(5)     The Post-Merger Charter Amendment Proposals — To consider and vote upon separate proposals to approve the following material differences between the proposed amended and restated certificate of incorporation of the Combined Entity (the “Amended Charter”) that will be in effect upon the closing of the Merger and the Existing Charter, a copy of which is attached to this proxy statement/prospectus as Annex C;

(a)     Post-Merger Charter Amendment Proposal A — Change in Name

(b)    Post-Merger Charter Amendment Proposal B — Change in Corporate Purpose

(c)     Post-Merger Charter Amendment Proposal C — Elimination of Class B Common Stock

(d)    Post-Merger Charter Amendment Proposal D — Additional Director Class and Increased Term

(e)     Post-Merger Charter Amendment Proposal E — Amendment of Corporate Opportunities Provision

(f)     Post-Merger Charter Amendment Proposal F — Removal of Blank Check Company Provisions

         We refer to these proposals collectively as the “Post-Merger Charter Amendment Proposals.”

(6)    The Equity Incentive Plan Proposal — To approve and adopt the Equity Incentive Plan of the Combined Entity, a copy of which is attached to the accompanying proxy statement/prospectus as Annex E. We refer to this proposal as the “Equity Incentive Plan Proposal.”

(7)    The Adjournment Proposal — To consider and vote upon a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals, or the Equity Incentive Plan Proposal. We refer to this proposal as the “Adjournment Proposal” and, together with the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals, and the Equity Incentive Plan Proposal, as the “Proposals.”

Only holders of record of CF III Common Stock at the close of business on July 12, 2021 (the “Record Date”) are entitled to notice of the Special Meeting and to vote at the Special Meeting and any adjournments or postponements of the Special Meeting. Please note that you will not be able to attend the Special Meeting in person. In light of the ongoing COVID-19 pandemic and to protect the health of CF III stockholders, management, employees and the community, the Special Meeting will be held virtually conducted via live audio webcast. You will be able to attend the Special Meeting by visiting www.cstproxy.com/cffinanceacquisitioncorpiii/sm2021. CF III recommends that you log in at least 15 minutes before the Special Meeting to ensure you are logged in when the meeting starts.

Pursuant to the Existing Charter, CF III is providing its public stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of Class A Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two (2) business days prior to the closing of the Business Combination) in the Trust Account that holds the proceeds (including interest but less taxes payable) of the IPO. For illustrative purposes, based on funds in the Trust Account of $232.3 million on June 30, 2021, the estimated per share redemption price would have been $10.10. CF III public stockholders are not required to affirmatively vote for or against the Business Combination in order to redeem their shares of CF III Class A Common Stock for cash. This means that public stockholders who hold shares of CF III Class A Common Stock on or before www.cstproxy.com/cffinanceacquisitioncorpiii/sm2021, (two (2) business days before the Special Meeting) will be eligible to elect to have their shares of CF III Class A Common Stock redeemed for cash in connection with the Special Meeting, whether or not they are holders as of the Record Date, and whether or not such shares are voted at the Special Meeting. A public stockholder, together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, with respect to 15% or more of the shares of CF III Class A Common Stock included in the Units sold in the IPO. Holders of our outstanding Public Warrants and Units do not have redemption rights with respect to such securities in connection with the Business Combination. Holders of

outstanding Units must separate the underlying Public Shares and Public Warrants prior to exercising redemption rights with respect to the Public Shares. The Sponsor and CF III’s officers and directors have agreed to waive their redemption rights with respect to any shares of CF III Common Stock they may hold in connection with the consummation of the Business Combination, and such shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Currently, the Sponsor owns 21.2% of the issued and outstanding shares of CF III Common Stock. The Sponsor and CF III’s directors and officers have agreed to vote any shares of CF III Common Stock owned by them in favor of the Business Combination Proposal.

The approval of each of the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, and the Post-Merger Charter Amendment Proposals requires the affirmative vote of a majority of the issued and outstanding shares of CF III Common Stock as of the Record Date for the Special Meeting. The approval of the election of each director nominee pursuant to the Director Election Proposal requires the affirmative vote of a plurality of the shares of CF III Common Stock present via the virtual meeting platform or represented by proxy and voted thereon at the Special Meeting. The approval of the Nasdaq Proposal, the Equity Incentive Plan Proposal and the Adjournment Proposal each require the affirmative vote of the holders of a majority of the shares of CF III Common Stock cast by the stockholders present via the virtual meeting platform or represented by proxy and entitled to vote thereon at the Special Meeting. If the Pre-Merger Charter Amendment Proposal and the Business Combination Proposal are not approved, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals and the Equity Incentive Plan Proposal will not be presented to the CF III stockholders for a vote. The approval of each of the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the election of each director nominee pursuant to the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals and the Equity Incentive Plan Proposal, is a precondition to the consummation of the Business Combination. The CF III Board has already approved the Business Combination.

As of June 30, 2021, there was $232.3 million in the Trust Account. Each redemption of shares of CF III Class A Common Stock by CF III’s public stockholders will decrease the amount in the Trust Account. Net tangible assets will be maintained at a minimum of $5,000,001 immediately prior to or upon consummation of the Business Combination.

Your attention is directed to the proxy statement/prospectus accompanying this notice (including the annexes thereto) for a more complete description of the proposed Business Combination and related transactions and each of the Proposals. We encourage you to read this proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call Morrow Sodali LLC at (800) 662-5200 (banks and brokers call collect at (203) 658-9400).

July 21, 2021

pro rata share of the aggregate amount on deposit in the Trust Account (including any interest earned on the funds held in the Trust Account, but net of taxes payable and up to $100,000 to pay dissolution expenses) (as determined in accordance with the CF III Governing Documents) in connection with the Business Combination.

“CF III Stockholders’ Approval” means the approval of the Proposals in accordance with the CF III Governing Documents at the Special Meeting duly called by the CF III Board and held for such purpose.

“CF III Transaction Expenses” means any out-of-pocket fees and expenses paid or payable by CF III, Merger Sub or the Sponsor (whether or not billed or accrued for) as a result of or in connection with the negotiation, documentation and consummation of the Business Combination, including (A) all fees, costs, expenses, brokerage fees, commissions, finders’ fees and disbursements of financial advisors, investment banks, data room administrators, attorneys, accountants and other advisors and service providers, (B) transfer taxes, and (C) any and all filing fees to the governmental authorities in connection with the Business Combination.

“Closing” means the closing of the Business Combination.

“Closing Date” means the date on which the Business Combination is consummated.

“Code” means the Internal Revenue Code of 1986, as amended.

“Combined Entity” means CF III (which is anticipated to be renamed to “AEye, Inc.” upon Closing), (and, where the context so requires, its subsidiaries), after the consummation of the Business Combination.

“Combined Entity Board” means the board of directors of the Combined Entity.

“COVID-19” means SARs-CoV-2 or COVID-19, and any evolutions or mutations thereof.

“COVID-19 Measures” means any legally binding quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, workplace safety or similar applicable law promulgated by any governmental authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including the CARES Act and Families First Act.

“DGCL” means the Delaware General Corporation Law, as amended.

“Director Election Proposal” means the proposal to be considered at the Special Meeting to elect seven directors to serve on the Combined Entity Board until the next annual meeting of stockholders and until their respective successors are duly elected and qualified.

“Dissenting Shares” means all shares of AEye Capital Stock held by an AEye Stockholder who has validly exercised its appraisal rights pursuant to Section 262 of the DGCL with respect to its AEye Capital Stock.

“DWAC” means The Depository Trust Company’s deposit/withdrawal at custodian system.

“Effective Time” means the effective time of the Business Combination.

“Equity Incentive Plan” means the Equity Incentive Plan of the Combined Entity, which will become effective following the Business Combination. A copy of the Equity Incentive Plan is attached to this proxy statement/prospectus as Annex E.

“Equity Incentive Plan Proposal” means the proposal to be considered at the Special Meeting to approve and adopt the Equity Incentive Plan of the Combined Entity.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Existing Charter” means CF III’s amended and restated certificate of incorporation as filed with the Secretary of State of the State of Delaware on November 12, 2020.

“Founders Shares” means 5,750,000 shares of Class B Common Stock currently outstanding, 5,710,000 shares of which are held by Sponsor and 40,000 shares of which are held by CF III’s independent directors.

