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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023

OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________

Commission file number 333-259554

AEye logo v3.jpg

AEye, Inc.
(Exact name of registrant as specified in its charter)
Delaware
37-1827430
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Park Place, Suite 200, Dublin, CA
94568
(Address of Principal Executive Offices)
(Zip Code)
(925) 400-4366
Registrant’s telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par value per shareLIDRThe Nasdaq Stock Market LLC
Warrants to purchase one share of common stockLIDRWThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of November 6, 2023, the registrant had 188,143,137 shares of common stock, $0.0001 par value per share, outstanding.






1




AEye, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2023


TABLE OF CONTENTS

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2




CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve substantial risks and uncertainties. These statements reflect the current views of management with respect to future events and our financial performance. In some cases, you can identify these statements by forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words or phrases, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements, which are subject to risks, uncertainties, and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies, and anticipated trends in our business.

These statements are only predictions based on our current expectations and projections about future events. These statements involve known and unknown risks, uncertainties, and other important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied by the forward-looking statements. Given these risks, uncertainties, and other factors, you should not place undue reliance on these forward-looking statements. These factors include the information set forth in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 under the heading “Risk Factors,” and Part II, Item 1A, of this Quarterly Report under the heading “Risk Factors,” which we encourage you to carefully read. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.







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PART 1. FINANCIAL INFORMATION
Item 1. Financial statements (Unaudited)
AEYE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value)
September 30, 2023December 31, 2022
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$37,149 $19,064 
Marketable securities8,743 75,135 
Accounts receivable, net 238 617 
Inventories, net4,868 4,553 
Prepaid and other current assets4,509 6,181 
Total current assets55,507 105,550 
Right-of-use assets14,397 15,502 
Property and equipment, net7,787 7,665 
Restricted cash2,150 2,150 
Other noncurrent assets1,040 2,473 
Total assets$80,881 $133,340 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$4,707 $3,218 
Accrued expenses and other current liabilities7,247 9,764 
Contract liabilities18 987 
Convertible notes 8,594 
Total current liabilities11,972 22,563 
Operating lease liabilities, noncurrent15,484 16,681 
Other noncurrent liabilities82 126 
Total liabilities27,538 39,370 
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDERS’ EQUITY:
Preferred stock—$0.0001 par value: 1,000,000 shares authorized; no shares issued and outstanding
  
Common stock—$0.0001 par value: 600,000,000 shares authorized; 186,674,693 and 163,099,124 shares issued and outstanding at September 30, 2023 and December 31, 2022
19 16 
Additional paid-in capital363,176 345,742 
Accumulated other comprehensive income (loss)1 (1,279)
Accumulated deficit(309,853)(250,509)
Total stockholders’ equity53,343 93,970 
Total liabilities and stockholders’ equity$80,881 $133,340 
The accompanying notes are an integral part of these condensed consolidated financial statements.






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AEYE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2023202220232022
REVENUE:
Prototype sales$56 $652 $426 $1,182 
Development contracts132 115 969 1,373 
Total revenue188 767 1,395 2,555 
Cost of revenue4,479 2,708 8,651 5,617 
Gross loss(4,291)(1,941)(7,256)(3,062)
OPERATING EXPENSES:
Research and development5,654 8,971 20,993 28,309 
Sales and marketing1,910 4,466 10,782 14,405 
General and administrative5,380 7,896 20,279 29,053 
Total operating expenses12,944 21,333 52,054 71,767 
LOSS FROM OPERATIONS(17,235)(23,274)(59,310)(74,829)
OTHER INCOME (EXPENSE):
Change in fair value of convertible note and warrant liabilities12 16 (914)125 
Interest income and other354 335 932 1,109 
Interest expense and other(174)(688)(9)(1,338)
Total other income (expense), net192 (337)9 (104)
Provision for income tax expense5 13 43 39 
Net loss$(17,048)$(23,624)$(59,344)$(74,972)
PER SHARE DATA
Net loss per common share (basic and diluted)$(0.09)$(0.15)$(0.34)$(0.48)
Weighted average common shares outstanding (basic and diluted)184,117,531 159,312,203 172,182,776 156,702,000 
COMPREHENSIVE LOSS:
Net loss$(17,048)$(23,624)$(59,344)$(74,972)
Change in net unrealized loss on available-for-sale securities, net of tax345 (84)1,255 (1,322)
Change in fair value due to instrument-specific credit risk, net of tax  (21) 
Net losses reclassified into income during the period, net of tax46 77 46 77 
Comprehensive loss$(16,657)$(23,631)$(58,064)$(76,217)

