LIDR 10-K & 10-Q changes, risk factors and insider trading

As noted above, our business is subject to numerous risks and uncertainties, including those highlighted in this “Risk Factors” section, that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business. The occurrence of one or more of the events or circumstances described in the section titledthis “Risk Factors,Factors” section, alone or in combination with other events or circumstances may have an adverse effect on our business, financial condition, results of operations, and prospects. Such risks include, but are not limited to:

As of December 31, 2024,2025, we had an accumulated deficit of approximately $373.1$407.1 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. Since we will incur the costs and expenses from these efforts prior to receiving incremental revenues with respect thereto, our losses in future periods may be significant. In the past, design wins, the first step towards commercialization with a particular OEM, have taken longer than originally expected. Similarly, in the Non-Automotive market, a proof-of concept, or POC, which usually occurs prior to the placement of a commercial order, is taking longer than expected, sometimes 12 months or more. Such delays, including delays that may occur in the future, will impact the timing of our revenue. If our products do not achieve sufficient market acceptance, we will not become profitable. If we fail to become profitable, or if we are unable to fund our continuing losses, we may be unable to continue our business operations. There can be no assurance that we will ever achieve or sustain profitability.

We willmay need 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.

We willmay need to raise additional capital either by issuing equity, debt, or a combination of the two, in order to respond to market timing delays, technological advancements, competition, competitive technologies, customer demands, business opportunities, other challenges, potential acquisitions, unforeseen circumstances, or other reasons. In order to further business relationships with current or potential customers or partners, we may issue equity or equity-linked securities to such customers or partners. Despite the need for additional capital, we may not be able to timely secure additional debt or equity financing on favorable terms, or at all, especially given current market conditions where raising additional capital has proven particularly challenging. If we raise additional capital through the issuance of equity or convertible debt or other equity-linked securities or if we issue equity or equity-linked securities to current or potential customers to further our business relationships, our existing stockholders would likely experience dilution, which may be significant. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital or to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business and to respond to business challenges could be significantly limited.

Additionally, under current SEC regulations, if at the time we file this Annual Report on Form 10-K our public float is less than $75 million,million at the time we file our Annual Report on Form 10-K, and for so long as our public float remains less than $75 million,million thereafter, the amount we can raise through primary public offerings of securities in any twelve-month period after such filing using a shelf registration statementsstatement on Form S-3 iswill be limited to an aggregate of one-third of our public float, which is referred to as the “baby shelf” rules. In the recent past, we have been subject to the "baby shelf" rules and we may become subject to such rules again. In the event we again become subject to the "baby shelf" rules, it would limit our ability to raise additional capital.

Since 2023, we have implemented multiple restructuring actions aimed at focusing the organization on the commercialization of our automotive products, while reducing fixed operating costs, including the elimination of our internal sales and marketing teams. Our capital light business model allows us to leverage one or more Tier 1 partners and their manufacturing capabilities, supply chains, OEM relationships, and sales teams to bring our products to market. Our recentThese restructurings could result in disruptions to our operations and adversely affect our business and our ability to maintain or obtain additional Tier 1 partners. For example, we are actively working with our current Tier 1 partner to pursue available RFQ opportunities and if our restructuring actions impede our ability to win these awards, this could materially impact our business. In addition, we cannot be sure that thethese cost reduction initiatives will be successful in reducing our overall expenses to the extent anticipated, or that unexpected costs will not offset any such reductions or related initiatives. If our operating costs are higher than we expect, or if we do not maintain adequate control of our costs and expenses, our operating results could be materially and adversely affected.

Our quarterly results of operations have fluctuated in the past and may vary significantly in the future. As such, historical comparisons of our operating results may not be meaningful. In particular, because our sales to date have primarily been to customers making purchases for their own R&D, sales in any given quarter can fluctuate based on the timing and success of our customers’ proof of concept and development projects. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately and adversely affect financial results for that quarter. This was particularly true for 2023, as we implemented significant cost-reduction measures making it more difficult for us to further reduce our operating expenses without a material adverse impact on our prospects in future periods. We have and may continue to incur significant or unanticipated expenses related to long-lived asset impairments, inventory write-downs, and one-time termination benefits to restructure our business. For example, in 2023, we impaired $9.9 million of long-lived assets, wrote down $8.6 million of inventory and other current assets, and incurred $3.3 million of one-time termination benefit costs, primarily relating to our decision to wind down our legacy Non-Automotive product line andas part of our effort to reduce supportfixed foroperating thiscosts, endfocus marketoperations, untilsimplify wesupply have sufficient scale in the Automotive market, which is our largestchains, and higheststreamline priority market.manufacturing.

Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and may not fully reflect the underlying performance of our business. These fluctuations could adversely affect our ability to meet our expectations or those of securities analysts, ratings agencies, or investors. If we do not meet these expectations for any period, the value of our business and our securities,securities could decline significantly.

The market price and trading volume of our common stock may be volatile and could decline significantly.significantly, including for matters related to Nasdaq listing standards.

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. 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. Although the notification did not have an immediate impact on our Nasdaq listing, we were given a period of 180 calendar days, or until July 19, 2023, to regain compliance with the requirement. At our request, on July 20, 2023, Nasdaq granted to us a second and final 180 calendar day period to regain compliance, or until January 16, 2024. To ensure compliance with the minimum bid price requirement by January 16, 2024, we held a special meeting of stockholders on December 12, 2023, to consider and authorize our Board of Directors to effect a reverse stock split. At the special meeting, the Company’s stockholders authorized the Board to effect a reverse stock split, in the Board's discretion, within one year from the date of the special meeting, at one of ten ratios in multiples of five between and including one-for-five to one-for-fifty. Thereafter, the Board resolved to effect a reverse stock split of our issued common stock at a ratio of one-for-thirty (the "Reverse Stock Split"), and pursuant to that resolution, on December 26, 2023, we caused a Certificate of Amendment to our Second Amended and Restated Certificate of Incorporation, as amended, to be filed with the Secretary of State of the State of Delaware. The Reverse Stock Split became effective upon the filing of the Certificate and our common stock began trading on a split-adjusted basis on The Nasdaq Capital Market at the opening of trading on December 27, 2023. Companies that implement a reverse stock split often see a materially negative impact on their stock price. In addition, since the Reverse Stock Split, and the resulting lower number of shares in our float, we have generally seen lower trading volumes in our stock. Since January 27, 2025, our stock has closed below $1.00 per share. Should this continue for a period of 30 consecutive trading days, we would expect to again receive notice from Nasdaq that we are no longer in compliance with the $1.00 per share minimum bid price requirement for continued listing on Nasdaq and thus we will need to regain compliance in accordance with Nasdaq rules. If we are unable to regain compliance, we will be subject to delisting. The trading volume of our common stock may fluctuate significantly for this or other reasons, which can have a significant impact on the price of our common stock. If the market price of our common stock declines significantly, you may be unable to resell your shares at an attractive price, or at all. We cannot assure you that the market price of our common stock will not fluctuate widely or decline significantly in the future.

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 productsproducts, and accordingly, our financial condition and operating results.

The production of our components is dependent on sourcing certain key components and raw materials at an acceptable price levels.cost. We have experienced, and may continue to experience, supply chain-induced shortages of key components, leading to a scarcity of such components, a limited availability of such components at greatly inflated prices, or both. This scarcity and limited availability of components may be further exacerbated by increasing trade tensions around the globe. 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.

