UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
AEye, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
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| (Address of Principal Executive Offices) | (Zip Code) | |
(
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 class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
| | | The |
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.
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).
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 | ☐ |
| | ☒ | 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
As of November 11, 2024, the registrant had
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2024
TABLE OF CONTENTS
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, 2023 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.
Item 1. Financial statements (Unaudited)
| CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts and par value data) |
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Restricted cash | ||||||||
| Other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Contract liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, noncurrent | ||||||||
| Convertible note | ||||||||
| Other noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 17) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock—$ par value: shares authorized; shares issued and outstanding | ||||||||
| Common stock—$ par value: shares authorized; and shares issued and outstanding at September 30, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
AEYE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share amounts and per share data)
(Unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| REVENUE: |
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| Prototype sales |
$ | $ | $ | $ | ||||||||||||
| Development contracts |
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| Total revenue |
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| Cost of revenue |
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| Gross loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| OPERATING EXPENSES: |
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| Research and development |
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| Sales and marketing |
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| General and administrative |
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| Total operating expenses |
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| LOSS FROM OPERATIONS |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| OTHER INCOME (EXPENSE): |
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| Change in fair value of convertible note and warrant liabilities |
( |
) | ( |
) | ||||||||||||
| Interest income and other |
||||||||||||||||
| Interest expense and other |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other income (expense), net |
( |
) | ( |
) | ||||||||||||
| Loss before income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income tax expense |
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| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| PER SHARE DATA |
||||||||||||||||
| Net loss per share (basic and diluted) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average shares outstanding (basic and diluted) |
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| COMPREHENSIVE LOSS: |
||||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Change in net unrealized gain on available-for-sale securities, net of tax |
||||||||||||||||
| Change in fair value due to instrument-specific credit risk, net of tax |
( |
) | ||||||||||||||
| Net losses reclassified into income during the period, net of tax |
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| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the nine months ended September 30, 2024 and 2023
(In thousands, except share amounts)
(Unaudited)
| Additional |
Accumulated Other |
Total |
||||||||||||||||||||||||||||||
| Preferred Stock |
Common Stock |
Paid-in |
Comprehensive |
Accumulated |
Stockholders’ |
|||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Capital |
Income (Loss) |
Deficit |
Equity |
|||||||||||||||||||||||||
| BALANCE—December 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Taxes related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Issuance of common stock under the Common Stock Purchase Agreement |
||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| BALANCE—March 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options |
||||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Taxes related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Issuance of common stock under the Common Stock Purchase Agreements |
||||||||||||||||||||||||||||||||
| Stock issuance costs related to Common Stock Purchase Agreements |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Issuance of common stock through Employee Stock Purchase Plan |
||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| BALANCE—June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Taxes related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Issuance of common stock under Common Stock Purchase Agreements |
||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax |
— | — | ||||||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| BALANCE—September 30, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
| Additional |
Accumulated Other |
Total |
||||||||||||||||||||||||||||||
| Preferred Stock |
Common Stock |
Paid-in |
Comprehensive |
Accumulated |
Stockholders’ |
|||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Capital |
Income (Loss) |
Deficit |
Equity |
|||||||||||||||||||||||||
| BALANCE—December 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options |
||||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Taxes related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Conversion of convertible note into common stock |
||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax |
— | — | ||||||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| BALANCE—March 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Taxes related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Conversion of convertible note into common stock |
||||||||||||||||||||||||||||||||
| Issuance of common stock through Employee Stock Purchase Plan |
||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax |
— | — | ||||||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| BALANCE—June 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options |
||||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Taxes related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Conversion of convertible note into common stock |
||||||||||||||||||||||||||||||||
| Issuance of common stock under the Common Stock Purchase Agreement |
||||||||||||||||||||||||||||||||
| Transaction costs related to Common Stock Purchase Agreement |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Other comprehensive income, net of tax |
— | — | ||||||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| BALANCE—September 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
AEYE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine months ended September 30, |