The accompanying notes are an integral part of these condensed consolidated financial statements.






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AEYE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the nine months ended September 30, 2023 and 2022
(In thousands, except share data)
(Unaudited)
Preferred StockCommon StockAdditional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated DeficitTotal Stockholders’ Equity
SharesAmountSharesAmount
BALANCE—December 31, 2022 $ 163,099,124 $16 $345,742 $(1,279)$(250,509)$93,970 
Stock-based compensation— — — — 6,513 — — 6,513 
Issuance of common stock upon exercise of stock options— — 2,069,081 — 391 — — 391 
Issuance of common stock upon vesting of restricted stock units— — 2,983,790 — — — — — 
Taxes related to net share settlement of equity awards— — (1,320,828)— (867)— — (867)
Conversion of convertible note into common stock— — 4,138,414 1 1,754 — — 1,755 
Other comprehensive income, net of tax— — — — — 469 — 469 
Net loss— — — — — — (26,265)(26,265)
BALANCE—March 31, 2023 $ 170,969,581 $17 $353,533 $(810)$(276,774)$75,966 
Stock-based compensation— — — — 4,110 — — 4,110 
Issuance of common stock upon vesting of restricted stock units— — 2,562,467 — — — — — 
Taxes related to net share settlement of equity awards— — (895,829)— (181)— — (181)
Conversion of convertible note into common stock — — 8,119,992 1 1,253 — — 1,254 
Issuance of common stock through Employee Stock Purchase Plan— — 664,102 — 118 — — 118 
Other comprehensive income, net of tax— — — — — 420 — 420 
Net loss— — — (16,031)(16,031)
BALANCE—June 30, 2023 $ 181,420,313 $18 $358,833 $(390)$(292,805)$65,656 
Stock-based compensation— — — — 4,084 — — 4,084 
Issuance of common stock upon exercise of options— — 333,249 — 59 — — 59 
Issuance of common stock upon vesting of restricted stock units— — 2,331,033 — — — — — 
Taxes related to net share settlement of equity awards— — (812,387)— (261)— — (261)
Conversion of convertible note into common stock — — 2,817,485 1 328 — — 329 
Issuance of common stock under the Common Stock Purchase Agreement— — 585,000 — 136 — — 136 
Transaction costs related to Common Stock Purchase Agreement— — — — (3)— — (3)
Other comprehensive income, net of tax— — — — 391 — 391 
Net loss— — — — — — (17,048)(17,048)
BALANCE—September 30, 2023 $ 186,674,693 $19 $363,176 $1 $(309,853)$53,343 