Accordingly, we expect to be subject to substantial and continuing pricing pressure from automotive OEMs, Tier 1 suppliers, and lidar competitors, which may impact the revenue we receive from licensing our product designs or selling our products. In particular, because automotive lidar technology appears to have been successfully commercialized in China, our competitors in that market have likely gained experience and efficiencies, including cost efficiencies, that often come with productization that suppliers outside of China, including us, do not have. Although trade barriers may prevent some Chinese lidar suppliers from entering Western lidar markets, to the extent Chinese lidar sensors enter Western markets, competitive pricing pressures on us would likely increase. It is possible that pricing pressures beyond our expectations could intensify as automotive OEMs, Tier 1 suppliers, and lidar competitors pursue restructuring, consolidation, and cost-cutting initiatives. If we are unable to identify sufficient design cost savings to meet the expectations of automotive OEMs and Tier 1 suppliers, our revenue and profitability would be adversely affected.

We expect to continue investing in R&D and commercializing new products, albeit at a reduced amount compared to prior years, which could significantly reduce our profitability and may never result in revenue to us.

While ourOur lidar-based sensing system can be applied to different use cases across end markets, an insignificant amount of revenue during the year ended December 31, 2024 and approximately 70% of our revenue during the year ended December 31, 2023 was generated from Automotive applications with the remainder from Non-Automotive applications.markets. 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. We have experienced a number of instances where potential automotive OEMs have delayed their programs for the inclusion of lidar in their end products. We continually study emerging and competing sensing technologies and methodologies and we may incorporate new sensing technologies to our product portfolio over time. However, lidar products for use in the Automotive market remain relatively new and it is possible that other sensing modalities, or a new disruptive modality based on new or existing technologies, including a combination of technologies, will achieve acceptance or leadership in the ADAS and autonomous driving space. Even if lidar products are used in initial generations of autonomous driving technology and ADAS products, we cannot guarantee that lidar products will be designed into or included in subsequent generations of such commercialized technology. The speed of market adoption and growth for ADAS or autonomous vehicles is difficult, if not impossible, to predict, and it is more difficult to predict this market’s future growth in light of the economic consequences of theunresolved lingeringglobal effects of the COVID-19 pandemicconflicts and increasing trade tensions, as well as other macroeconomic factors. Although we currently believe we have a differentiated market leading technology for the autonomous vehicle market, by the time mass market adoption of autonomous vehicle technology is achieved, we expect competition among providers of sensing technology based on lidar and other modalities to increase substantially. If, by the time autonomous vehicle technology achieves mass market adoption, commercialization of lidar products is not successful, or not as successful as we or the market currently expects, or if other sensing modalities gain acceptance by developers of ADAS products, automotive OEMs, regulators, safety organizations, or other market participants, our business, results of operations, and financial condition will be materially and adversely affected.

Addressing these requirements can be time-consuming and costly. The market for lidar technology is relatively new, rapidly developing, and unproven in many markets orand industries. Many of our prospective customers are still in the testing and development phases and we cannot be certain that they will commercialize products or systems with our lidar products, or at all. We cannot be certain that lidar will be sold into these markets, or that lidar will be sold into any markets at scale. 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 theunresolved lingeringglobal effects of the COVID-19 pandemic,conflicts and increasing trade tensions, as well as other macroeconomic factors, and the length of any associated economic recovery. If lidar technology does not achieve commercial success, or if adoption of lidar is deferred or the market otherwise develops at a pace slower than we expect, our business, results of operations, and financial condition will be materially and adversely affected.

Over the long term, we may experience significant growth in the scope and nature of our operations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, and management controls, legal and compliance programs, and reporting systems. We may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in existing controls, programs, systems, and procedures, which could have an adverse effect on our business, reputation, and financial results. In addition, we currently operate with a limited number of employees, particularly in sales, marketing, and customer support. This limited resourcing could constrain our ability to scale operations, meet customer demand, and execute on growth opportunities if interest in our technology exceeds expectations. Failure to adequately expand and support these functions as interest increases could negatively impact our ability to achieve our strategic objectives.

Most of the components that go into the manufacturing of our solutions are sourced from third-party suppliers. To date, we have produced our products in relatively limited quantities for use in R&D programs. Although we do not have any experience in managing our supply chain to manufacture and deliver our products at scale, our future success will depend on our ability to do so. Some of the key components used to manufacture our products come from limited or single source suppliers.suppliers, which includes components only produced in countries, such as China, that some customers, for a variety of reasons, may be unable or unwilling to purchase from us. We are therefore subject to the risk of shortages and long lead times in the supply of these components and the risk that our suppliers discontinue or modify components used in our products.

As we rely on a global supply chain, the lingeringpotential effects of the COVID-19 pandemic,for other epidemics and outbreaks,outbreaks of contagions, should they materialize, unresolved and continuing global conflicts, and increasing trade tensions, as well as other macroeconomic factors may adversely affect our ability to source components in a timely or cost-effective manner from our third-party suppliers due to, among other things, work stoppages or interruptions. For example, our products depend on lasers. Any shortage in the availability of these lasers could materially and adversely affect our ability to manufacture our solutions. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. While we have entered into agreements with some suppliers for the supply of certain components at set prices, such quantities are limited given we are not yet producing at scale. Therefore, we have in the past experienced, and may in the future experience, component shortages and significant price fluctuations of key components and materials, and the predictability of the availability and pricing of these components may be limited. Component shortages or pricing fluctuations could be material in the future, which could be exacerbated by employee retention issues at any of our suppliers. In the event of a component shortage, supply interruption, or a material pricing change from suppliers of these components, we may not be able to develop alternate sources in a timely manner, or at all, especially in the case of sole or limited source items. Developing alternate sources of supply for these components may be time-consuming, difficult, and costly and we may not be able to source these components on terms that are acceptable to us, or at all, which may undermine our ability to meet our requirements or to fill customer orders in a timely manner. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would adversely affect our ability to meet our scheduled product deliveries to our customers. 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. Even where we are able to pass increased component costs along to our customers, there may be a lapse of time before we are able to do so such that we will be required to absorb some or all of the increased cost. If we are unable to buy these components in sufficient quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver products to our customers, which may result in such customers using competitive products instead of our products.

In the fourth quarter of 2023, we made the decision to wind down our legacy Non-Automotive product. We anticipate that ourOur new Automotive product, Apollo,OPTISTM, willis be well-suitedintended to address the Non-Automotive markets without significant additional modifications.market. Our manufacturing strategy for the Non-Automotive market had been focused on outsourcing volume manufacturing to contract manufacturers , or our Tier 1 manufacturing partners, while maintaining the design, engineering, prototyping, testing, and pilot manufacturing in-house at our facility in Pleasanton, California.