“Fully-Diluted AEye Shares” means the number of shares of AEye Capital Stock equal to the total number of issued and outstanding shares of AEye Capital Stock on an as-converted to AEye Common Stock basis as of immediately prior to the Effective Time and assuming as outstanding all shares of AEye Capital Stock subject to (a) all of AEye’s outstanding awards under the AEye ESOP and (b) all of the outstanding AEye Warrants, in each case, as of immediately prior to the Effective Time.

“GAAP” means accounting principles generally accepted in the United States of America.

“IPO” means CF III’s initial public offering which was consummated in November 2020.

“Merger” means the merger of Merger Sub with and into AEye pursuant to the terms of the Merger Agreement, with AEye continuing as the surviving entity and becoming a wholly-owned subsidiary of the Combined Entity.

“Merger Agreement” means the Merger Agreement, dated as of February 17, 2021, as amended on April 30, 2021, as the terms and conditions therein may be further amended, modified or waived from time to time, by and among CF III, Merger Sub and AEye.

“Merger Sub” means Meliora Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of CF III.

“Minimum Cash Amount” means the Available CF III Cash after (i) deducting the amount required to satisfy the CF III Share Redemption Amount, (ii) deducting the sum of any indebtedness of CF III for borrowed money immediately prior to the Closing (for the avoidance of doubt, excluding (x) any debt financing or other loans made by the Sponsor or its affiliates to CF III and (y) any CF III Transaction Expenses) and (iii) including the amount from the PIPE Investments.

“Nasdaq” means The Nasdaq Stock Market, LLC.

“Nasdaq Proposal” means the proposal to be considered at the Special Meeting to approve the issuance of Class A Common Stock to holders of AEye Capital Stock pursuant to the Merger Agreement and the related PIPE Investment in order to comply with The Nasdaq Stock Market Listing Rule 5635.

“NDA” means the Non-Disclosure Agreement, dated as January 7, 2021, between CF III and AEye.

“Original Merger Agreement” means the original Merger Agreement entered into by and among CF III, Merger Sub and AEye on February 17, 2021.

“PCAOB” means the Public Company Accounting Oversight Board and any division or subdivision thereof.

“PIPE Investment” means the sale of shares of newly issued Class A Common Stock in a private placement to occur concurrently with the consummation of the Business Combination.

“PIPE Investors” means investors that subscribed for shares of Class A Common Stock in the PIPE Investment.

“Placement Shares” means the shares of CF III Class A Common Stock underlying the Placement Units.

“Placement Units” means the Units issued to the Sponsor in the Private Placement.

“Placement Warrants” means the Warrants underlying the Placement Units.

“Post-Merger Charter Amendment Proposals” means the proposals to be considered at the Special Meeting to approve the Amended Charter to adopt certain material differences that will each be in effect upon the consummation of the Business Combination.

“PPP Loan” means all principal, accrued interest, penalties, fines and other payment obligations of any nature of AEye under that certain U.S. Small Business Administration Paycheck Protection Program Note dated April 22, 2020, issued to AEye.

“Pre-Merger Charter Amendment Proposal” means the proposal to be considered at the Special Meeting to approve the increase of the number of Class A Common Stock authorized to be issued under the Existing Charter from 200,000,000 to 300,000,000.

“Private Placement” means the private placement consummated simultaneously with the IPO on November 17, 2020 in which CF III issued to the Sponsor the Placement Units.

“Proposals” means the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals, the Equity Incentive Plan Proposal and the Adjournment Proposal.

“Public Shares” means the shares of CF III Class A Common Stock underlying the Public Units.

“Public Units” means the Units issued in the IPO.

“Public Warrants” means the Warrants underlying the Public Units.

“Record Date” means July 12, 2021, the record date for the Special Meeting.

“Redemption Price” means an amount equal to a pro rata portion of the aggregate amount then on deposit in the Trust Account determined in accordance with the Existing Charter (as equitably adjusted for stock splits, stock dividends, combinations, recapitalizations and the like prior to the Redemption). The Redemption Price will be calculated two (2) business days prior to the completion of the Business Combination in accordance with the Existing Charter, as then in effect.

“Redemption Rights” means the right of the holders of CF III Class A Common Stock to have their shares redeemed in accordance with the procedures set forth in this proxy statement/prospectus.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Special Meeting” means the special meeting of the stockholders of CF III, to be held on August 12, 2021 at 9:30 a.m. Eastern Time, as a virtual meeting. The meeting will be held virtually over the internet by means of a live audio webcast. You will be able to attend, vote your shares and submit questions during the Special Meeting via a live webcast available at www.cstproxy.com/cffinanceacquisitioncorpiii/sm2021.

“Sponsor” means CF Finance Holdings III, LLC, a Delaware limited liability company.

“Surviving Corporation” means, with respect to the periods from and after the Effective Time, AEye, the surviving corporation of the Merger.

“Trust Account” means the Trust Account of CF III, which holds the net proceeds of the IPO and the sale of the Placement Units, together with interest earned thereon, less amounts released to pay tax obligations and up to $100,000 for dissolution expenses.

“Unit” means a unit consisting of one share of CF III Class A Common Stock and one-third of one Warrant.

“Warrant” means a warrant to purchase one share of CF III Class A Common Stock at a price of $11.50 per share issued in connection with the IPO. “Warrant” excludes the AEye Warrants.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial of CF III and AEye. These statements are based on the beliefs and assumptions of the management of CF III and AEye. Although CF III and AEye believe that their respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither CF III nor AEye can assure you that either will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements about:

•        the benefits from the Business Combination;

•        CF III’s ability to consummate the Business Combination or, if CF III does not complete the Business Combination, any other initial business combination;

•        any satisfaction or waiver (if applicable) of the conditions to the Business Combination, including, among other things: the satisfaction or waiver of certain customary closing conditions, including, among others, the existence of no material adverse effect at CF III or AEye and receipt of certain stockholder approvals contemplated by this proxy statement/prospectus;

•        the occurrence of any other event, change or other circumstances that could give rise to the termination of the Merger Agreement;

•        the ability to maintain the listing of the Class A Common Stock on Nasdaq following the Business Combination;

•        the Combined Entity’s future financial performance following the Business Combination, including any expansion plans and opportunities;

•        the Combined Entity’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following the Business Combination or any other initial business combination;

•        changes in the Combined Entity’s strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects and plans;

•        the implementation, market acceptance and success of the Combined Entity’s business model;

•        the Combined Entity’s ability to scale in a cost-effective manner;

•        CF III’s officers and directors allocating their time to other businesses and potentially having conflicts of interest with CF III’s business or in approving the Business Combination;

•        CF III’s public securities’ potential liquidity and trading;

•        the ability of CF III and AEye to consummate the PIPE Investment or raise additional financing concurrently with the consummation of the Business Combination or otherwise in the future;

•        the use of proceeds not held in the Trust Account or available to CF III from interest income on the Trust Account balance;

•        the impact of epidemics, including the COVID-19 pandemic, on AEye’s business and the actions AEye may take in response thereto;

•        AEye’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

•        expectations regarding the time during which the Combined Entity will be an emerging growth company under the JOBS Act (as defined below);

•        AEye’s future capital requirements and sources and uses of cash;

•        AEye’s ability to obtain funding for its operations;

•        AEye’s business, expansion plans and opportunities;

•        AEye’s ability to successfully commercialize its products on its expected timeframe;

•        AEye’s estimates of the total addressable market;

•        the anticipated cash available at the closing of the Business Combination; and

•        the anticipated use of the Combined Entity’s cash and cash equivalents.

These forward-looking statements are based on information available as of the date of this proxy statement/prospectus, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

In addition, statements that CF III or AEye “believes,” and similar statements reflect only such parties’ beliefs and opinions on the relevant subject. These statements are based upon information available to such party as of the date of this proxy statement/prospectus, and while such party believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that either CF III or AEye has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not place undue reliance on these forward-looking statements in deciding how to grant your proxy or instruct how your vote should be cast or vote your shares on the proposals set forth in this proxy statement/prospectus. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause CF III’s actual results to differ include:

•        the occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination;

•        the outcome of any legal proceedings that may be instituted against CF III, AEye or others following announcement of the Business Combination and the transactions contemplated therein;

•        the inability to complete the transactions contemplated by the Business Combination due to the failure to obtain approval of the stockholders of CF III or AEye or other conditions to closing in the Merger Agreement;

•        the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and consummation of the Business Combination;

•        the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the ability of the Combined Entity to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

•        costs related to the proposed Business Combination;

•        the possibility that CF III or AEye may be adversely impacted by other economic, business, and/or competitive factors;

•        the risk that the market for AEye’s products may not develop on the timeframe or in the manner that AEye currently anticipates;

•        future exchange and interest rates;

•        the significant uncertainty created by the COVID-19 pandemic; and

•        other risks and uncertainties indicated in this proxy statement/prospectus, including those under “Risk Factors” herein, and other filings that have been made or will be made with the SEC by CF III.