Preferred StockCommon StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmountSharesAmount
BALANCE—December 31, 2021 $ 155,137,237 $16 $320,937 $(391)$(151,795)$168,767 
Stock-based compensation5,340 — — 5,340 
Issuance of common stock upon exercise of options— — 656,303 — 222 — — 222 
Issuance of common stock upon vesting of restricted stock units— — 856,917 — — — — — 
Taxes related to net share settlement of equity awards— — (285,533)— (1,149)— — (1,149)
Change in net unrealized loss on available-for-sale securities, net of tax— — — — — (1,056)— (1,056)
Net loss— — — — — (24,881)(24,881)
BALANCE—March 31, 2022 $ 156,364,924 $16 $325,350 $(1,447)$(176,676)$147,243 
Stock-based compensation— — — — 6,557 — — 6,557 
Issuance of common stock upon exercise of stock options— — 1,105,298 — 446 — — 446 
Issuance of common stock upon vesting of restricted stock units— — 883,318 — — — — — 
Taxes related to net share settlement of equity awards— — (312,920)— (1,431)— — (1,431)
Issuance of common stock under the Common Stock Purchase Agreement— — 435,000 — 1,422 — — 1,422 
Issuance of stock upon exercise of public warrants— — 10 — — — — — 
Change in net unrealized loss on available-for-sale securities, net of tax— — — — — (182)— (182)
Net loss— — — — — — (26,467)(26,467)
BALANCE—June 30, 2022 $ 158,475,630 $16 $332,344 $(1,629)$(203,143)$127,588 
Stock-based compensation— — — — 6,106 — — 6,106 
Issuance of common stock upon exercise of stock options— — 1,014,428 — 364 — — 364 
Issuance of common stock upon vesting of restricted stock units— — 976,852 — — — — — 
Taxes related to net share settlement of equity awards— — (339,064)— (846)— — (846)
Issuance of common stock under the Common Stock Purchase Agreement, net of transaction costs— — 710,000 — 1,469 — — 1,469 
Transaction costs related to Common Stock Purchase Agreement— — — — (29)— — (29)
Other comprehensive loss, net of tax— — — — — (7)— (7)
Net loss— — — — — — (23,624)(23,624)
BALANCE—September 30, 2022 $ 160,837,846 $16 $339,408 $(1,636)$(226,767)$111,021 
The accompanying notes are an integral part of these condensed consolidated financial statements.






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AEYE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended September 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(59,344)$(74,972)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 998 794 
Loss on sale of property and equipment, net53  
Noncash lease expense relating to operating lease right-of-use assets1,058 993 
Impairment of right-of-use assets47  
Inventory write-downs, net of scrapped inventory3,666 576 
Change in fair value of convertible note and warrant liabilities914 (125)
Realized loss on instrument-specific credit risk46  
Stock-based compensation14,707 18,003 
Realized loss on redemption of marketable securities 77 
Amortization of premiums and accretion of discounts on marketable securities, net of change in accrued interest33 1,211 
Changes in operating assets and liabilities:
Accounts receivable, net379 3,598 
Inventories, current and noncurrent, net(2,681)(2,256)
Prepaid and other current assets1,672 (445)
Other noncurrent assets 133 420 
Accounts payable 1,494 (1,236)
Accrued expenses and other current liabilities(2,571)220 
Operating lease liabilities(1,143)(983)
Contract liabilities(969)(1,400)
Net cash used in operating activities(41,508)(55,525)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment(1,421)(3,402)
Proceeds from sale of property and equipment243  
Purchase of marketable securities(8,736) 
Proceeds from redemptions and maturities of marketable securities76,350 93,592 
Net cash provided by investing activities66,436 90,190 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options450 1,032 
Proceeds from the issuance of convertible notes 10,000 
Payments for convertible note redemptions(6,235) 
Taxes paid related to the net share settlement of equity awards(1,312)(4,252)
Proceeds from issuance of common stock under the Common Stock Purchase Agreement136 2,891 
Proceeds from issuance of common stock through Employee Stock Purchase Plan118  
Stock issuance costs related to the Common Stock Purchase Agreement (29)
Net cash (used in) provided by financing activities(6,843)9,642 
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH18,085 44,307 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period21,214 16,333 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period$39,299 $60,640 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes16 20 
Cash paid for interest115  
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchases of property and equipment included in accounts payable and accrued liabilities23 154 
Operating lease right-of-use assets obtained in exchange for lease obligations upon adoption of ASC 842 16,284 
Conversion of convertible notes and accrued interest into Class A common stock3,338  
Stock issuance costs included in accounts payable and accrued liabilities3  
Taxes related to net share settlement of equity awards included in accrued liabilities1 9 
Operating lease right-of-use assets obtained in exchange for lease obligation 556 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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AEYE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data or otherwise stated)