Reliance on third-party manufacturers reduces our control over the manufacturing process, including reduced control over quality, product costs, and product supply, and timing. We may experience delays in shipments or issues concerning product quality from our third-party manufacturers. If any of our third-party manufacturers experience interruptions, delays, or disruptions in supplying our products, including by (i) natural disasters, (ii) the lingering effects of the global COVID-19 pandemic, or if otherany epidemics or outbreaks of other contagions materialize,contagions, such as “bird flu,” (iii) increased military conflict, especially in Ukraine and the Middle East, (iv) increasing trade tensions around the globe, or (v) work stoppages or capacity constraints, our ability to ship products would be delayed. In addition, unfavorable economic conditions could result in financial distress among third-party manufacturers upon which we rely, thereby increasing the risk of disruption of supplies necessary to fulfill our production requirements and meet customer demands. Additionally, if any of our third-party manufacturers experience quality control problems in their manufacturing operations and our products do not meet customer or regulatory requirements, we could be required to cover the cost of repair or replacement of any defective products. These delays or product quality issues could have an immediate and material adverse effect on our ability to fulfill orders and could have a negative effect on our operating results. In addition, such delays or issues with product quality could adversely affect our reputation and our relationship with our channel partners. 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. It would be time-consuming, and could be costly and impracticable, to begin to use new manufacturers or designs, and such changes could cause significant interruptions in supply and could have an adverse effect on our ability to meet our scheduled product deliveries, and may subsequently lead to the loss of sales. While we take measures to protect our trade secrets, the use of third-party manufacturers may also risk disclosure of our innovative and proprietary manufacturing methodologies, which could adversely affect our business.

Recently,We wehave began anbegun engagement with a new manufacturing partnerpartner, based in China in an effort to penetrate the lidar market in China, initially focused on the autonomous trucking and railway segments. Given this is a new endeavor, there is no guarantee that this will be successful or be effective at mitigating the risks associated with our outsourced manufacturing business model.

In May 2024, we announced that we have partnered with Accelight Technologies, Inc. and LighTekton Co., Ltd. to deliver our lidar solutions to the China market, specifically focused on the autonomous trucking and railway,railway segments, as the market in China appears to be ahead of the rest of the world in lidar adoption. However, we have not previously sold into the China market and our partners, although they regularly conduct business in China, do not have experience in the lidar market. There is also significant competition in China from local lidar manufacturers. We can provide no assurances that we will be successful in the China lidar market.

Our products are intended to be combined with third-party hardware and software as part of a larger system. These larger systems are also highly technical, complex, and require high standards to manufacture. The third-party components incorporated into these larger systems,systems have been and will be subject to defects, errors, and reliability issues during development, production, and use. Should these third-party components, in which our products are intended to be combined with, fail or require action to correct defects or errors, it would likely delay the sale of the larger system in which our products are to be incorporated, thereby adversely affecting our financial results. As the production of third-party components is largely outside of our control, we are subject to such third parties investing sufficient time and resources to manufacture their products without minimal defects. For example, if a third-party reseller intended to overlay perception software on our product prior to resale, but such perception software contained defects or errors such that it could not be introduced into the market, the sales of our products would be delayed or cancelled, thereby adversely affecting our financial results.

To ensure adequate inventory, we must forecast inventory needs and expenses, place orders sufficiently in advance with our suppliers and manufacturing partners, and manufacture products based on our estimates of future demand for particular products. Fluctuations in the adoption of lidar products may affect our ability to forecast our future operating results, including revenue, gross margins, cash flows, and 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, such as “bird flu,” 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.East, or escalating trade tensions around the globe. If our lidar products are commercialized in autonomous driving and ADAS applications, both of which are experiencing rapid growth in demand, we may face challenges acquiring adequate supplies to manufacture our products and/or we and our manufacturing partners may not be able to manufacture our products at a rate necessary to satisfy the levels of demand, which would negatively affect our revenue. This risk may be enhanced by the fact that we may not carry or be able to obtain for our manufacturing partners a significant level of inventory to satisfy short-term increases in demand. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products available-for-sale.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would adversely affect our financial results, including our gross margin, and have a negative effect on our brand. In the past, including in the fourth quarter of 2023, we took inventory write-downs for obsolete and excess components associated with our decision to wind-down our legacy Non-Automotive product line. Conversely, if we underestimate customer demand for our products, we, or our manufacturing partners, may not be able to deliver products to meet our requirements, and this could result in damage to our brand and customer relationships, and adversely affect our revenue and operating results.

We may experience declines in the average selling prices of our products generally as our customers seek to commercialize autonomouslidar-based systems at prices low enough to achieve market acceptance or due to competitive pressures. In order to sell products that have a falling average unit selling price and maintain margins at the same time, we will need to continually reduce product and manufacturing costs. To manage manufacturing costs, we and our Tier 1 partners must continually engineer the most cost-effective design for our products. In addition, we continuously drive initiatives to reduce assembly cost, improve efficiency, reduce the cost of materials, use fewer materials, and further lower overall product costs by carefully managing component prices, inventory, and shipping costs. We also need to continually introduce new and competitive products in order to maintain our overall gross margin. We may also experience declines in fees or royalties from licensing our technology as customers reduce the prices of their products incorporating our licensed technology in order to achieve market acceptance or due to competitive pressures. If we are unable to manage the cost structure of our products, successfully introduce new products with higher gross margins, and develop new technology that we can license at attractive royalty rates, our revenue and overall gross margin would likely decline.

While we make our strategic planning decisions based on the assumption that the markets we are targeting will grow, our business is dependent, in large part on, and directly affected by, business cycles and other factors affecting the global automotive industry and the global economy generally. Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rates (which significantly increased beginning in 2022 and have fallen starting in 2025) and credit availability, changes in inflation rates (which the U.S. has recently experienced and may continue to do so), consumer confidence,confidence (which may be starting to wane), fuel costs, fuel availability, environmental impact, tariffs,tariffs (especially those targeting automobiles or components used by the automotive industry in particular, such as steel and aluminum), governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks, which may impact our ability to raise additional capital in the future. In addition, the ongoing hostilities between Russia and Ukraine, the war in the Middle East, and global reactions thereto have increasedcaused significant fluctuations in U.S. domestic and global energy prices. Oil supply disruptions related to the Russia-Ukraine conflict, and sanctions and other measures taken by the U.S. and its allies, could lead to higher costs for gas, food, and goods in the U.S. and exacerbate the inflationary pressures on the economy, with potentially adverse impacts on our customers and on our business, results of operations, and financial condition. Moreover, certain raw materials needed to produce components that are incorporated into our products, and the products of our customers, are primarily derived in the region in which the Russia-Ukraine conflict is occurring. The longer the Russia-Ukraine conflict continues and the more damage to Ukrainian infrastructure that occurs, the greater the impact could be on the supply of such raw materials, and the failure to have access to such raw materials could have an adverse effect on our business and results of operations. In addition, the U.S. Cybersecurity and Infrastructure Security Agency, or CISA, has in the past warned all organizations in the U.S. to be on guard against possible cyber attackscyber-attacks coming from Russia and Iran which has the potential to disrupt business operations, limit access to essential services, and threaten public safety.

Automotive production and sales can also be significantly affected by our automotive OEM and Tier 1 supplier customers’ ability to continueoperate operatingeffectively in responsethe toface of challenging economic conditions and in response to labor relations issues, regulatory requirements, trade agreements, and other factors, such as the unavailability of unrelated components in the assembly of automobiles, an example of which iswas the shortage of semiconductors necessary for automobile production. In addition, ongoing global trade disputes, and the resulting imposition or modification of tariffs (including those specifically targeting the automotive industry, including the components used in automobile manufacturing), increasing trade tensions, and the implementation of potential trade restrictions, are expected to negatively impact automotive OEMs and their Tier 1 suppliers. The volume of automotive production in North America, Europe, and theother restkey of the worldmarkets has fluctuated, sometimes significantly, from year to year, and we expect such fluctuationsvolatility to givecontinue, rise to fluctuationsespecially in the demand for our products and licenseslight of ourthese technology.additional issues. Any significant adverse change in any of these factors may result in a reduction in automotive sales and production by our automotive OEM and Tier 1 supplier customerscustomers, which could, in turn, reduce demand for our products and couldlicenses of our technology, which would have a material adverse effect on our business, results of operations, and financial condition.