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| 2024 |
2023 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| (Gain) loss on sale of property and equipment, net |
( |
) | ||||||
| Noncash lease expense relating to operating lease right-of-use assets |
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| Gain on termination of operating lease, net |
( |
) | ||||||
| Common stock purchase agreement costs |
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| Impairment of right-of-use assets |
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| Inventory write-downs, net of scrapped inventory |
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| Change in fair value of convertible note and warrant liabilities |
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| Realized loss on instrument-specific credit risk |
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| Stock-based compensation |
||||||||
| Amortization of premiums and accretion of discounts on marketable securities, net of change in accrued interest |
( |
) | ||||||
| Expected credit losses, net of write-off |
||||||||
| Changes in operating assets and liabilities: |
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| Accounts receivable, net |
||||||||
| Inventories, current and noncurrent, net |
( |
) | ||||||
| Prepaid and other current assets |
||||||||
| Other noncurrent assets |
||||||||
| Accounts payable |
||||||||
| Accrued expenses and other current liabilities |
( |
) | ( |
) | ||||
| Operating lease liabilities |
( |
) | ( |
) | ||||
| Contract liabilities |
( |
) | ||||||
| Other noncurrent liabilities |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale of property and equipment |
||||||||
| Purchases of marketable securities |
( |
) | ( |
) | ||||
| Proceeds from redemptions and maturities of marketable securities |
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| Net cash provided by investing activities |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Proceeds from exercise of stock options |
||||||||
| Proceeds from the issuance of convertible note |
||||||||
| Payments for convertible note redemptions |
( |
) | ||||||
| Taxes paid related to the net share settlement of equity awards |
( |
) | ( |
) | ||||
| Proceeds from issuance of common stock under Common Stock Purchase Agreements |
||||||||
| Stock issuance costs related to Common Stock Purchase Agreements |
( |
) | ||||||
| Proceeds from issuance of common stock through the Employee Stock Purchase Plan |
||||||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
( |
) | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period |
||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period |
$ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Cash paid for income taxes, net of refund |
$ | ( |
) | $ | ||||
| Cash paid for interest |
||||||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities |
||||||||
| Conversion of convertible notes and accrued interest into Class A common stock |
||||||||
| Operating lease liabilities extinguished upon termination of lease |
||||||||
| Operating lease right-of-use asset derecognized upon termination of lease |
||||||||
| Operating lease right-of-use assets obtained in exchange for lease obligations |
||||||||
| Stock issuance costs included in accounts payable and accrued liabilities |
||||||||
| Stock issuance costs through issuance of common stock |
||||||||
| Taxes related to net share settlement of equity awards included in accrued liabilities |
||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data or otherwise stated)
| ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
AEye, Inc. (the “Company” or “AEye”) is a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems (ADAS), and smart industrial applications. AEye’s software-definable 4SightTM Intelligent Sensing Platform combines solid-state active 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.
AEye, formerly known as CF Finance Acquisition Corp. III (“CF III”), was originally incorporated in Delaware on March 15, 2016 under the name CF SPAC Re Inc. On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc., entered into an Agreement and Plan of Merger with CF III. Based on CF III’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended. On August 16, 2021, the business combination contemplated by the Agreement and Plan of Merger was closed and CF III changed its name to AEye, Inc.
The Company’s common stock and public warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “LIDR” and “LIDRW”, respectively. Unless otherwise specified, “we,” “us,” “our,” “AEye,” and the “Company” refers to AEye, Inc.
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, 2023 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principle of Consolidation and Liquidity
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company has funded its operations primarily through the business combination and issuances of stock. As of September 30, 2024, the Company’s existing sources of liquidity included cash, cash equivalents, and marketable securities of $
ASC 205-40, Presentation of Financial Statements - Going Concern, requires management to assess an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. These condensed consolidated financial statements have been prepared on a going concern basis.
As is common in early-stage companies with limited operating histories, the Company is subject to risks and uncertainties such as its ability to develop and commercialize its products; produce and deliver lidar and software products meeting acceptable performance metrics; attract new and retain existing customers; develop, obtain, or progress strategic partnerships; secure an automotive OEM design win; secure additional capital to support the business plan; and other risks and uncertainties.
Since its inception, the Company has incurred net losses and negative cash flows from operations. As of September 30, 2024, the Company had an accumulated deficit of $
As described in Note 17, the Company was served with a complaint related to the alleged default of the lease for the Company’s former headquarters. The former landlord has claimed that the amount owed could be up to $
When conditions and events, in the aggregate, impact an entity’s ability to continue as a going concern, management evaluates the mitigating effect of its plans to determine if it is probable that the plans will be effectively implemented, and, when implemented, the plans will mitigate the relevant conditions or events.
The Company is dependent upon raising additional capital to provide the cash necessary to continue its ongoing operations and execute against its strategic objectives. During the nine months ended September 30, 2024, the Company raised $
Management believes that these plans can be successfully implemented and alleviate the substantial doubt that was raised about the Company's ability to continue as a going concern, which will result in sufficient liquidity and cash flows to support its ongoing operations and meet its obligations for at least one year following the date these condensed consolidated financial statements are issued.