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the Special Meeting of CF III stockholders. The following questions and answers do not include all the information that is important to stockholders of CF III. We urge the stockholders of CF III to read carefully this entire proxy statement/prospectus, including the annexes and other documents referred to herein.

Q:     Why am I receiving this proxy statement/prospectus?

A:     CF III stockholders are being asked to consider and vote upon a proposal to approve and adopt the Merger Agreement, among other proposals. CF III has entered into the Merger Agreement as a result of which AEye will become a wholly-owned subsidiary of CF III upon the consummation of the Business Combination. Subject to the terms of the Merger Agreement, CF III is expected to issue an aggregate of up to 154,081,440 shares of Class A Common Stock to holders of AEye Capital Stock in exchange for their shares of AEye Capital Stock (which includes the maximum number of shares of Class A Common Stock underlying AEye Warrants and AEye Options to be assumed in connection with the Business Combination). A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

This proxy statement/prospectus and its annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Special Meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes.

Below are proposals on which CF III stockholders are being asked to vote.

(1)    The Pre-Merger Charter Amendment Proposal — To approve and adopt an amendment to CF III’s Charter to increase the number of authorized shares of Class A Common Stock from 200,000,000 to 300,000,000 shares for the purposes of carrying out the Business Combination;

(2)    The Business Combination Proposal — To approve and adopt the Merger Agreement, and approve the transactions contemplated thereby, including the Merger. Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time:

(a)     each share of AEye Capital Stock outstanding immediately prior to the Effective Time (other than dissenting shares and certain other shares as set forth under the Merger Agreement) will be converted into the right to receive a number of shares of Class A Common Stock equal to the “Exchange Ratio,” as further described in the section titled “The Business Combination Proposal — The Merger Agreement”;

(b)    each option and warrant of AEye outstanding immediately prior to the Effective Time, if not exercised prior to such time, will be assumed by CF III and convert, at the same ratio, into an option or warrant to purchase shares of Class A Common Stock; and

(c)     CF III will change its name to “AEye, Inc.”

Copies of the Merger Agreement and certain other agreements to be entered into pursuant to the Merger Agreement are attached to this proxy statement/prospectus as Annexes A, F, G, H and I;

(3)    The Director Election Proposal — To consider and vote upon a proposal to elect seven directors to serve on the Combined Entity Board until the next annual meeting of stockholders and until their respective successors are duly elected and qualified;

(4)    The Nasdaq Proposal — To approve, for purposes of complying with the Nasdaq Listing Rule, the issuance of up to 154,081,440 shares of Class A Common Stock, par value $0.0001 per share, pursuant to the Merger Agreement and up to 22,500,000 shares of Class A Common Stock pursuant to the related PIPE Investment;

(5)    The Post-Merger Charter Amendment Proposals — To approve and adopt the Amended Charter, a copy of which is attached to this proxy statement/prospectus as Annex C;

(6)    The Incentive Plan Proposal — To approve and adopt the Equity Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex E; and

(7)    The Adjournment Proposal — To consider and vote upon a proposal to adjourn the Special Meeting to a later date or dates if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposal, or the Incentive Plan Proposal.

Q:     Are the proposals conditioned on one another?

A:     The Business Combination Proposal is subject to and conditioned upon the approval of the Pre-Merger Charter Amendment Proposal. Unless the Pre-Merger Charter Amendment Proposal is approved, the Business Combination Proposal will not be presented to the stockholders of CF III at the Special Meeting. The Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals and the Equity Incentive Plan Proposal are subject to and conditioned on the approval of the Pre-Merger Charter Amendment Proposal and the Business Combination Proposal. Unless the Pre-Merger Charter Amendment Proposal and the Business Combination Proposal are approved, the Director Election Amendment Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals and the Equity Incentive Plan Proposal will not be presented to the stockholders of CF III at the Special Meeting.

The Business Combination Proposal is also subject to and conditioned on the approval of the Director Election Proposal, the Nasdaq Proposal, each of the Post-Merger Charter Amendment Proposals, and the Equity Incentive Plan Proposal. The Adjournment Proposal is not conditioned on the approval of any other Proposal set forth in this proxy statement/prospectus. It is important for you to note that in the event that the Business Combination Proposal or any of the other Proposals (except for the Adjournment Proposal) does not receive the requisite vote for approval, we will not consummate the Business Combination. If CF III does not consummate the Business Combination and fails to complete an initial business combination by September 17, 2021, which date the Sponsor has agreed to extend to January 17, 2022 (if necessary), and as may be further extended by the Sponsor to up to September 17, 2022 in accordance with the Existing Charter (or a later date approved by the stockholders of CF III pursuant to the Existing Charter), CF III will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to its public stockholders in accordance with the Existing Charter, subject to payment of CF III’s tax obligations and up to $100,000 of dissolution expenses.

Q:     What will happen in the Business Combination?

A:     At the Closing, Merger Sub will merge with and into AEye with AEye surviving such merger and holders of AEye Capital Stock will receive shares of Class A Common Stock in exchange for their shares of AEye Capital Stock. Upon consummation of the Business Combination, AEye will become a wholly-owned subsidiary of CF III. In connection with the Business Combination, the remaining cash held in the Trust Account after redemptions, if any, and the proceeds from the PIPE Investment will be used to pay the transaction expenses of CF III and AEye in connection with the Business Combination and for working capital and general corporate purposes. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

Q:     What equity stake will current stockholders of CF III and holders of AEye Capital Stock hold in the Combined Entity after the Closing?

A:     It is anticipated that, upon the completion of the Business Combination, and assuming no redemptions by CF III’s public stockholders, (i) CF III’s public stockholders (other than the PIPE Investors) will retain an ownership interest of approximately 11.3% of the Combined Entity, (ii) the PIPE Investors (other than the Sponsor and holders of AEye Capital Stock and AEye Convertible Equity Instruments) will own approximately 10.1% of the Combined Entity, (iii) the Sponsor, the other initial stockholders and their affiliates, through their ownership of Founder Shares, Placement Units and the purchase by the Sponsor of Class A Common

Stock in the PIPE Investment, will retain an ownership interest of approximately 3.3% of the Combined Entity, and (iv) existing holders of AEye Capital Stock and AEye Convertible Equity Instruments (including their shares of Class A Common Stock purchased in the PIPE Investment) will own approximately 75.4% of the Combined Entity.

The ownership percentage with respect to the Combined Entity following the Business Combination is based upon the number of shares of AEye Capital Stock issued and outstanding as of June 30, 2021, assuming the issuance of Class A Common Stock underlying Assumed Options and Assumed Warrants using the Treasury Stock Method, but does not take into account (i) the redemption of any shares by CF III’s public stockholders, (ii) the exercise of the Warrants, or (iii) the exercise of any options or other securities under any incentive plans issued after June 30, 2021. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by CF III’s existing stockholders and AEye Stockholders in the Combined Entity will be different.

See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

Q:     What conditions must be satisfied to complete the Business Combination?

A:     There are a number of closing conditions in the Merger Agreement, including the approval by the stockholders of CF III of the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals and the Equity Incentive Plan Proposal. CF III must obtain the approval of CF III stockholders for each of the Proposals set forth in this proxy statement/prospectus for their approval (other than the Adjournment Proposal) and AEye must obtain the written consent of AEye Stockholders for the Merger. CF III and AEye must also obtain certain necessary regulatory approvals and satisfy other closing conditions set forth under the Merger Agreement. For a summary of the conditions that must be satisfied or waived prior to the Closing of the Business Combination, see the section titled “The Business Combination Proposal — The Merger Agreement.”

Q:     Why is CF III providing stockholders with the opportunity to vote on the Business Combination?