If we and our partners are able to secure design wins so that our solutions are included in autonomous driving and ADAS products, we expect that we, or our Tier 1 partnerspartners, will enter into supply agreements with that customer. Market practice dictates that these supply agreements typically require us to supply a customer’s requirements for a particular vehicle model or autonomous driving or ADAS product, rather than supply a set number of products. 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. Therefore, even if we are successful in obtaining design wins, and we or our Tier 1 partners are able to enter into definitive agreements with OEMs, and the systems into which our products are built are commercialized, the discontinuation of, the loss of business with respect to, or a lack of commercial success of a particular vehicle model or technology package for which we are a significant supplier could mean that the expected sales of our products will not materialize, materially and adversely affecting our business.

We are pursuing opportunities in markets that are undergoing rapid changes, including technological and regulatory changes, and it is difficult to predict the timing and size of the opportunities. For example, autonomous driving and lidar-based ADAS applications require the utilization of complex technology. Because these systems depend on technology from many companies, commercialization of autonomous driving or ADAS products could be delayed or impaired on account of certain technological components not being ready to be deployed in automobiles. We are in the process of developing necessary relationships with commercial partners which may not result in the commercialization of our technology immediately, or at all. Regulatory, safety, or reliability developments, many of which are outside of our control, could also cause delays or otherwise impair commercial adoption of these new technologies, which will adversely affect our growth. Our future financial performance will depend on our ability to make timely investments in emerging market opportunities. If one or more of these markets experienceexperiences a shift in customer or prospective customer demand, our products may not compete as effectively, if at all, and they may not be designed into commercialized products. Given the evolving nature of the markets in which we operate, it is difficult to predict customer demand or adoption rates for our products or the future growth of these markets. If demand does not develop or if we cannot accurately forecast customer demand, the size or timing of our markets, inventory requirements, or our future financial results, our business, results of operations, and financial condition will be adversely affected.

Although we have and continue to pursue a broad customer base, wein arethe currentlyAutomotive courtingmarkets, there exist only a limited number of customers, most of which have strong purchasing power and for which the relationships arecontinue developing.to Fordevelop. year ended December 31, 2023, Continental AG accounted for approximately 70% of our annual revenue. AtIn the endNon-Automotive ofmarkets, 2023,there Continentalare informedconsiderably usmore ofpotential theircustomers, decisionbut tothe endmarket ouris existinghighly arrangement as our Tier 1 partner.fragmented. The loss of business from any of our existing or potential customers (whether by lower overall demand for our products, component shortages that impact our customers’ production plans or product development plans, cancellation of existing contracts or product orders, or the failure to design in our products) could have a material adverse effect on our business.

The markets for sensing technology applicable to autonomous solutions across numerous industries are highly competitive. Our future success will depend on our ability to achieve a leadership position in our target 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 competitors compete with us directly by offering lidar products and indirectly by attempting to solve some of the same challenges with different technologies. Our current and future competitors may enjoy competitive advantages, such as greater name recognition, established relationships, or existing contracts with Tier 1 suppliers and/or OEMs, and substantially greater financial, technical, and other resources. Because automotive lidar technology appears to have been successfully commercialized in China, our competitors in that market have likely gained experience that comes with productization that suppliers outside of China, including us, have yet to gain. We face competition from a number of sources including camera and radar companies, other developers of lidar products, Tier 1 suppliers, and other technology and automotive supply companies. In the Automotive market, our competitors have commercialized both lidar and non-lidar-based ADAS technologytechnology, thatwhich has achieved market adoption, strong brand recognition, and is expected to improve over time. Other competitors are working towards commercializing autonomous driving technologytechnology, and either by themselves,themselves or with a publicly announced partner, and have substantial financial, marketing, R&D, and other resources. Some of our customers in the autonomous vehicle and ADAS markets have announced development efforts or made acquisitions directed at creating their own lidar-based or other sensing technologies, which would compete with our solutions. We do not know how close these competitors are to commercializing autonomous driving systems or novel ADAS applications. In the Non-Automotive markets, our competitors seek to develop new sensing applications across industries. Even in these emerging markets, we face substantial competition from numerous competitors seeking to prove the value of their technology.

While we intend to invest substantial resources to remain on the forefront of technological development, continuing technological changes in sensing technology and lidar, and the markets for these products, including the ADAS and autonomous driving space, could adversely affect adoption of lidar and/or our products, either generally or for particular applications. Our future success will depend upon our ability to develop and introduce a variety of new capabilities and innovations to our existing product offerings,products, as well as our ability to introduce a variety of new product offerings,offerings to address the changing needs of the markets in which we offer our products.customers. We cannot guarantee that such new products will be released in a timely manner, or at all, or achieve market acceptance. Delays in delivering new products that meet customer requirements could damage our relationships with customers and lead them to seek alternative sources of supply. In addition, to date, we have focused on the delivery of our solutions to R&D programs in which developers are investing substantial capital to develop new systems that incorporate our solutions. Our future success relies heavily on the outcome of the R&D efforts by these customers. As autonomous technology reaches the stage of large-scale commercialization, we will be required to develop and deliver solutions at price points that enable wider and ultimately mass-market adoption. Delays in introducing products and innovations, the failure to choose correctly among technical alternatives, or the failure to offer innovative products or configurations at competitive prices may cause existing and potential customers to purchase our competitors’ products or turn to alternative sensing technologies.

Significant developments in alternative technologies, such as cameras and radar, or a fusion of lidar with cameras and/or radar, may materially and adversely affect our business, prospects, financial condition, and operating results in ways we do not currently anticipate. Existing and future camera and radar technologies may emerge as customers’ preferred alternative to our solutions. In addition, some of our competitors are developing lidar based on frequency-modulated continuous wave, or FMCW, sensors or single photon avalanche diode, or SPAD, sensors, rather than the time-of-flight, or ToF, sensors we utilize. Each type of sensor has advantages and disadvantages over the others and it is impossible to predict which one, or if all of these sensors will ultimately be adopted by various markets. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced products in the autonomous vehicle industry,products, which could result in the loss of competitiveness of our lidar solutions, decreased revenue, and a loss of market share to competitors (or a failure to increase revenue and/or market share). Our R&D efforts may not be sufficient to adapt to changes in technology. As technologies change, we plan to upgrade or adapt our lidar solutions with the latestlatest, yet cost effective, technology. However, our solutions may not compete effectively with alternative systems if we are not able to source and integrate the latest technology into our existing lidar solutions.solutions in a cost-effective manner.

Our current controls, and any new controls that we develop, may be inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results or cause us to fail to meet our reporting obligations, and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in the periodic reports we will file with the SEC under Section 404(a) of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and a lack of internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer ana emergingsmaller growthreporting company.company or a non-accelerated filer. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results.