Reverse Stock Split
On December 27, 2023, the Company effected a 1-for-
In connection with the Reverse Stock Split, there was no change to the number of shares authorized or in the par value per share of common stock of $
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 receivable are derived from customers located in the U.S., Europe, and Asia-Pacific. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, to increase the transparency and usefulness of income tax information through improvements to the income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is currently in the process of evaluating the effects of the new guidance.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires public companies, including entities with a single reportable segment, to disclose information about their reportable segments’ significant expenses and other items on an interim and annual basis to provide more transparency about the expenses they incur from revenue generating business units. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis, with early adoption permitted. The Company does not expect the adoption of the new standard to have a material effect on its 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, other current and noncurrent liabilities, and convertible note. The carrying values of these financial instruments approximate their fair values.
The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
| Fair Value Measured as of September 30, 2024 Using: |
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| Adjusted Cost |
Unrealized Gains |
Fair Value |
Cash and Cash Equivalent |
Marketable Securities |
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| Assets |
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| Level 1 |
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| Money market funds |
$ | $ | — | $ | $ | $ | — | |||||||||||||
| Level 2 |
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| Corporate bonds |
— | |||||||||||||||||||
| Commercial paper |
— | |||||||||||||||||||
| U.S. Government securities |
— | |||||||||||||||||||
| Total financial assets |
$ | $ | $ | $ | $ | |||||||||||||||
| Liabilities |
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| Level 2 |
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| Private placement warrant liability |
$ | — | $ | — | $ | $ | — | $ | — | |||||||||||
| Level 3 |
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| Derivative warrant liability |
— | — | — | — | ||||||||||||||||
| Total financial liabilities |
$ | — | $ | — | $ | $ | — | $ | — | |||||||||||
| Fair Value Measured as of December 31, 2023 Using: |
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| Adjusted Cost |
Unrealized Gains |
Fair Value |
Cash and Cash Equivalent |
Marketable Securities |
||||||||||||||||
| Assets |
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| Level 1 |
||||||||||||||||||||
| Money market funds |
$ | $ | — | $ | $ | $ | — | |||||||||||||
| Level 2 |
||||||||||||||||||||
| Corporate bonds |
— | |||||||||||||||||||
| Commercial paper |
— | |||||||||||||||||||
| U.S. Government securities |
— | |||||||||||||||||||
| Total financial assets |
$ | $ | $ | $ | $ | |||||||||||||||
| Liabilities |
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| Level 2 |
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| Private placement warrant liability |
$ | — | $ | — | $ | $ | — | $ | — | |||||||||||
| Level 3 |
||||||||||||||||||||
| Derivative warrant liability |
— | — | — | — | ||||||||||||||||
| Total financial liabilities |
$ | — | $ | — | $ | $ | — | $ | — | |||||||||||
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, and commercial paper. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities.
Derivative Warrant Liability: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $
Private Placement Warrant Liability: The 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, as terms of both warrants are substantially similar. Any changes in the fair value of the liability are reflected in other income (expense), net, on the 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, 2024, 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, 2024 (in thousands):
| Derivative Warrant Liability |
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| Balance at December 31, 2023 |
$ | |||
| Additions |
||||
| Change in fair value included in other income (expense), net |
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| Balance at September 30, 2024 |
$ | |||
The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at September 30, 2024 are as follows:
| September 30, 2024 | ||||
| Expected term (years) |
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| Expected volatility |
% | |||
| Risk-free interest rate |
% | |||
| Dividend yield |
% | |||
| Exercise price |
$ | |||
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, 2024 and December 31, 2023 were as follows (in thousands):
| September 30, 2024 |
December 31, 2023 |
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| (unaudited) |
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| Cash and cash equivalents |
$ | $ | ||||||
| Restricted cash |
||||||||
| Total cash, cash equivalents, and restricted cash |
$ | $ | ||||||
Restricted cash of $
| 4. |
INVENTORIES |
Inventory, net of write-downs, as of September 30, 2024 and December 31, 2023 were as follows (in thousands):
| September 30, 2024 |
December 31, 2023 |
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| (unaudited) |
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| Raw materials |
$ | $ | ||||||
| Work in-process |
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| Finished goods |
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| Total inventory, net |
$ | $ | ||||||
The Company also had $
The Company’s current and noncurrent inventory as of September 30, 2024 and December 31, 2023 was written down by $
| 5. | PREPAID AND OTHER CURRENT ASSETS |
Prepaid and other current assets as of September 30, 2024 and December 31, 2023 were as follows (in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Prepaid expenses | $ | $ | ||||||
| Advances to suppliers | ||||||||
| Other | ||||||||