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

AEye, Inc. (the “Company” or “AEye”), formerly known as CF Finance Acquisition Corp. III, (“CF III”) was originally incorporated in Delaware on March 15, 2016 under the name CF SPAC Re Inc. On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc., entered into an Agreement and Plan of Merger with CF III. Based on CF III’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended. On August 16, 2021, the business combination contemplated by the Agreement and Plan of Merger was closed and CF III changed its name to AEye, Inc.

AEye is a provider of high-performance lidar systems for vehicle autonomy, advanced driver-assistance systems (ADAS), and smart industrial applications. AEye’s software-definable 4SightTM Intelligent Sensing Platform combines solid-state lidar and integrated deterministic artificial intelligence to capture more intelligent information with less data, enabling faster, more accurate, and more reliable perception of the surroundings.

The Company’s common stock and public warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “LIDR” and “LIDRW,” respectively. Unless otherwise specified, “we,” “us,” “our,” “AEye,” and the “Company” refers to AEye, Inc.

Unaudited Condensed Consolidated Financial Statements

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Certain prior year line-item descriptions have been updated for consistency with the current year presentation, however, these changes did not impact the amounts or comparability. Amortization of premiums on marketable securities, net of change in accrued interest is now presented as Amortization of premiums and accretion of discounts on marketable securities, net of change in accrued interest on the condensed consolidated statements of cash flows.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and marketable securities, and accounts receivable. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, to limit the exposure of each investment. The Company’s marketable securities have investment grade ratings when purchased which mitigates risk.

The Company’s accounts receivables are derived from customers located in the U.S., Europe, and Asia. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral.

Recently Adopted Accounting Guidance

In June 2016, the Financial Accounting Standards Board, ("FASB"), issued Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments, which has subsequently been amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, and ASU No. 2019-11. The objective of the guidance in ASU 2016-13 is to allow entities to recognize estimated credit losses in the period that the change in valuation occurs. ASU 2016-13 requires an entity to present financial assets measured on an amortized cost basis on the balance sheet net of an allowance for credit losses. Available-for-sale and held to maturity debt securities are also required to be held net of an allowance for credit losses. For public business entities, this standard
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is effective for fiscal years beginning after December 15, 2019. For smaller reporting companies, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2016-13 on January 1, 2023 which resulted in an immaterial impact to the consolidated financial statements.

2.FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial assets and liabilities is determined in accordance with the fair value hierarchy established in FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs, other than Level 1 inputs, which are observable either directly or indirectly or can be corroborated by observable market data using quoted prices for similar assets or liabilities.

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, and other current liabilities. The carrying values of these financial instruments approximate their fair values.

The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

Fair Value Measured as of September 30, 2023 Using:
Adjusted Cost
Unrealized gain
Fair ValueCash and Cash EquivalentsMarketable Securities
Assets
Level 1
Money market funds$29,289 $— $29,289 $29,289 $— 
Level 2
Corporate bonds1,994  1,994 1,994 — 
Commercial paper4,829  4,829 — 4,829 
U.S. Government securities3,913 1 3,914 — 3,914 
Total financial assets$40,025 $1 $40,026 $31,283 $8,743 
Liabilities
Level 2
Private placement warrant liability$— $— $2 $— $— 
Level 3
Derivative warrant liability— — 80 — — 
Total financial liabilities$— $— $82 $— $— 