We anticipate growing demand for our 4SightTMApolloTM Intelligent Sensing Platformplatform across our two major markets, Automotive and Non-Automotive.Non-Automotive, Weand we believe this expected growth will allowenable us to capture market share asacross well as pursue specialized opportunities like highway autonomous driving applications that benefit from our products. We anticipate concentrating onboth the Automotive marketand byNon-Automotive moremarkets. effectivelyWe leveragingplan ourto businesspursue model,opportunities focusing onin advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking.trucking, Inwhile addition,also we will look forexploring opportunities in the Non-Automotive market, such as in the railway, airport safety and security, perimeter monitoring, aerospace and defense, transportation logistics, and intelligent transportation systems, or ITS segments. This strategydiversified approach provides us with multiple opportunities for sustained growth by enabling new applications and product features across thesea broad range of industries and market segments. However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market demand and customer adoption. In the Automotive market for example, which accounted for an insignificant portion of our revenues in 2024 and 70% of our revenues in 2023, our growth and financial performance will be heavily influenced by our ability to successfully integrate into OEM programs that require years of development, testing, and validation. Because of the size and complexity of these OEM programs, having Tier 1 partnerships should provide a substantial competitive advantage over our competitors given their large scale, mass-production capabilities, and existing OEM relationships held by our Tier 1 partners. If we fail to remain engaged with one or more Tier 1 automotive suppliers, it may have an adverse effect on our business. The markets for lidar are projected to see significant growth in both the near and long-term.

Our technology is designed to be a key enabler in certain Automotive and Non-Automotive market applications. Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers. The time to achieve a design win varies based on the market and application. We consider design wins to be critical to our future success, although the revenue that may be generated by each design win and the time necessary to achieve such a design win can vary significantly, making it difficult to predict our financial performance. InWe have unified our supply chain for the Automotive and Non-Automotive market,markets and plan to leverage our strategyTier has1 beenautomotive suppliers to produce products for us to sell our lidar solutions to customers utilizing components that are sourced, in part, from the Tier 2 automotive supply chain and assembled byinto our contractNon-Automotive manufacturingmarkets, partners.whereas Inin the Automotive market,markets, we will utilize aanticipate licensing modelour withtechnology to our Tier 1 suppliers thatin wouldexchange generatefor a royaltyroyalty. forThe us and, hence, can be more easily replicated with multiple Tier 1 suppliers. As the Tier 2 automotiveunified supply chain matures,should weallow intendus to leverage thosethe suppliers,scale, efficiencies, and the volume createdassociated forwith supplying the Automotive market,market to participatebenefit in theour Non-Automotive market.market Withcustomers. thatIn in2023, mind,as in the fourth quarterpart of 2023,our effort to reduce fixed operating costs, simplify our supply chain, and focus resources on our next‑generation architecture, we made the decision to windwound down support for our legacy productNon‑Automotive line for the Non-Automotive market and curtailed support.product. Since thelaunching launch of our new product, Apollo,ApolloTM in 2024, we have seen renewed interest from Non-AutomotiveNon‑Automotive customers across a broad range of sectors and are now actively engaged on multiple opportunities.

We believe our revenue and profitability will also be dependent upon our success in licensing our technology to Tier 1 automotive suppliers, such as our current Tier 1 partner, LITEON, or our previous partner Continental, which represented 70% of 2023 revenue, and these partners securing program awards from OEMSOEMs and scaling to high volume production of our lidar sensors. Delays in autonomy programs by OEMs that we are currently or plan to be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the time frame we anticipate, or at all.

Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of our development contracts with customers, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features. Our gross margins have in the past and may continue to be negatively impacted by inventory write-downs. As an example, in 2023, we recorded inventory write-downs of $7,005 relating to the transition to certain higher grade components in our automotive products as well as the winding down of our legacy product line for the Non-Automotive market. In the future, we expect to generate attractive gross margins from licensing our lidar technology and software to our Tier 1 partners in the Automotive market. We also anticipate being able to leverage on our foundation in the Automotive market to movebe tomore cost competitive in other markets.

Our proprietary adaptive,adaptive intelligent lidar technology delivers industry-leading performance, addressing the toughest challenges in achieving partial or full autonomy. Unlike traditional sensing systems that passively collect data, our active 4Sight™ Intelligent Sensing Platform employs principles from automated targeting systems and biomimicry to actively scan the environment, intelligently focusing on critical elements to enable safer, smarter, and faster decisions in complex scenarios.

In June 2024, we introduced Apollo, the first product inApolloTM, our 4Sight™next Flex family of next-generationgeneration lidar sensors.sensor. ApolloApolloTM offers best-in-class range and resolution in a compact, power-efficient, and cost-effective form factor, making it ideal for both automotive and non-automotive applications. ApolloApolloTM can be integrated behind the windshield, on the roof, or in the grille, allowing original equipment manufacturers (OEMs) to implement essential safety features with minimal impact on vehicle design. This innovative sensor leverages our 4Sight™ Intelligent Sensing Platform, providing a highly programmable and customizable lidar solution that can be updatedcontinually throughenhanced software.via software updates. With a horizontal field of view up to 120° and long-range detection capabilities of up to 1one km,kilometer, ApolloApolloTM is poised to be a key player in advancing vehicle safety and autonomy, as well as smart infrastructure and logistics applications.

We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position. This is further dependent on the investments we make in research and development and our ability to commercialize our products. We believe price is becoming a critical differentiator in the marketplace and OEMs are favoring companies that have the infrastructure to build lower cost products at higher volumes. It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products, lower bill of materials, or BOM costs, industrialize,industrialize the manufacturing process, and generate strong market demand for our products. If we fail to do this, our market position and revenue may be adversely affected, and our investments in that area will not be recovered.

Total Revenues

DevelopmentOur contractsproduct representedrevenue theprimarily majorityrelates to unit sales of our totallidar revenuesunits, software and support. Revenue from these sales is typically recognized at a point in 2024time when the control of the goods is transferred to the customer, generally upon delivery of or shipment to the customer, and 2023.when services have been provided. Revenue from development and/or collaboration arrangement contracts are earned from R&D activities and collaboration with OEMs and Tier 1 suppliers. These contracts primarily focus on customization of our proprietary 4SightTMproduct's capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs. Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time. This assessment is made at the outset of the arrangement for each performance obligation.

Cost of revenue includes the costs directly associated with the production of prototypeslidar units, cost of software and support, and certain costs associated with development contracts. Such costs for prototypesproduct include direct materials, direct labor, indirect labor, inventory write downs, losses on purchase commitments, warranty expense, and allocation of overhead. As we increase the volume of ApolloTM units that are manufactured, we expect the bill of material costs to decrease over time. Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts.

Our research and development,development or ("R&D,D"), efforts are focused primarily on hardware, software, and system engineering related to the design and development of our advanced lidar solutions. R&D expenses include:

Historically, ourOur sales and marketing,marketing or ("S&M,M") efforts wereare focused primarily on sales, business development, and marketing programs in pursuit of revenue contracts from potential and existing customers. S&M expenses include:

Our general and administrative,administrative or ("G&A,A") spending supports all business functions. G&A expenses include:

We expect our G&A expenses to decrease slightly with reduced facility costs and professional fees, while continuing to incur expensesincrease to support othergrowth departmentsas we pursue Non-Automotive opportunities and as we continue to develop and commercialize our Apollo product.products.