A:     Under the Existing Charter, CF III must provide all holders of its Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of CF III’s initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, CF III has elected to provide its stockholders with the opportunity to have their Public Shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, CF III is seeking to obtain the approval of its stockholders of the Business Combination Proposal in order to allow its public stockholders to effectuate redemptions of their Public Shares in connection with the Closing of the Business Combination.

Q:     Are there any arrangements to help ensure that the Company will have sufficient funds, together with the proceeds in its Trust Account, to meet the minimum cash condition for consummating the Business Combination?

A:     Yes. On February 17, 2021, CF III entered into Subscription Agreements (the “PIPE Subscription Agreements”) with a number of subscribers, including the Sponsor, pursuant to which the subscribers agreed to purchase, and CF III agreed to sell to the subscribers, an aggregate of 22,500,000 shares of Class A Common Stock for gross proceeds to CF III of $225 million in a private placement. The closing of the PIPE Investment is contingent upon, among other customary closing conditions, the substantially concurrent Closing. The proceeds from the Trust Account and the PIPE Investment will be used to pay any loans owed by CF III to the Sponsor, for any CF III transaction expenses or other administrative expenses incurred by CF III, and to pay all unpaid transaction expenses of AEye and any remainder will be used for general corporate purposes, including, but not limited to, working capital for operations, capital expenditures and future acquisitions. In addition, AEye may seek to arrange for additional third-party financing which may be in the form of debt (including bank debt or convertible notes) or equity, the proceeds of which would be used for a variety of purposes.

Q:     How many votes do I have at the Special Meeting?

A:     CF III stockholders are entitled to one vote at the Special Meeting for each share of CF III Common Stock held of record as of July 12, 2021, the Record Date for the Special Meeting. As of the close of business on the Record Date, there were 29,250,000 outstanding shares of CF III Common Stock.

Q:     What vote is required to approve the proposals presented at the Special Meeting?

A:     The approval of the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal and the Post-Merger Charter Amendment Proposals requires the affirmative vote of a majority of the issued and outstanding shares of CF III Common Stock as of the Record Date. Accordingly, a CF III stockholder’s failure to vote by proxy or to vote via the virtual meeting platform at the Special Meeting or an abstention will have the same effect as a vote “AGAINST” the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal and the Post-Merger Charter Amendment Proposals.

The Sponsor and our directors and officers have agreed to vote their shares in favor of the Business Combination Proposal. As a result, we would need only 8,375,001, or approximately 36.4%, of the 23,000,000 Public Shares, to be voted in favor of the Business Combination in order to have the Business Combination approved.

The approval of the election of each director nominee pursuant to the Director Election Proposal requires the affirmative vote of a plurality of the shares of CF III Common Stock present via the virtual meeting platform or represented by proxy and voted thereon at the Special Meeting. The approval of the Nasdaq Proposal, the Equity Incentive Plan Proposal and the Adjournment Proposal each requires the affirmative vote of the holders of a majority of the shares of CF III Common Stock cast by the stockholders present via the virtual meeting platform or represented by proxy and entitled to vote thereon at the Special Meeting. A CF III stockholder’s failure to vote by proxy or to vote via the virtual meeting platform at the Special Meeting will not be counted towards the number of shares of CF III Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, it will have no effect on the outcome of the vote on the Director Election Proposal, the Nasdaq Proposal, the Equity Incentive Plan Proposal, and the Adjournment Proposal.

If the Pre-Merger Charter Amendment Proposal and the Business Combination Proposal are not approved, the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals and the Equity Incentive Plan Proposal will not be presented to the CF III stockholders for a vote. The approval of the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, the election of each director nominee pursuant to the Director Election Proposal, the Nasdaq Proposal, the Post-Merger Charter Amendment Proposals, and the Equity Incentive Plan Proposal are preconditions to the consummation of the Business Combination.

Q:     What constitutes a quorum at the Special Meeting?

A:     Holders of a majority in voting power of CF III Common Stock issued and outstanding and entitled to vote at the Special Meeting constitute a quorum. In the absence of a quorum, the chairman of the meeting has the power to adjourn the Special Meeting. As of the Record Date, 14,625,001 shares of CF III Common Stock would be required to achieve a quorum.

Q:     How will the Sponsor and CF III’s directors and officers vote?

A:     The Sponsor and CF III’s officers and directors have agreed to vote any Founders Shares and Placement Shares held by them in favor of the initial business combination, including the Business Combination. Accordingly, if CF III seeks stockholder approval of its initial business combination, it is more likely that the necessary stockholder approval will be received than would be the case if the Sponsor and CF III’s officers and directors had agreed to vote their Founders Shares and Placement Shares in accordance with the majority of the votes cast by CF III’s public stockholders.

As a result, we would need only 8,375,001, or approximately 36.4%, of the 23,000,000 Public Shares, to be voted in favor of the Business Combination in order to have the Business Combination approved.

Q:     What interests do CF III’s current officers and directors have in the Business Combination?

A:     The Sponsor and CF III’s directors and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interest. These interests include:

•        unless CF III consummates an initial business combination, CF III’s officers and directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them on behalf of CF III (no such expenses have been incurred as of June 30, 2021 which have not been reimbursed by CF III) to the extent that such expenses exceed the amount of available proceeds not deposited in the Trust Account;

•        the Placement Units, including the Placement Shares, and Placement Warrants, purchased by the Sponsor in the Private Placement for $5,000,000 will be worthless if a business combination is not consummated;

•        the Sponsor has agreed that the Placement Units, and all of their underlying securities, will not be sold or transferred by it until 30 days after CF III has completed a business combination, subject to limited exceptions;

•        the fact that Sponsor paid an aggregate of $25,000 for its Founders Shares, which such Founder Shares (excluding the 40,000 Founder Shares transferred to CF III’s two independent directors), if unrestricted and freely tradeable, would be valued at approximately $57.3 million, based on the closing price of Class A Common Stock on June 30, 2021, and that such shares will be worthless if a business combination is not consummated;

•        the fact that Sponsor has agreed not to redeem any of the Founders Shares or Placement Shares in connection with a stockholder vote to approve a proposed initial business combination;

•        if CF III does not complete an initial business combination by September 17, 2021, which date the Sponsor has agreed to extend to January 17, 2022, if necessary, and as may be further extended by the Sponsor to up to September 17, 2022 in accordance with the Existing Charter (or a later date approved by the stockholders of CF III pursuant to the Existing Charter), the proceeds from the sale of the Placement Units of $5,000,000 will be included in the liquidating distribution to CF III’s public stockholders and the Placement Warrants will expire worthless;

•        the fact that upon completion of the Business Combination, an aggregate amount of $8.65 million in business combination marketing fees, $10.0 million of M&A advisory fees and $6.75 million of placement agent fees (payable in connection with the PIPE Offering) will be payable to CF&Co., an affiliate of CF III and the Sponsor;

•        if the Trust Account is liquidated, including in the event CF III is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify CF III to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Share by the claims of prospective target businesses with which CF III has entered into an acquisition agreement or claims of any third party for services rendered or products sold to CF III, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

•        the fact that the Sponsor and CF III’s officers and directors will lose their entire investment in CF III, including loans in the aggregate amount of approximately $3,460,955 as of June 30, 2021, if an initial business combination is not completed;

•        the fact that CF III’s two independent directors own an aggregate of 40,000 Founder Shares that were transferred by the Sponsor at no cost, which if unrestricted and freely tradeable would be valued at $401,200, based on the closing price of Class A Common Stock on June 30, 2021; and

•        the fact that CF III’s existing officers and directors will be eligible for continued indemnification and continued coverage under a directors’ and officers’ liability insurance policy after the business combination and pursuant to the Merger Agreement.

These interests may influence CF III’s officers and directors in making their recommendation that you vote in favor of the approval of the Business Combination.

Q:     Did the CF III Board obtain a fairness opinion in determining whether or not to proceed with the Business Combination?

A:     The CF III Board did not obtain a fairness opinion in connection with its determination to approve the Business Combination. The CF III Board believes that based upon the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to its stockholders. The CF III Board also determined, without the benefit of a fairness opinion, that AEye’s fair market value was at least 80% of CF III’s net assets, excluding any taxes payable on interest earned on the funds held in the Trust Account. Accordingly, investors will be relying on the judgment of the CF III Board as described above in valuing AEye’s business and assuming the risk that the CF III Board may not have properly valued such business.