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Fair Value Measured as of December 31, 2022 Using:
Adjusted CostUnrealized lossesFair ValueCash and Cash EquivalentsMarketable Securities
Assets
Level 1
Money market funds$14,253 $— $14,253 $14,253 $— 
Level 2
Asset-backed securities$3,507 $(119)$3,388 $— $3,388 
Corporate bonds22,139 (240)21,899 — 21,899 
Commercial paper20,760  20,760 — 20,760 
U.S. Government securities29,983 (895)29,088 — 29,088 
Total financial assets$90,642 $(1,254)$89,388 $14,253 $75,135 
Liabilities
Level 2
Private placement warrant liability$— $— $7 $— $— 
Level 3
Convertible notes$8,594 
Derivative warrant liability119 
Total financial liabilities$— $— $8,720 $— $— 

The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following:

Money Market Funds: The Company holds financial assets consisting of money market funds. These securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Marketable Securities: The Company holds financial assets consisting of fixed-income U.S. government agency securities, corporate bonds, commercial paper, and asset-backed securities. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities.
    2022 Convertible Note: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $10,500,000 (the "2022 Note"). The Company elected the fair value option to account for the 2022 Note. The fair value estimate of the 2022 Note was based on a binomial lattice model, which represents Level 3 measurements. Significant assumptions include the discount rate used in the model, remaining term, stock price, and volatility. The discount rate is derived from the estimated credit spread and the risk-free interest rate, which is based on interpolated U.S. Treasury rates, commensurate with a similar term to the 2022 Note. The remaining term is calculated based on the estimated maturity date of the 2022 Note. The stock price is based on the publicly traded price of our common stock as of the measurement date. The Company estimated the volatility for the 2022 Note based on the historical and implied volatilities of the Company's publicly traded common stock. The changes in fair value are recognized in other income (expense), net for each reporting period.

Derivative Warrant Liability: The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note. The warrants are recorded on the condensed consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of our common stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. The term to expiration was calculated as the contractual term of the warrants of 4 years. Finally, the Company does not currently anticipate paying a dividend.
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Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the condensed consolidated balance sheets.

Private Placement Warrant Liability: As of September 30, 2023, Private Placement Warrants are recorded on the condensed consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of the Company's public warrants. Any changes in the fair value of the liability are reflected in other income (expense), net, on the condensed consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the condensed consolidated balance sheets.

For the nine months ended September 30, 2023, there were no net transfers between Level 1 and Level 2 inputs.

The following table presents a summary of the changes in fair value of the Company's Level 3 financial instruments for the nine months ended September 30, 2023 (in thousands):

2022 NoteDerivative Warrant LiabilityTotal
Balance at December 31, 2022$8,594 $119 $8,713 
Payments or conversions(9,573) (9,573)
Change in fair value included in other income (expense), net958 (39)919 
Change in fair value due to instrument specific credit risk included in other comprehensive income21  21 
Balance at September 30, 2023$ $80 $80 

The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at September 30, 2023 are as follows:

September 30, 2023
Expected term (years)2.9 
Expected volatility142.3 %
Risk-free interest rate4.8 %
Dividend yield %
Exercise price$3.50 

If factors or assumptions change, the estimated fair values could be materially different. The value of the Company’s derivative warrant liability would increase if a higher risk-free interest rate was used, and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the liability, and a lower volatility assumption would decrease the value of the liability.

3.CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash, cash equivalents, and restricted cash as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023December 31, 2022
(unaudited)
Cash and cash equivalents$37,149 $19,064 
Restricted cash2,150 2,150 
Total cash, cash equivalents, and restricted cash$39,299 $21,214 

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4. INVENTORIES

Inventory, net of write-downs, as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023December 31, 2022
(unaudited)
Raw materials$1,841 $2,022 
Work in-process3,027 2,484 
Finished goods 47 
Total inventory, net$4,868 $4,553 

The Company also had $191 and $1,491 of non-current inventory (raw materials) classified within Other noncurrent assets on the condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022, respectively.

The Company's current and non-current inventory as of September 30, 2023 and December 31, 2022 was written down by $3,160 and $833, respectively, in order to reduce inventory to the lower of cost or net realizable value.