The changes in fair value of the 2022convertible Notenote and warrant liabilities are the result of the change in fair value at each reporting date. The 2022convertible Notenote and warrant liabilities arewere recorded at fair value for each reporting period, and the changes in fair value arewere reported within other income (expense), net during the period. We also elected to record interest expense on the 2022convertible Notenote as changes in fair value. We have fully repaid the 2025 convertible note and will not have change in fair value of the convertible note in future periods. In addition, we expect the change in fair value of warrant liabilities to decrease as the warrant associated with the 2022 convertible note was cancelled and the warrant associated with the 2025 convertible note was exercised in full.

Interest income and other consists primarily of interest and investment income earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash, cash equivalents, and cashmarketable equivalentssecurities balances and market rates. Interest income and other also includes gains on sale of property and equipment. Interest expense and other consists primarily of financing costs, and amortization of premiums and accretion of discounts on marketable securities, net.net and foreign exchange gains and losses. We expect interest income will increase due to higher average cash, cash equivalents, and marketable securities balances.

We have incurred net losses in each year since our inception. In the threesix months ended MarchJune 31,30, 2026 and 2025, we incurred net losses of approximately $8.3$18.4 million and $8.0$17.3 million, respectively. We expect that we will continue to incur significant losses through at least the next few years as we:

As of MarchJune 31,30, 2026, we had an accumulated deficit of approximately $415.4$425.4 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. Since we will incur the costs and expenses from these efforts prior to receiving incremental revenues with respect thereto, our losses in future periods may be significant. In the past, design wins, the first step towards commercialization with a particular OEM, have taken longer than originally expected. Similarly, in the Non-Automotive market, a proof-of concept, or POC, which usually occurs prior to the placement of a commercial order, is taking longer than expected, sometimes 12 months or more. Such delays, including delays that may occur in the future, will impact the timing of our revenue. If our products do not achieve sufficient market acceptance, we will not become profitable. If we fail to become profitable, or if we are unable to fund our continuing losses, we may be unable to continue our business operations. There can be no assurance that we will ever achieve or sustain profitability.

Our future growth depends on penetrating new markets, adapting existing products to new applications and customer requirements, achieving volume-based component price reductions, and introducing new products that achieve market acceptance. We expect to continue to incur R&D costs as part of our efforts to design, develop, manufacture, and commercialize new products and enhance existing products. Our R&D expenses were approximately $3.8$8.5 million and $3.5$7.2 million during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, and may increase in the future. Because we account for R&D as an operating expense, these expenditures will adversely affect our results of operations in the future. Further, our R&D program may not produce successful results, and our new products may not achieve market acceptance, create additional revenue, or become profitable.

Sales to international customers accounted for 26%17% and 100%94% of our revenue during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. In May 2024, we announced that we have partnered with Accelight Technologies, Inc. and LighTekton Co., Ltd. to deliver our lidar solutions to the China market, specifically focused on the autonomous trucking and railway segments, as the market in China appears to be ahead of the rest of the world in lidar adoption. However, we have not previously sold into the China market and our partners, although they regularly conduct business in China, do not have experience in the lidar market. There is also significant competition in China from local lidar manufacturers. We can provide no assurances that we will be successful in the China lidar market.

We are highly dependent on our executive officers, in particular, Matthew Fisch, our Chief Executive Officer, and Conor B. Tierney, our Chief Financial Officer, and Erica Allen, our Chief People Officer. The loss of any of our executive officers or other senior executives could adversely affect our business because the loss could make it more difficult to, among other things, compete with other market participants, continue to develop innovative product designs, and retain existing customers or cultivate new ones. Negative public perception of, or negative news related to any of our executive officers or senior executives may adversely affect our brand, relationship with customers, or standing in the industry. In the past, we have lost the services of some of our executive officers for various reasons.

In 2025, a group of dissident stockholders initiated a proxy contest and, among other things, opposed company proposals that provided for the replenishment of our employee equity incentive plan. The opposition was successful and hashad significantly impaired our ability to offer competitive equity-based compensation, which is a key component of our strategy to attract, retain, and motivate employees. We may experience similar proxy contests in the future and the uncertainty surrounding the outcome of any proxy contest may also create internal disruption, reduce employee morale, and make it more difficult to recruit new talent. Any loss of key personnel or inability to attract and retain qualified employees could materially and adversely affect our business, product development efforts, and long-term growth prospects.

In 2025, we were notified by a former vendor that it intended to pursue a claim against ourthe Company's wholly owned subsidiary, AEye Technologies, Inc., arising out of an agreement entered into in May 2020, in which the former vendor alleges that ourAEye subsidiaryTechnologies, Inc. failed to pay approximately $3.3 million, plus interest from the date the former vendor alleges such payments were due. In February 2026, the former vendor initiated a binding arbitration proceeding against ourAEye subsidiaryTechnologies, Inc. pursuant to the underlying purchase agreement. Our subsidiary has,has disputed, and continues to dispute the total amount owed based, in part, on the claim that the products supplied by the former vendor were largely defectivedefective, andthat suchthe former vendor was repeatedly made aware of the existence of such defects.defects, Whileand ithas asserted counterclaims in the arbitration. The arbitration hearing was held in July 2026, and the Company expects the arbitrator to issue an award in the second half of 2026. Because the outcome turns on disputed issues concerning the alleged defective and late delivery of the devices and the Company’s counterclaims, the Company is reasonablyunable possibleto thatpredict athe lossoutcome mayof bethe incurred,arbitration we are unableor to estimate the possible loss or rangeamount of lossprobable thatloss, couldif resultany, from an unfavorable outcome inat this legal proceeding In 2024, we were purportedly served with a complaint that alleged we were in breach of a lease for office space in Dublin, California, entered into by our subsidiary, AEye Technologies, Inc. in 2019, because of an alleged failure to pay rent. The landlord claimed that the amount owed could be up to $8.5 million. Thereafter, in August 2024, the landlord fully drew down the standby letter of credit of $2.15 million, which was held as security for the payment of rent, due to the alleged default of the lease. We disputed, among other things, the total damages claimed by the landlord. On April 28, 2025, the Company and the former landlord entered into a settlement agreement to resolve all outstanding disputes related to the lease. Under the terms of the settlement agreement, the Company paid $1.4 million in cash and issued a warrant to purchase up to 350,000 shares of common stock at an exercise price of $2.22 per share.time.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Our actual results and the timing of events may differ materially from those described in or implied by these forward-looking statements due to a number of factors,factors. includingYou thoseshould discussedread belowthe and those set forth under in Part II, Item 1A,sections of this Quarterly Report underon theForm heading10-Q titled “Risk Factors” and other“Cautionary filingsNote weRegarding makeForward-Looking withStatements” for a discussion of such factors that could cause our actual results to differ materially from the SECresults fromdescribed timein toor time.implied by the forward-looking statements contained in the following discussion and analysis. Unless the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “we,” “our,” “us,” and “AEye,” refer to the business and operations of AEye, Inc.

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 the threesix months ended MarchJune 31,30, 2026, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report, including our condensed consolidated financial statements and accompanying notes.

All dollar amounts expressed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands of dollars, except for share amounts, per share amountsamounts, and unless otherwise specified.