Q:     What factors did the CF III Board consider in determining whether or not to proceed with the Business Combination?

A:     The CF III Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Merger Agreement and the transactions contemplated thereby, including, but not limited to, AEye’s leadership position in the long-range lidar industry, a large and growing addressable market, AEye’s differentiated technology, relationships with important Tier 1 automotive suppliers, an experienced management team and an attractive valuation.

The CF III Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination including, but not limited to: macroeconomic uncertainty generally and in the lidar industry, technological risks in the lidar industry and in AEye’s target markets, the risks that business plan and projections may not be achieved, and risks relating to CF III’s valuation of AEye, in particular the lack of a fairness opinion. See the sections titled “The Business Combination Proposal — The CF III Board’s Reasons for the Approval of the Business Combination.”

Q:     What happens if I sell my shares of Class A Common Stock before the Special Meeting?

A:     The Record Date is earlier than the date of the Special Meeting. If you transfer your shares of CF III Class A Common Stock after the Record Date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination in accordance with the provisions described herein. If you transfer your shares of CF III Class A Common Stock prior to the Record Date, you will have no right to vote those shares at the Special Meeting.

Q:     What happens if I vote against the Business Combination Proposal?

A:     Pursuant to the Existing Charter, if the Business Combination Proposal is not approved and CF III does not otherwise consummate an alternative business combination by September 17, 2021, which date the Sponsor has agreed to extend to January 17, 2022, if necessary, and as may be further extended by the Sponsor to up to September 17, 2022 in accordance with the Existing Charter (or a later date approved by the stockholders of CF III pursuant to the Existing Charter), CF III will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the public stockholders, subject to payment of CF III’s tax obligations and up to $100,000 of dissolution expenses.

Q:     Do I have redemption rights?

A:     Pursuant to the Existing Charter, holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Existing Charter. As of June 30, 2021, based on funds in the Trust Account of $232.3 million, this would have amounted to $10.10 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of CF III Common Stock for cash. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to CF III’s transfer agent prior to the Special Meeting. See the section titled “Special Meeting of CF III Stockholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Q:     Will how I vote affect my ability to exercise redemption rights?

A:     No. You may exercise your redemption rights whether or not you affirmatively vote your shares of CF III Common Stock “FOR” or “AGAINST” the Business Combination Proposal or abstain from voting on the Business Combination Proposal or any other Proposal described by this proxy statement/prospectus. As a result, the Merger Agreement can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.

Q:     How do I exercise my redemption rights?

A:     In order to exercise your redemption rights, you must, prior to 5:00 p.m., Eastern time, on August 10, 2021 (two (2) business days before the Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your Public Shares for cash to Continental Stock Transfer & Trust Company, our transfer agent, at the following address:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004

Attn: Mark Zimkind

E-mail: mzimkind@continentalstock.com

Please also affirmatively certify in your request to Continental Stock Transfer & Trust Company for redemption if you “ARE” or “ARE NOT” acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of CF III Class A Common Stock. A holder of the Public Shares, together with any of its affiliates any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) will be restricted from seeking redemption rights with respect to an aggregate of 15% or more of the Public Shares, which we refer to as the “15% threshold.” Accordingly, all Public Shares in excess of the 15% threshold beneficially owned by a public stockholder or group will not be redeemed for cash. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is CF III’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, CF III does not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with CF III’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to CF III’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that CF III’s transfer agent return the shares (physically or electronically). You may make such request by contacting CF III’s transfer agent at the phone number or address listed under the question “Who can help answer my questions?” below.

Q:     What are the federal income tax consequences of exercising my redemption rights?

A:     CF III expects that a U.S. holder (as defined below) that exercises its redemption rights to receive cash from the Trust Account in exchange for its Public Shares will generally be treated as selling such Public Shares resulting in the recognition of capital gain or capital loss. There may be certain circumstances in which the redemption may be treated as a distribution for U.S. federal income tax purposes depending on the amount of Public Shares that a U.S. holder owns or is deemed to own (including through the ownership of Public Warrants). For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “The Business Combination Proposal — United States Federal Income Tax Considerations of the Redemption.”

TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF EXERCISING YOUR REDEMPTION RIGHTS WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE EXERCISE OF REDEMPTION RIGHTS TO YOU IN YOUR PARTICULAR CIRCUMSTANCES.

Q:     If I am a Warrant holder, can I exercise redemption rights with respect to my Warrants?

A:     No. The holders of Warrants have no redemption rights with respect to Warrants.

Q:     If I am a Unit holder, can I exercise redemption rights with respect to my Units?

A:     No. Holders of outstanding Units must separate the underlying Public Shares and Public Warrants prior to exercising redemption rights with respect to the Public Shares.

If you hold Units registered in your own name, you must deliver the certificate for such Units to Continental Stock Transfer & Trust Company, our transfer agent, with written instructions to separate such Units into Public Shares and Public Warrants. This must be completed far enough in advance to permit the mailing of the Public Share certificates back to you so that you may then exercise your redemption rights upon the separation of the Public Shares from the Units. See “How do I exercise my redemption rights?” above. The address of Continental Stock Transfer & Trust Company is listed under the question “Who can help answer my questions?” below.

If a broker, dealer, commercial bank, trust company or other nominee holds your Units, you must instruct such nominee to separate your Units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company, our transfer agent. Such written instructions must include the number of Units to be split and the nominee holding such Units. Your nominee must also initiate electronically, using DTC’s deposit withdrawal at custodian (DWAC) system, a withdrawal of the relevant Units and a deposit of an equal number of Public Shares and Public Warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the Public Shares from the Units. While this is typically done electronically the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your Public Shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

Q:     Do I have appraisal rights if I object to the proposed Business Combination?

A:     No. There are no appraisal rights available to holders of CF III Common Stock in connection with the Business Combination.

Q:     What happens to the funds held in the Trust Account upon consummation of the Business Combination?

A:     If the Business Combination is consummated, the funds held in the Trust Account will be released to pay:

•        CF III stockholders who properly exercise their redemption rights;

•        the $8,650,000 business combination marketing fee to CF&Co.;

•        certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees, and other professional fees) that were incurred by CF III or AEye in connection with the transactions contemplated by the Business Combination and pursuant to the terms of the Merger Agreement;

•        any loans owed by CF III to the Sponsor for any CF III transaction expenses or other administrative expenses incurred by CF III; and

•        for general corporate purposes including, but not limited to, working capital for operations.

Q:     What happens if the Business Combination is not consummated?

A:     There are certain circumstances under which the Merger Agreement may be terminated. See the section titled “The Business Combination Proposal — The Merger Agreement” for information regarding the parties’ specific termination rights.

If, as a result of the termination of the Merger Agreement or otherwise, CF III is unable to complete the Business Combination or another initial business combination transaction by September 17, 2021, which date the Sponsor has agreed to extend to January 17, 2022, if necessary, and as may be further extended by the

Sponsor to up to September 17, 2022 in accordance with the Existing Charter (or a later date approved by the stockholders of CF III pursuant to the Existing Charter), the Existing Charter provides that CF III will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, subject to lawfully available funds therefor, redeem 100% of the Public Shares in consideration of a per-share price, payable in cash, equal to the quotient obtained by dividing (A) the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to it to pay taxes payable and up to $100,000 for dissolution expenses, by (B) the total number of then outstanding Public Shares, which redemption will completely extinguish rights of the public stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemptions, subject to the approval of the remaining stockholders and the CF III Board in accordance with applicable law, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under the DGCL to provide for claims of creditors and other requirements of applicable law.

CF III expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Business Combination, subject in each case to CF III’s obligations under the DGCL to provide for claims of creditors and other requirements of applicable law. Holders of Founders Shares have waived any right to any liquidation distribution with respect to those shares.

In the event of liquidation, there will be no distribution with respect to CF III’s outstanding Warrants. Accordingly, the Warrants will expire worthless.

Q:     When is the Business Combination expected to be completed?

A:     The Closing is expected to take place on (a) the third business day following the satisfaction or waiver of the conditions described below under the section titled “The Business Combination Proposal — Conditions to the Closing” (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver thereof) or (b) such other date as agreed to by the parties to the Merger Agreement in writing, in each case, subject to the satisfaction or waiver of the Closing conditions. The Merger Agreement may be terminated by either CF III or AEye if the Closing has not occurred by on or before the earlier of six months from the date this Registration Statement was initially filed with the SEC and the 270 day anniversary of the date of the Merger Agreement, subject to certain exceptions.

