis of Presentation We currently conduct our business through one operating segment. 47 Components of Results of Operations Total Revenues We categorize our revenue as (1) prototype sales and (2) development contracts.
See additional discussion in Note 2 to our consolidated financial statements. 46 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.
Interest expense and other consists primarily of convertible note issuance costs, and amortization of premiums and accretion of discounts on marketable securities, net. 49 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this report.
Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023. 49 Cash Flow Summary Twelve months ended December 31, 2022 2021 (in thousands) Net cash provided by (used in): Operating activities $ (71,649) $ (55,703) Investing activities $ 68,463 $ (151,546) Financing activities $ 8,067 $ 207,084 Operating Activities For the year ended December 31, 2022, net cash used in operating activities was $71,649.
Cash Flow Summary Twelve months ended December 31, 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ (50,725) $ (71,649) Investing activities $ 55,351 $ 68,463 Financing activities $ (6,758) $ 8,067 Operating Activities For the year ended December 31, 2023, net cash used in operating activities was $50,725.
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.
This decrease was primarily due to less interest earned on our marketable securities in the current period. Interest Expense and Other Interest expense and other decreased by $1,627, or 118%, to a gain of $248 for the year ended December 31, 2023, from a loss of $1,379 for the year ended December 31, 2022.
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.
This decrease was primarily due to changes in fair value of the 2022 Note between the periods partially offset by a favorable change in fair value on warrant liabilities. Interest Income and Other Interest income and other decreased by $228, or 15%, to $1,317 for the year ended December 31, 2023, from $1,545 for the year ended December 31, 2022.
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.
This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in third party research and development work of $4,459, personnel costs of $2,974, engineering parts and lab equipment expense of $2,419, information technology and facilities expense of $707, stock-based compensation expense of $379, and travel and entertainment expense of $292.
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.
The decrease was primarily due to less revenue recognized in the current year from a Tier 1 automotive supplier contract as we fulfilled our obligations in the fourth quarter of 2023. Cost of Revenue Cost of revenue increased by $6,587, or 75%, to $15,319 for the year ended December 31, 2023, from $8,732 for the year ended December 31, 2022.
This increase was primarily due to an increase in operating expenses. 48 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.
Liquidity and Capital Resources Sources of Liquidity Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to find a replacement Tier 1 automotive supplier and the timing of an OEM design win, our ability to extend our cash runway based on the restructuring initiatives announced this year, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products , and market adoption of new and enhanced products and features.
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.
Cash used was offset by cash provided by decreases in prepaid and other current assets, accounts receivable, and other noncurrent assets of $2,279, $451 and $284, respectively, and an increase in accounts payable of $252. For the year ended December 31, 2022, net cash used in operating activities was $71,649.
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 (90 th ) calendar day after the first Note Closing provided that we meet certain equity conditions.
On September 15, 2022, we closed the first Note Closing with the investor and received cash proceeds of $9,850 (net of fees paid to the investor). On September 26, 2023, the U.S. Securities and Exchange Commission declared our registration statement on Form S-3 to be effective (the "Shelf Registration").
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.
This was primarily due to a decrease in units sold of our 4Sight™-based industrial product due to bid delays from various customers and our focus on key automotive milestones. Development Contracts Development contracts decreased by $917, or 48%, to $987 for the year ended December 31, 2023, from $1,904 for the year ended December 31, 2022.
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.
Interest Income, Interest Expense and Other Interest income and other consists primarily of interest earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash and cash equivalents balances and market rates. Interest income and other also includes gains on sale of property and equipment.
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 net cash provided by investing activities during this period were proceeds from redemptions and maturities of marketable securities of $76,350, partially offset by the purchases of marketable securities of $19,331 and purchases of property and equipment of $1,951. For the year ended December 31, 2022, net cash provided by investing activities was $68,463.
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.
This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $2,250, stock-based compensation of $1,703, marketing and consultant spend of $1,507, travel and entertainment expense of $721, and information technology and facilities expense of $550.
Market Trends and Uncertainties We anticipate growing demand for our 4Sight TM 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.
Market Trends and Uncertainties We anticipate future demand for our 4Sight TM Intelligent Sensing Platform will come from two major markets, Automotive and Industrial. In the near term, we anticipate concentrating on the Automotive market by more effectively leveraging our business model, focusing on advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking.
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.
Despite the recent restructuring initiatives, we expect that our expenses will continue to exceed our operating income and, as a result, we may need additional capital resources to fund our operations. We believe that the net proceeds from the business combination with CF Finance Acquisition Corp.
Operating Expenses Research and Development Research and development expenses increased by $11,101, or 42%, to $37,644 for the year ended 47 December 31, 2022, from $26,543 for the year ended December 31, 2021.
This increase was partially offset by decreased costs recognized in the current year relating to a Tier 1 automotive supplier contract as the we fulfilled our obligations in the fourth quarter of 2023. 50 Operating Expenses Research and Development Research and development expenses decreased by $11,473, or 30%, to $26,171 for the year ended December 31, 2023, from $37,644 for the year ended December 31, 2022.
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.
Net Loss Net loss decreased by $11,588, or 12%, to $87,126 for the year ended December 31, 2023, from $98,714 for the year ended December 31, 2022.
Removed
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.
Added
Pursuant to the Reverse Stock Split, every thirty (30) shares of issued and outstanding shares of common stock were combined into one (1) share of common stock. We did not issue fractional shares in connection with the Reverse Stock Split. Stockholders who were otherwise entitled to fractional shares of common stock were instead entitled to receive a proportional cash payment.
Removed
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.
Added
The number of outstanding warrants were also proportionately adjusted. In connection with the Reverse Stock Split, there was no change to the shares authorized or in the par value per share of $0.0001.
Removed
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.
Added
Accordingly, unless we indicate otherwise, all historical per share data, number of shares issued and outstanding, stock awards, and other common stock equivalents for the periods presented in this Annual Report on Form 10-K have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.
Removed
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.
Added
In the longer term, we will look for opportunities in the Industrial 45 market, such as in the railway and intelligent transportation systems, or ITS segments, when it becomes cost-effective to do so based on higher volume production in the Automotive market.
Removed
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.
Added
The decision by our former Tier 1 partner, Continental, to discontinue our joint lidar development program and if we are unable to find a replacement Tier 1 automotive supplier in a timely manner, it could have a material and adverse effect on our business as our business model is predicated on licensing our lidar designs and other intellectual property to automotive Tier 1 suppliers.
Removed
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.
Added
Our primary focus in the Automotive market is on ADAS for passenger and commercial vehicle autonomy, particularly highway autonomy applications. We believe that growth in that market is driven by both more stringent safety regulations and consumer demand for vehicles offering increased safety, and advanced driver assist features.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 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.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks in the ordinary course of our business.
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. 52
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. 56
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.
Our 2022 Convertible Note bore a fixed interest rate, and therefore was 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.
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.
Interest Rate Risk As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $36,523, 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.
As of December 31, 2022, there were four customers 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.
As of December 31, 2023, there were four customers each accounting for 10% or more of our accounts receivable and one vendor accounting for 10% or more of our accounts payable. We perform credit evaluations as needed and generally do not require collateral for our customers.
We 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.
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.
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.
We analyze accounts receivable, historical percentages of uncollectible accounts, and changes in payment history when evaluating the adequacy of the allowance for doubtful accounts for potential credit losses on customers’ accounts. For the twelve months ended December 31, 2023 and 2022, we did not have any write-offs and recorded a $35 and $0 provision for expected credit losses, respectively.
Added
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. 55 We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.

Other LIDRW 10-K year-over-year comparisons