We anticipate growing demand for our ApolloTM platform across our two major markets, Automotive and Non-Automotive, and we believe this expected growth will enable us to capture market share across both the Automotive and Non-Automotive markets. We plan to pursue opportunities in advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking, while also exploring opportunities in the Non-Automotive market, such as in the railway, airport safety and security, perimeter monitoring, aerospace and defense, transportation logistics, sports analytics, and intelligent transportation systems, or ITS, segments. This diversified approach provides us with multiple opportunities for sustained growth by enabling new applications and product features across a broad range of industries and market segments. However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market demand and customer adoption.

In early 2024, we engaged LITEON as our Tier 1 automotive supplier and are actively working with LITEON to bring our product to market. We recently announced an expansion of this relationship and the creation of a dedicated production line for ApolloTM, with capacity to produce up to 60,000 units annually. We believe we are starting to see an inflection point in customer demand, and this expansion ensures we can meet that growth if it develops. This partnership enables us to leverage LITEON’s manufacturing expertise to produce high-quality products that meet stringent performance standards, which is a critical step towards scaling production and delivering our advanced lidar solutions to the market.

In May 2024, we announced a strategic partnership with Accelight Technologies, Inc. ("ATI") and LighTekton Co., Ltd ("LighTekton") to manufacture and distribute our products in China. This collaboration provides us with access to a potential $2.5 billion market opportunity. By leveraging ATI's and LighTekton's extensive networks and manufacturing capabilities, we aim to accelerate our market penetration and deliver our advanced lidar solutions to a broader audience.

In July 2025, we announced the validation of our lidar technology on the NVIDIA DRIVE AGX OrinTM platform. We have since expanded our collaboration and demonstratedvalidated our lidar with NVIDIA's next-generation DRIVE AGX ThorTM platform, enabling our sensors to interface directly with NVIDIA’s autonomous driving compute architecture and development toolchain. These integrations are intended to support alignment with NVIDIA’s Hyperion reference architecture and may provide opportunities to engage with global automotive OEMs and Tier 1 suppliers that adopt NVIDIA‑based ADAS and automated driving systems. We continue to demonstrate advances in the high‑speed and long‑range performance of our lidar systems, which we believe further strengthen the technical basis for these integrations. Because these engagements are relatively recent, there can be no guarantee that they will result in commercial adoption.

In July 2025, we launched OPTIS™, a complete physical AI solution designed to modernize legacy infrastructure and deliver actionable intelligence across diverse industries. OPTIS™ integrates our software-defined ApolloTM lidar technology with advanced computing to bridge the gap between perception and real-time action. Beyond addressing critical needs in transportation, safety, and security, OPTIS™ opens our platform to third-party partners and developers, creating an ecosystem for innovation and growth beyond automotive applications. Since launch, we’ve transitioned OPTIS™ from concept to a structured offering, with initial deployments already completed.offering. Our flagship OPTIS™ deploymentdeployments in California isand Michigan are live at an active intersectionintersections and providesa highway, and provide the potential for a complete traffic management solution that integrates our lidar, perception, and actuation in conjunction with our partners Flasheye and Blue-Band, with several additional deployments planned. Recent additions to our partner network include Black Sesame TechnologiesFlasheye,Blue-Band and Vueron.

In aerospace and defense, our customer engagements continued to rampincrease during the firstsecond quarter of 2026, with multiple repeat orders from existing customers and active development across multiple programs with certain customers.programs. We are evaluatingbeing evaluated for expanded use cases for our products with these customers, and we expect to receive additional requests for quotation in the near term. While we are encouraged by the trajectory of these engagements, there can be no assurance that they will translate into commercial sales for us.

Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of our development contracts with customers, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features. Our gross margins have and may continue to be negatively impacted by inventory write-downs. In the future, we expect to generate attractive gross margins from licensing our lidar technology and software to our Tier 1 partners in the Automotive market. We also anticipate being able to leverage on our foundation in the Automotive market to be more cost competitive in other markets.

To date, we have primarily generated revenue through sales of our products to Non‑Automotive customers and through development contracts with OEMs andOEMs, Tier 1 suppliers.suppliers and other customers. Non‑Automotive applications typically command higher average selling prices and may carry higher gross margins than Automotive programs due to lower volume sensitivity, more specialized operating requirements, and greater willingness by customers to pay for performance differentiation. These engagements often involve customization of our product’s capabilities to address application‑specific needs, including software‑based configuration of scan patterns, region‑of‑interest tuning, advanced perception features, and other enhancements. In many cases, customers require more complex configurations or software‑enabled feature additions, which allows us greater latitude to price these solutions at a premium. As a result, customized Non‑Automotive deployments generally reflect higher contractual pricing and may contribute more favorably to gross margin relative to standard Automotive configurations.

Our product revenue primarily relates to unit sales of our lidar units, software, and support. Revenue from these sales is typically recognized at a point in time when the control of the goods is transferred to the customer, generally upon delivery of or shipment to the customer, or when services have been provided. Revenue from development and/or collaboration contracts are earned from R&D activities and collaboration with OEMs andOEMs, Tier 1 suppliers.suppliers and other customers. These contracts primarily focus on customization of our product's capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs. Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time. This assessment is made at the outset of the arrangement for each performance obligation.

The changes in fair value of the convertible note and warrant liabilities are the result of the change in fair value at each reporting date. The convertible note and warrant liabilities were recorded at fair value for each reporting period, and the changes in fair value were reported within other income (expense), net during the period. We also elected to record interest expense on the convertible note as changes in fair value. We have fully repaid the 2025 convertible note and will not have a changeNote in fair2025. value of the convertible note in future periods. In addition, weWe expect the change in fair value of warrant liabilities to decrease as the warrant associated with the 2022 convertible noteNote was cancelled and the warrant associated with the 2025 convertible noteNote was exercised in full.full in 2025.

Comparison of the three months ended MarchJune 31,30, 2026 and 2025

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report. The following table sets forth our consolidated results of operations data for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands, except for percentages):

Revenues increased by $37,$180, or 58%,818%, to $101$202 for the three months ended MarchJune 31,30, 2026, from $64$22 for the three months ended MarchJune 31,30, 2025. This increase is primarily due to salesthe higher volume of our ApolloTM lidar units,units partiallysold offsetand by lowerhigher contract development revenues.revenues during the quarter.

Cost of revenue increased by $105,$255, or 109%,236%, to $201$363 for the three months ended MarchJune 31,30, 2026, from $96$108 for the three months ended MarchJune 31,30, 2025. This increase was primarily due to the higher costsvolume of product sales in the current quarter, partially offset by lower inventory provisions.quarter.

Research and development expenses increased by $275,$1,073, or 8%,29%, to $3,765$4,743 for the three months ended MarchJune 31,30, 2026, from $3,490$3,670 for the three months ended MarchJune 31,30, 2025. This increase was primarily driven by an increase in personnel costs, net of allocations, of $537, and$307, increased fees paid to third party development work,work of $314, allocated information technology and facilities expense of $135, engineering parts and lab equipment,equipment and other research and development expenses of $235. These increases were partially offset by a decrease in stock-based compensation expense of $484.$271.

Sales and marketing expenses increased by $603,$546, or 91%, to $986$1,147 for the three months ended MarchJune 31,30, 2026, from $383$601 for the three months ended MarchJune 31,30, 2025. This increase was primarily driven by increases in personnel costs, including allocations, of $438$159 and marketing, trade show and consultant expenses of $189.$277 as we continue to invest in sales and marketing activities to build brand awareness and expand our commercial pipeline.