For a description of the conditions to the completion of the Business Combination, see the section titled “The Business Combination Proposal.”

Q:     What do I need to do now?

A:     You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

Q:     How do I vote?

A:     If you were a holder of record of CF III Common Stock on July 12, 2021, the Record Date, you may vote with respect to the Proposals at the Special Meeting via the virtual meeting platform, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Special Meeting and vote via the virtual meeting platform, obtain a proxy from your broker, bank or nominee.

Q:     What will happen if I abstain from voting or fail to vote at the Special Meeting?

A:     At the Special Meeting, CF III will count a properly executed proxy marked “ABSTAIN” with respect to a particular Proposal as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the Pre-Merger Charter Amendment Proposal, the Business Combination Proposal, and the Post-Merger Charter Amendment Proposals. Abstentions will have no effect on the Director Election Proposal, the Nasdaq Proposal, the Equity Incentive Plan Proposal or the Adjournment Proposal. Broker non-votes will not be counted as present for the purposes of establishing a quorum and will have no effect on any of the Proposals.

Q:     What will happen if I sign and return my proxy card without indicating how I wish to vote?

A:     Signed and dated proxies received by CF III without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each Proposal presented to the stockholders at the Special Meeting. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.

Q:     If I am not going to attend the Special Meeting, should I return my proxy card instead?

A:     Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Q:     If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

A:     No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. CF III believes the Proposals presented to the stockholders will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

Q:     May I change my vote after I have mailed my signed proxy card?

A:     Yes. You may change your vote by sending a later-dated, signed proxy card to CF III’s secretary at the address listed below so that it is received by CF III’s secretary prior to the Special Meeting or attend the Special Meeting and vote via the virtual meeting platform. You also may revoke your proxy by sending a notice of revocation to CF III’s secretary, which must be received by CF III’s secretary prior to the Special Meeting.

Q:     What should I do if I receive more than one set of voting materials?

A:     You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

Q:     Who will solicit and pay the cost of soliciting proxies?

A:     CF III will pay the cost of soliciting proxies for the Special Meeting. CF III has engaged Morrow Sodali LLC, which we refer to as “Morrow,” to assist in the solicitation of proxies for the Special Meeting. CF III has agreed to pay Morrow a fee of $27,500, plus disbursements. CF III will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. CF III will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of CF III Common Stock for their expenses in forwarding soliciting materials to beneficial owners of the CF III Common Stock and in obtaining voting instructions from those owners. CF III’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Q:     Who can help answer my questions?

A:     If you have questions about the Proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact:

CF Finance Acquisition Corp. III

110 East 59th Street

New York, New York 10022

Tel: (212) 938-5000

E-mail: CFFinanceIII@cantor.com

You may also contact our proxy solicitor at:

Morrow Sodali LLC

Tel: (800) 662-5200 or (203) 658-9400 (banks and brokers)

Email: CFIII.info@investor.morrowsodali.com

To obtain timely delivery, CF III stockholders must request the materials no later than August 5, 2021 (five business days prior to the date of the special meeting).

You may also obtain additional information about CF III from documents filed with the SEC by following the instructions in the section titled “Where You Can Find More Information.”

If you intend to seek redemption of your Public Shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to CF III’s transfer agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004

Attn: Mark Zimkind

E-mail: mzimkind@continentalstock.com

•        expanding its sales and marketing efforts to attract new customers and strategic partners;

•        investing in new applications and markets for its products;

•        further enhancing its manufacturing processes and partnerships;

•        protection of its intellectual property; and

•        investing in legal, accounting, and other administrative functions necessary to support its operations as a public company.

These initiatives may prove more expensive than AEye currently anticipates, and AEye may not succeed in increasing its revenue, if at all, in an amount sufficient to offset these higher expenses and to achieve and maintain profitability. The market opportunities AEye is pursuing are at an early stage of development, and it may be many years before the end markets AEye expects to serve generate demand for its products at scale, if at all. AEye’s revenue may be adversely affected for a number of reasons, including the development and/or market acceptance of new technology that competes with its products, if OEMs, Tier 1 automotive suppliers or other market participants change their autonomous vehicle or ADAS technology or strategy, a failure of AEye’s customers to commercialize autonomous systems that include its solutions, AEye’s inability to effectively manage or outsource the management of its inventory, manufacturing or contract manufacturing of products at scale, AEye’s inability to enter new markets or to help its customers adapt its products for new applications or AEye’s failure to attract new customers or secure production orders from existing customers currently analyzing AEye’s solutions or increasing competition. Furthermore, it is difficult to predict the size and growth rate of AEye’s target markets, customer demand for its products, commercialization timelines, developments in autonomous sensing, ADAS and related technology, the entry of competitive products, or the success of existing competitive products and services. For these reasons, AEye does not expect to achieve profitability over the near term. If AEye’s revenue does not grow over the long term, its ability to achieve and maintain profitability may be adversely affected, and the value of its business may significantly decrease.

If AEye’s deterministic artificial intelligence-driven sensing system is not selected for inclusion in autonomous driver-assistance systems, or ADAS, by OEMs or their suppliers, its business will be materially and adversely affected.

OEMs and their suppliers design and develop autonomous driving and ADAS technology over several years. These OEMs and suppliers undertake extensive testing or qualification processes prior to placing orders for large quantities of products such as AEye’s active lidar products because such products will function as part of a larger system or platform and must meet specifications that AEye does not control or dictate. AEye spends significant time and resources to have its products selected by OEMs and their suppliers, which we refer to as a “design win.” In the case of autonomous driving and ADAS technology, a design win means AEye’s active lidar product has been selected for use in a particular vehicle model or models. In addition, AEye’s relationships with Tier 1 suppliers are still subject to definitive agreements. If these relationships do not materialize, OEMs may be less inclined to select AEye’s products for use in their vehicle models. If AEye does not achieve a design win with respect to a particular vehicle model, it may not have an opportunity to supply its products to the OEM or its supplier for that vehicle model for a period of many years. In many cases, this period can be as long as five to seven years (or more). If AEye’s products are not selected by an OEM or its suppliers for one vehicle model or if AEye’s products are not successful in that vehicle model, it is less likely that its product will be deployed in other vehicle models of that OEM. If AEye fails to obtain design wins for a significant number of vehicle models from one or more OEMs or their suppliers, its business, results of operations and financial condition will be materially and adversely affected. The period of time from a design win to implementation is long and AEye is subject to the risks of cancellation or postponement of the contract or unsuccessful implementation.

AEye’s products require key components and critical raw materials and AEye’s inability to reduce and control the cost of such components and raw materials could negatively impact the adoption of its products and accordingly, its financial condition and operating results.

The production of AEye’s components is dependent on sourcing certain key components and raw materials at acceptable price levels. If AEye or its licensees or contract manufacturers are unable to adequately reduce and control the costs of such key components, they will be unable to realize manufacturing costs targets, which could reduce the market adoption of AEye’s products, damage its reputation with current or prospective customers, and have an adverse effect on its brand, business, prospects, financial condition and operating results.

Continued pricing pressures, OEM and Tier 1 supplier cost reduction initiatives and the ability of OEMs and Tier 1 suppliers to re-source or cancel vehicle or technology programs may result in lower than anticipated revenue, or cause substantial losses to be incurred, which may adversely affect AEye’s business.

Cost-cutting initiatives adopted by AEye’s customers may result in continuing downward pressure on pricing. AEye’s agreements and partnerships with OEMs and Tier 1 suppliers may require step-downs in pricing over the term of the agreement or partnership, or if commercialized, over the period of production. In addition, AEye’s OEM and Tier 1 supplier customers often reserve the right to terminate their supply contracts for convenience, which enhances their ability to obtain price reductions. OEMs and Tier 1 suppliers also possess significant leverage over their suppliers, including AEye, because the automotive component supply industry is highly competitive, serves a limited number of customers and has a high fixed cost base. See “‒AEye operates in a highly competitive market involving emerging technology. AEye competes against a number of competitors, some of whom have substantially greater resources than AEye” below.