5.PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023December 31, 2022
(unaudited)
Prepaid expenses$2,635 $4,203 
Advances to suppliers1,658 984 
Demonstration units45 281 
Other171 713 
Total prepaid and other current assets$4,509 $6,181 

6.     LEASES

The components of operating lease expenses for the three and nine months ended September 30, 2023 and 2022 are as follows (in thousands):

Three months ended September 30,Nine months ended September 30,
2023202220232022
Operating lease cost$593 $602 $1,797 $1,780 
Variable lease cost89 62 248 171 
Total operating lease cost$682 $664 $2,045 $1,951 

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Maturities of lease liabilities are as follows (in thousands):

Operating leases
Years ending - December 31: (Unaudited)
2023 (remaining three months)$634 
20242,570 
20252,583 
20262,660 
20272,701 
Thereafter11,116 
Total lease payments22,264 
Less amount to discount to present value(4,271)
Present value of lease liabilities $17,993 

7. OTHER NONCURRENT ASSETS

Other noncurrent assets as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023December 31, 2022
(unaudited)
Non-current inventory$191 $1,491 
Long-term prepaid expenses763 901 
Security deposits86 81 
Total other noncurrent assets$1,040 $2,473 

8.    CONVERTIBLE NOTES

2022 Convertible Note

On September 14, 2022, the Company entered into a Securities Purchase Agreement, or SPA, with an investor allowing for the sale and issue of two convertible notes, each with a principal balance of $10,500 and cash proceeds of $9,850, for a total of $20,000 in proceeds between the two issuances (each, a "Note Closing"). The first Note Closing ("First Closing") occurred on September 15, 2022, and the Company entered into a Senior Unsecured Convertible Note with the investor pursuant to which the Company issued to the investor one convertible note ("2022 Note") with a principal balance of $10,500 for cash proceeds of $9,850. As part of the First Closing, the Company also issued warrants to the investor. The second tranche convertible note under the SPA can be drawn at the Company's option, subject to satisfaction of certain conditions specified in the SPA, including, without limitation, (i) absence of an uncured event of default, as defined, (ii) there being a sufficient number of authorized but unissued shares of our common stock available for issuance, (iii) the daily volume weighted average price of our common stock exceeding $1.50 for the twenty (20) trading days prior to the draw of the second tranche, (iv) the average daily trading volume of our common stock exceeding $1.5 million for the twenty (20) trading days prior to the draw of the second tranche, and (v) the outstanding balance of the first tranche being less than $2 million. These conditions can be waived by the lender, but the lender has no obligation to do so. If the second tranche is not drawn down by March 15, 2024, the Company's right to effect a Second Closing shall automatically terminate.

The 2022 Note bore interest at an annual rate of 5.0%, in addition to an original issue discount of 4.76%, and had an initial maturity date of March 15, 2024 ("Maturity Date"). Beginning December 15, 2022, and the first of each subsequent month (each a "Monthly Redemption Date" or an "Installment Date"), the Company was required to redeem the Monthly Redemption Amount until the 2022 Note was fully redeemed. The Monthly Redemption Amount, in most instances, was 1/15th of the original principal amount, plus any amount accelerated pursuant to the 2022 Note, accrued but unpaid interest, and late fees, if any. The principal and interest could be settled in cash or, so long as certain equity conditions are met, shares of Common Stock at the option of the Company and was payable together with monthly redemptions of the outstanding principal amount of the Note.

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If the Company elects to settle such redemptions in shares of Common Stock, the number of shares to be settled shall be based on an Installment Conversion Price equal to the lower of (i) $2.50 or (ii) 95% of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the applicable Monthly Redemption Date. If the Company elects to settle redemptions in cash, the Monthly Redemption Amount shall include a 5% premium.

The investor is permitted to accelerate up to four (4) Monthly Redemption Amounts in any calendar month (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price, subject to a $2,800 limit per month. The Acceleration Conversion Price shall be the lower of (i) the Installment Conversion Price for such current Installment Date or (ii) the greater of $0.30 and 95% of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the Acceleration Date.