General and administrative expenses increased by $1,283,$356, or 44%,8%, to $4,178$4,704 for the three months ended MarchJune 31,30, 2026, from $2,895$4,348 for the three months ended MarchJune 31,30, 2025. This increase was primarily driven by ahigher favorablestock-based adjustmentcompensation of $1,685$1,230, uponpartially settlementoffset ofby a lease dispute during the three months ended March 31, 2025. The increase was also due to higherdecreased personnel costs, net of allocations, of $250,$448, partially offset byand decreases in stock-based compensation of $430, and legalprofessional fees and consultingstock expensesrelated costs of $225.$216.

Change in fair value of convertible note and warrant liabilities decreased by $661$723 to $19$130 for the three months ended MarchJune 31,30, 2026, from $680$593 for the three months ended MarchJune 31,30, 2025. This decrease was primarily due to the change in fair value of the 2025 Note and warrants,warrants related to the 2025 Note and 2022 Note, which were fully settled or cancelled in 2025.

Interest income and other increased by $431,$198, or 201%,50%, to $645$591 for the three months ended MarchJune 31,30, 2026, from $214$393 for the three months ended MarchJune 31,30, 2025. This increase was primarily due to higher interest earned on our cash, cash equivalents, and marketable securities in the current period.

Interest expense and other decreased by $2,130,$377, to a net income of $22$12 for the three months ended MarchJune 31,30, 2026, from a net expense of $2,108$365 for the three months ended MarchJune 31,30, 2025. This decrease was primarily due to a decrease in costs related to financing arrangements of $1,959$134 and higherlower foreign exchange gainslosses (lossesgains), netnet, of $172.$230.

Net loss increased by $329,$752, or 4%,8%, to $8,345$10,022 for the three months ended MarchJune 31,30, 2026, from $8,016$9,270 for the three months ended MarchJune 31,30, 2025. This increase was primarily due to increasedhigher facilitiesstock-based costs as a result of the favorable adjustment from the settlement of a lease dispute in the prior year's quartercompensation and increased personnelengineering costs,spend, partially offset by decreased stock-based compensation, lower changes in fair value of convertible note and warrants, and decreased financing costs.warrants.

Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to establish and maintain a relationship with one or more Tier 1 automotive suppliers and the timing of any OEM design wins, our ability to effectively and efficiently manage our expenses, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products, and the market adoption of new and enhanced products and features. To date, our principal sources of liquidity have been the proceeds received from the issuance of equity.equity and convertible notes.

On September 26, 2023, the U.S. Securities and Exchange Commission declared our Registration Statement on Form S-3 effective (the "Shelf"), which allows us to raise up to $200,000 in capital over the following three years. The use of the Shelf was subject to a limitation of one-third of our public float in any rolling twelve-month period, when our public float was below $75,000, which is commonly referred to as the “baby shelf" rules. Since July 28, 2025, we have not been subject to the "baby shelf" rules. Since the Shelf was established, we have used the Shelf to register the shares sold in the May 29, 2024 Registered Direct Offering and the September 12, 2024 A.G.P. Transaction, both of which are further described below. The Shelf is scheduled to expire in September 2026, and on May 19, 2026, we expect to filefiled a replacement registration statement on Form S-3 in(the May“2026 2026Shelf”) to maintain our capacity to raise capitalcapital. underThe 2026 Shelf registers the offering and sale, from time to time, of up to $200,000 of our existingcommon financingstock, programs.preferred Therestock, candebt besecurities, nowarrants, assurancerights, thatand we will be able to raise additional capital under any such replacement registration statement,units, in the amounts anticipated,one or atmore all.offerings. The 2026 Shelf had not been declared effective by the SEC as of the date of this Quarterly Report.

On September 12, 2024, we entered into an At Market Issuance Sales Agreement with Alliance Global Partners, or A.G.P., pursuant to which we may issue and sell through A.G.P., up to $2,600 of our common stock from time to time through an "at-the-market" equity offering program. In December 2025, we increased the aggregate amount available under the ATM program to $125,000, following multiple prior increases since the original agreement was entered into. Such sales of common stock by us, if any, may occur from time to time at our sole discretion, over a 36-month period. As of MarchJune 31,30, 2026, we have sold 23,220,78424,070,541 shares under the ATM Agreement for gross proceeds totaling $68,436$70,412 and have remaining availability of $56,564.$54,588.

For the threesix months ended MarchJune 31,30, 2026 and 2025, we had a net loss of $8,345$18,367 and $8,016,$17,286, respectively. We expect that our expenses will continue to exceed our operating income and, as a result, we may need additional capital resources to fund our operations. We believe we currently have sufficient financial resources to fund our operating expenses, working capital, and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q. Our plans for the use of cash in the long term (beyond twelve months from this Quarterly Report on Form 10-Q) are primarily related to funding operating expenses to support the continued development and commercialization of our products. For additional information regarding our cash requirements from contractual obligations, see Note 16 to the Condensed Consolidated Financial Statements in Item 1of Part I of this Quarterly Report on Form 10-Q.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was $8,555.$15,842. Factors affecting operating cash flows during this period were net loss of $8,345,$18,367, partially offset by stock-based compensation of $1,542 and$3,961 common stock purchase agreement costs of $136.$233 and noncash lease expense relating to operating lease right-of-use assets of $193. Within operating activities, the net changes in operating assets and liabilities were cash used of $2,041,$1,702, primarily driven by an increase in accounts receivable, net, of $139, and decreases in accrued expenses and other liabilitiesliabilities, and operating lease liabilities of $2,895$2,054, and $121,$201, respectively. Cash used was offset by cash provided by a decrease in prepaid and other current assets of $684$480 and an increase in accounts payable of $205.$147.

For the threesix months ended MarchJune 31,30, 2025, net cash used in operating activities was $7,803.$14,158. Factors affecting operating cash flows during this period were a net loss of $8,016,$17,286, a gain on termination of an operating lease, net, of $1,685,$1,612, and change in fair value of convertible notes and warrant liabilities of $680,$87, partially offset by stock-based compensation of $2,501,$3,661, debt issuance costs of $1,984,$2,020, and common stock purchase agreement costs of $111.$306. Within operating activities, the net changes in operating assets and liabilities were cash used of $2,056,$1,207, primarily driven by decreases in accrued expenses and other liabilities and operating lease liabilities of $2,408$1,522 and $57,$1,532, respectively. Cash used was offset by cash provided by decreases in prepaid and other current assets and other noncurrent assets of $98$84 and $80,$134, respectively, and an increase in accounts payable of $222.$1,761.

For the threesix months ended MarchJune 31,30, 2025,2026, net cash used in investing activities was $8,578.$17,530. The primary factors affecting net cash used in investing activities during thethis period were the purchases of marketable securities of $14,303$31,411 and property and equipment of $319. The cash outflow was partially offset by proceeds from the redemptions and maturities of marketable securities of $5,731.$14,200.

For the threesix months ended MarchJune 31,30, 2025,2026, net cash provided by financing activities was $11,382.$1,226. The primary factors affecting financing cash flows during this period were proceeds from the issuance of common stock under the common stock purchase agreement of $9,495$1,977 and fromthrough the issuanceEmployee Stock Purchase Plan of a convertible note of $2,950,$109, partially offset by debt issuance costs of $578, taxes paid on net settlement of equity awards of $333$519 and payments of stock issuance costs related to common stock purchase agreementsagreement of $152.$341.