Accordingly, AEye expects its product designs to be subject to substantial and continuing pricing pressure from OEMs, Tier 1 suppliers and lidar competitors, which may impact the revenue we receive from licensing our product designs or selling our products. It is possible that pricing pressures beyond AEye’s expectations could intensify as OEMs, Tier 1 suppliers and lidar competitors pursue restructuring, consolidation and cost-cutting initiatives. If AEye is unable to identify sufficient design cost savings to meet the expectations of OEMs and Tier 1 suppliers, its revenue and profitability would be adversely affected.

AEye expects to incur substantial R&D costs and to devote significant resources to identifying and commercializing new products, which could significantly reduce its profitability and may never result in revenue to AEye.

AEye’s future growth depends on penetrating new markets, adapting products to new applications and customer requirements, and introducing new products that achieve market acceptance. AEye plans to incur substantial, and increasing, R&D costs as part of its efforts to design, develop, manufacture and commercialize new products and enhance existing products. AEye’s R&D expenses were approximately $17.0 million and $18.6 million during 2020 and 2019, respectively, and are likely to grow in the future. Because AEye accounts for R&D as an operating expense, these expenditures will adversely affect its results of operations in the future. Further, AEye’s R&D program may not produce successful results, and its new products may not achieve market acceptance, create additional revenue or become profitable.

Although AEye believes that lidar is an essential technology for autonomous vehicles and other emerging applications, market adoption of lidar is uncertain. If market adoption of lidar does not continue to develop, or adoption is deferred or otherwise develops more slowly than AEye expects, its business will be adversely affected.

While AEye’s artificial intelligence-driven lidar-based sensing system can be applied to different use cases across end markets, approximately 79% of its revenue during 2020 was generated from automotive applications with a few customers in the aerospace, delivery, shuttle, railway, mining and aviation sectors. Despite the fact that the automotive industry has engaged in considerable effort to research and test lidar products for ADAS and autonomous driving applications, the automotive industry may not introduce lidar products in commercially available vehicles on a timeframe that matches AEye’s expectations, if at all. AEye continually studies emerging and competing sensing technologies and methodologies and AEye may incorporate new sensing technologies to its product portfolio over time. However, lidar products 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 technology, 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, AEye cannot guarantee that lidar products will be designed into or included in subsequent generations of such commercialized technology. In addition, AEye expects that initial generations of autonomous vehicles will be focused on limited applications, such as robo-taxis and shuttles, and that mass market adoption of autonomous technology may significantly lag behind these initial applications. 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 the COVID-19 pandemic. Although AEye currently believes it has a differentiated market leading technology for the autonomous vehicle market, by the time mass market adoption of autonomous vehicle technology is achieved, AEye expects 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 AEye or the market expects, or if other sensing modalities gain acceptance by developers of ADAS, OEMs, regulators, safety organizations or other market participants, AEye’s business, results of operations and financial condition will be materially and adversely affected.

AEye is investing in and pursuing market opportunities outside of the Automotive market, including in the aerospace and defense, shuttle, delivery vehicle, drone, railway, traffic system, and mining sectors. AEye believes that its future revenue growth, if any, will depend in part on its ability to expand within new markets such as these and to enter new markets as they emerge. Each of these markets presents distinct risks and, in many cases, requires AEye to address the particular requirements of that market.

Addressing these requirements can be time-consuming and costly. The market for lidar technology is relatively new, rapidly developing and unproven. Many of AEye’s prospective customers are still in the testing and development phases and it cannot be certain that they will commercialize products or systems with its lidar products, or at all. AEye 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 AEye’s 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 of designing lidar into larger sensing systems outweigh 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 AEye can keep pace with the expected rapid technological change in certain developing markets and the global response to the COVID-19 pandemic 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 AEye expects, AEye’s business, results of operation and financial condition will be materially and adversely affected.

AEye may experience difficulties in managing its growth and expanding its operations.

AEye expects to experience significant growth in the scope and nature of its operations. AEye’s ability to manage its operations and future growth will require AEye to continue to improve its operational, financial and management controls, legal and compliance programs and reporting systems. AEye 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 its business, reputation and financial results.

AEye relies on third-party suppliers and because some of the raw materials and key components in its products come from limited or single source suppliers, AEye is susceptible to supply shortages, longer than anticipated lead times for components, and supply changes, any of which could disrupt its supply chain and could delay deliveries of its products to customers.

Most of the components that go into the manufacture of AEye’s solutions are sourced from third-party suppliers. To date, AEye has produced its products in relatively limited quantities for use in R&D programs. Although AEye does not have any experience in managing its supply chain to manufacture and deliver its products at scale, its future success will depend on its ability to manage or outsource the management of its supply chain to allow it to manufacture and deliver its products at scale. Some of the key components used to manufacture AEye’s products come from limited or single source suppliers. AEye is therefore subject to the risk of shortages and long lead times in the supply of these components and the risk that its suppliers discontinue or modify components used in its products. AEye has a global supply chain and the COVID-19 pandemic and other epidemics and outbreaks may adversely affect its ability to source components in a timely or cost-effective manner from its third-party suppliers due to, among other things, work stoppages or interruptions. For example, AEye’s products depend on lasers. Any shortage of these lasers could materially and adversely affect AEye’s ability to manufacture its solutions. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. While AEye has entered into agreements with suppliers for the supply of some components at set prices, such quantities are limited given AEye is not yet producing at scale. Therefore, AEye has in the past, and may in the future, experience component shortages and 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. In the event of a component shortage, supply interruption or a material pricing change from suppliers of these components, AEye may not be able to develop alternate sources in a timely manner, or at all, 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 AEye may not be able to source these components on terms that are acceptable to it, or at all, which may undermine AEye’s ability to meet its 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 AEye’s ability to meet its scheduled product deliveries to its customers. This could adversely affect AEye’s relationships with its customers and channel partners and could cause delays in shipment of its products and adversely affect its operating results. In addition, increased component costs could result in lower gross margins. Even where AEye is able to pass increased component costs along to its customers, there may be a lapse of time before it is able to do so such that AEye will be required to absorb some or all of the increased cost. If AEye is unable to buy these components in quantities sufficient to meet its requirements on a timely basis, it will not be able to deliver products to its customers, which may result in such customers using competitive products instead of AEye’s.

Because AEye’s sales have been primarily to customers making purchases for R&D projects and customers’ current orders are project-based, AEye expects its results of operations to fluctuate on a quarterly and annual basis, which could cause the stock price of the Combined Entity to fluctuate or decline.

AEye’s quarterly results of operations have fluctuated in the past and may vary significantly in the future. As such, historical comparisons of its operating results may not be meaningful. In particular, because AEye’s 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 AEye’s customers’ development projects. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. AEye’s quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of its control and may not fully reflect the underlying performance of AEye’s business. These fluctuations could adversely affect AEye’s ability to meet its expectations or those of securities analysts, ratings agencies or investors. If AEye does not meet these expectations for any period, the value of its business and its securities, or those of the Combined Entity, could decline significantly. Factors that may cause these quarterly fluctuations include, without limitation, those listed below:

•        the timing and magnitude of orders and shipments of AEye’s products in any quarter;

•        decreases in pricing that AEye may adopt to drive market adoption or in response to competitive pressure;

•        AEye’s ability to retain its existing customers and strategic partners and attract new customers and strategic partners;

•        AEye’s ability to develop, introduce, manufacture and ship, in a timely manner, products that meet customer requirements;

•        disruptions in AEye’s sales channels or termination of its relationships with important channel partners;

•        delays in customers’ purchasing cycles or deferments of customers’ purchases in anticipation of new products or updates from AEye or its competitors;

•        fluctuations in demand for AEye’s products;

•        the mix of products sold or licensed in any quarter;

•        the duration or worsening of the global COVID-19 pandemic and the time it takes for economic recovery;

•        the timing and rate of broader market adoption of ADAS or autonomous systems utilizing AEye’s solutions across the automotive and other market sectors;

•        the timing and scale of the market acceptance of lidar generally;

•        further technological advancements by AEye’s competitors and other market participants;

•        the ability of AEye’s customers and strategic partners to commercialize systems that incorporate AEye’s products;

•        any change in the competitive dynamics of AEye’s markets, including consolidation of competitors, regulatory developments and new market entrants;

•        AEye’s ability to effectively manage or outsource management of its inventory;

•        changes in the source, cost, availability of and regulations pertaining to components and materials AEye uses in its products;

•        adverse litigation, judgments, settlements or other litigation-related costs, or claims that may give rise to such costs; and

•        general economic, industry and market conditions, including trade disputes.