As these terms are defined in the 2022 Note, if either the relevant Installment Conversion Price or Acceleration Conversion Price, as applicable, is less than $0.30 per share, then a Conversion Floor Price Condition exists and we must deliver to the note holder the Conversion Installment Floor Amount in cash, in addition to the required number of shares, which are valued at $0.30 regardless of the actual trading price of our shares. The Conversion Installment Floor Amount is an amount in cash equal to the product obtained by multiplying (A) the higher of (i) the highest price that the Common Stock trades at on the Trading Day immediately preceding the relevant Share Delivery Date and (ii) the applicable Installment or Acceleration Conversion Price and (B) the difference obtained by subtracting (i) the number of shares of Common Stock delivered to the investor on the applicable Share Delivery Date with respect to such Conversion from (ii) the quotient obtained by dividing (x) the applicable Installment or Acceleration amount subject to such Conversion, by (y) the applicable Installment Conversion Price. Interest payments are also trued-up in cash when the value of our shares is below $0.30 per share.

The Company elected to apply the fair value option to the measurement of the 2022 Note. As a result of adopting the fair value option, no embedded derivatives should be bifurcated from the 2022 Note. The Company classifies the 2022 Note as a liability at fair value and will remeasure the 2022 Note to fair value at each reporting period. The fair value measurement includes the assumption of accrued interest and expense and thus a separate amount is not reflected on the condensed consolidated statement of operations.

As of September 30, 2023, the 2022 Note has no outstanding principal balance as all outstanding principal and accrued interest has been fully settled. As part of the debt extinguishment, the Company reclassified the accumulated change in fair value due to instrument-specific credit risk out of accumulated other comprehensive loss on the condensed consolidated balance sheet and into interest expense and other on the condensed consolidated statement of operations.

9. INTEREST EXPENSE AND OTHER

Interest expense and other for the three and nine months ended September 30, 2023 and 2022 consisted of the following (in thousands):

Three months ended September 30,Nine months ended September 30,
2023202220232022
Convertible note issuance costs 381  381 
Amortization of premiums (accretion of discounts) on marketable securities, net(1)203 (230)811 
Realized losses on redemptions of marketable securities 77  77 
Common Stock Purchase Agreement costs   28 
Loss on disposal of assets105  105  
Impairment of right-of-use assets  47  
Realized loss on instrument-specific credit risk46  46  
Other24 27 41 41 
Interest expense and other$174 $688 $9 $1,338 


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10.    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2023 and 2022 are as follows (in thousands):

Change in net unrealized loss on available-for-sale securitiesChange in fair value due to instrument-specific credit riskTotal
Balance at December 31, 2022$(1,254)$(25)$(1,279)
Other comprehensive income (loss), net of tax490 (21)469 
Balance at March 31, 2023$(764)$(46)$(810)
Other comprehensive income, net of tax420  420 
Balance at June 30, 2023$(344)$(46)$(390)
Other comprehensive income before reclassifications, net of tax345  345 
Amounts reclassified from accumulated other comprehensive loss, net of tax 46 46 
Net other comprehensive income345 46 391 
Balance at September 30, 2023$1 $ $1 

Change in net unrealized loss on available-for-sale securitiesChange in fair value due to instrument-specific credit riskTotal
Balance at December 31, 2021$(391)$ $(391)
Other comprehensive loss, net of tax(1,056) (1,056)
Balance at March 31, 2022$(1,447)$ $(1,447)
Other comprehensive loss, net of tax(182) (182)
Balance at June 30, 2022$(1,629)$ $(1,629)
Other comprehensive loss before reclassifications, net of tax(84) (84)
Amounts reclassified from accumulated other comprehensive loss, net of tax77  77 
Net other comprehensive loss(7) (7)
Balance at September 30, 2022$(1,636)$ $(1,636)

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11.    NET LOSS PER SHARE

The following table sets forth the basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except share and per share data):

Three months ended September 30,Nine months ended September 30,
2023202220232022
Numerator:
Net loss attributable to common stockholders$(17,048)$(23,624)$(59,344)$(74,972)
Denominator:
Weighted average common shares outstanding- Basic184,117,531 159,312,203 172,182,776 156,702,000 
Dilutive effect of potential common shares    
Weighted average common shares outstanding- Diluted184,117,531 159,312,203 172,182,776 156,702,000 
Net loss per share attributable to common stockholders - Basic and Diluted$(0.09)$(0.15)$(0.34)$(0.48)

Due to net losses for the nine months ended September 30, 2023 and 2022, basic and diluted net loss per share were the same, as the effect of all potentially dilutive securities would have been anti-dilutive. The following table sets forth the anti-dilutive common share equivalents for the periods listed:

Nine months ended September 30, 2023
20232022
Common stock options issued and outstanding9,395,315 26,082,681 
Unvested restricted stock units23,617,958 13,513,002 
Warrants9,583,322 9,583,322 
Conversion of convertible notes 9,801,467 
ESPP1,302,183  
Total43,898,778 58,980,472 


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12.    STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation expense recorded in each component of operating expenses in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Three months ended September 30,Nine months ended September 30,
2023202220232022
Cost of revenue$32$43$127$86
Research and development1,7201,8995,5285,167
Sales and marketing6531,2392,6953,477
General and administrative1,6792,9256,3579,273
Total stock-based compensation$4,084$6,106$14,707$18,003

The Company uses the Monte-Carlo simulation model to estimate the grant date fair value of awards with a market condition, which requires the input of subjective assumptions such as expected term, the expected stock price volatility, risk free interest rate and dividend yield as discussed below.

Expected Term—The expected term for awards with a market condition is the length of time from the grant date to the date the market condition expires.

Expected Volatility—Expected volatility is estimated using a combination of the average historical volatility of the Company's own stock and those of comparable companies’ stock.

Risk-Free Interest Rate—The risk-free interest rates are based on US Treasury yields in effect at the grant date for notes with comparable terms as the awards.

Dividend Yield—The expected dividend-yield assumption is based on the Company’s current expectations about its anticipated dividend policy.

The following table summarizes the valuation assumptions used in estimating the fair value of awards granted during the period with a market condition:

Nine months ended September 30, 2023
Expected term (years)1.05
Expected volatility104.5 %
Risk-free interest rate4.8 %
Dividend yield %

13.    REVENUE

Sale of Prototypes

The Company recorded revenue for prototype sales of $56 and $426 in the three and nine months ended September 30, 2023, respectively, and $652 and $1,182 in the three and nine months ended September 30, 2022, respectively, in the condensed consolidated statements of operations and comprehensive loss. The Company does not incur significant contract costs in fulfilling or obtaining their contracts with customers.

Development Contracts

The Company has entered into research and development contracts with companies primarily in the automotive industry. The Company assessed the number of performance obligations associated with the promises under each agreement, primarily the delivery of customized 4SightTM perception-related goods and services, and recognized $132 and $969 in revenue for performance obligations satisfied during the three and nine months ended September 30, 2023 and $115 and $1,373 during the three and nine months ended September 30, 2022, respectively,
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in the condensed consolidated statements of operations and comprehensive loss.

Disaggregation of Revenue

The Company recognized the following revenues by geographic area based on the primary billing address of the customer and by the timing of the transfer of goods or services to customers (point in time or over time), as it believes such criteria best depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors. Total revenue based on the disaggregation criteria described above are as follows (in thousands):

Three months ended September 30,Nine months ended September 30,
2023202220232022
Revenue by primary geographical market:
United States$164 $130 $1,154 $1,777 
Europe24 622 184 742 
Australia  32  
Asia 15 25 </