AEye may face risks associated with its reliance on certain artificial intelligence and machine learning models.

AEye relies on artificial intelligence and machine learning (“AI/ML”) in the development of its deterministic artificial intelligence-driven sensing system for vehicle autonomy, ADAS and industrial applications. The AI/ML models that AEye uses are trained using various data sets. If the AI/ML models are incorrectly designed, the data AEye uses to train them is incomplete, inadequate, or biased in some way, or if AEye does not have sufficient rights to use the data on which AEye’s AI/ML models rely, the performance of AEye’s products, services, and business, as well as AEye’s reputation, could suffer or AEye could incur liability through the violation of laws, third-party privacy, or other rights, or contracts to which AEye is a party.

AEye’s outsourced manufacturing business model for the Industrial and Mobility markets may not be successful, which could harm its ability to deliver products and recognize revenue in the Industrial and Mobility markets.

AEye’s manufacturing strategy for the Industrial and Mobility markets has always been focused on outsourcing volume manufacturing to contract manufacturers while maintaining the design, engineering, prototyping, testing, and pilot manufacturing in-house at its facility in Dublin, California. AEye currently has agreements with certain third-party manufacturers to provide contract manufacturing, testing and delivery of certain of its products.

Reliance on third-party manufacturers reduces AEye’s control over the manufacturing process, including reduced control over quality, product costs and product supply and timing. AEye may experience delays in shipments or issues concerning product quality from its third-party manufacturers. If any of AEye’s third-party manufacturers experience interruptions, delays or disruptions in supplying its products, including by natural disasters, the global COVID-19 pandemic, other epidemics or outbreaks of other contagions, or work stoppages or capacity constraints, AEye’s ability to ship products would be delayed. In addition, unfavorable economic conditions could result in financial distress among third-party manufacturers upon which AEye relies, thereby increasing the risk of disruption of supplies necessary to fulfill AEye’s production requirements and meet customer demands. Additionally, if any of AEye’s third-party manufacturers experience quality control problems in their manufacturing operations and AEye’s products do not meet customer or regulatory requirements, it 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 AEye’s ability to fulfill orders and could have a negative effect on its operating results. In addition, such delays or issues with product quality could adversely affect AEye’s reputation and its relationship with its channel partners. If AEye’s 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 AEye’s products in required volumes or at all, AEye’s supply may be disrupted, it may be required to seek alternate manufacturers and it may be required to re-design its products. It would be time-consuming, and could be costly and impracticable, to begin to use new manufacturers and designs, and such changes could cause significant interruptions in supply and could have an adverse effect on AEye’s ability to meet its scheduled product deliveries and may subsequently lead to the loss of sales. While AEye takes measures to protect its trade secrets, the use of third-party manufacturers may also risk disclosure of its innovative and proprietary manufacturing methodologies, which could adversely affect AEye’s business.

AEye engages international contract manufacturers, and therefore it may face risks associated with manufacturing operations outside the United States.

Manufacturing outside the United States is subject to several inherent risks, including:

•        foreign currency fluctuations;

•        local economic conditions;

•        political instability;

•        import and export requirements;

•        foreign government regulatory requirements;

•        reduced protection for intellectual property rights in some countries;

•        tariffs and other trade barriers and restrictions; and

•        potentially adverse tax consequences.

AEye intends to continue to engage with contract manufacturers outside the United States, therefore it will be subject to these risks, each of which could increase AEye’s costs and decrease its profit margins.

AEye, its outsourcing partners and its suppliers may rely on complex machinery to produce AEye’s products, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

AEye, its outsourcing partners and suppliers may rely on complex machinery for the production, assembly and installation of AEye’s lidar solutions, which will involve a significant degree of uncertainty and risk in terms of operational performance and costs. AEye’s limited in-house production facility and the facilities of its outsourcing partners and suppliers consist of large-scale machinery combining many components. These components may suffer unexpected malfunctions from time to time and will require repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of AEye’s control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fires, seismic activity and natural disasters. Should such operational risks materialize, it may result in the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, some of which may be the responsibility of our outsourcing partners and suppliers, but could have a material adverse effect on AEye’s business, prospects, financial condition or operating results.

As part of growing its business, AEye may make acquisitions. If AEye fails to successfully select, execute or integrate its acquisitions, then its business, results of operations and financial condition could be materially adversely affected, and the stock price of the Combined Entity could decline.

From time to time, AEye may undertake acquisitions to add new products and technologies, acquire talent, gain new sales channels or enter into new markets or sales territories. In addition to possible stockholder approval, AEye may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt AEye’s business strategy if it fails to do so. Furthermore, acquisitions and the subsequent integration of new assets, businesses, key personnel, customers, vendors and suppliers will require significant attention from AEye’s management and could result in a diversion of resources from AEye’s existing business, which in turn could have an adverse effect on AEye’s operations. Acquired assets or businesses may not generate the financial results AEye expects. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

To date, AEye has limited experience with acquisitions and the integration of acquired technology and personnel. Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect its business, financial condition and results of operations and could cause the Combined Entity’s stock price to decline.

AEye’s sales and operations in international markets expose it to associated operational, financial and regulatory risks.

International sales comprise a significant amount of AEye’s overall revenue. Sales to international customers accounted for 79% and 74% of AEye’s revenue in 2020 and 2019, respectively. AEye is committed to growing its international sales, and while it has committed resources to expanding its international operations and sales channels, these efforts may not be successful. International operations are subject to a number of other risks, including:

•        exchange rate fluctuations;

•        political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;

•        global or regional health crises, such as the COVID-19 pandemic or other epidemics or outbreaks of other contagions;

•        potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;

•        preference for locally branded products, and laws and business practices favoring local competition;

•        potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there;

•        increased difficulty in managing inventory;

•        delayed revenue recognition;

•        less effective protection of intellectual property;

•        stringent regulation of the autonomous or other systems or products using AEye’s products and stringent consumer protection and product compliance regulations, including but not limited to the General Data Protection Regulation in the European Union, European competition law, the Restriction of Hazardous Substances Directive, the Waste Electrical and Electronic Equipment Directive and the European Ecodesign Directive that are costly to comply with and may vary from country to country;

•        difficulties and costs of staffing and managing foreign operations;

•        import and export laws and the impact of tariffs;

•        changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws; and

•        U.S. government’s restrictions on technology transfers to certain countries.

The occurrence of any of these risks could negatively affect AEye’s international business and consequently its business, operating results and financial condition.

The complexity of AEye’s products could result in unforeseen delays or expenses from undetected defects, errors or reliability issues in its hardware or software which could reduce the market adoption of its products, damage its reputation with current or prospective customers, expose AEye to product liability and other claims and thereby adversely affect its operating costs.

AEye’s products are highly technical, very complex and require high standards to manufacture. AEye’s products have in the past, and will likely in the future, experience defects, errors or reliability issues at various stages

of development, production and use. AEye may be unable to timely release new products, manufacture existing products, correct problems that have arisen or correct such problems to its customers’ satisfaction. Additionally, undetected errors, defects or security vulnerabilities, especially as new products are introduced or as new versions are released, could result in serious injury to the end users of the technology incorporating AEye’s products, or those in the surrounding area, its customers never being able to commercialize technology incorporating our products, litigation against AEye, negative publicity and other consequences. These risks are particularly prevalent in the highly competitive autonomous driving and ADAS markets. Some errors or defects in AEye’s products may only be discovered after they have been tested, commercialized and deployed by customers. If that is the case, AEye may incur significant additional development costs and product recall, repair or replacement costs. These problems may also result in claims, including class actions, against AEye. AEye’s reputation or brand may be damaged as a result of these problems and customers may be reluctant to buy its products, which could adversely affect its ability to retain existing customers and attract new customers and could adversely affect its financial results.

In addition, AEye could face material legal claims for breach of contract, product liability, fraud, tort or breach of warranty as a result of these problems. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of AEye and its products. In addition, AEye’s business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms, or at all. These product-related issues could result in claims against AEye and its business could be adversely affected.

AEye may be subject to product liability or warranty claims that could result in significant direct or indirect costs, which could adversely affect its business and operating results.

AEye’s customers use its solutions in autonomous driving and ADAS applications, which present the risk of significant injury, including fatalities. AEye may be subject to claims if a product using its active lidar technology is involved in an accident and persons are injured or purport to be injured. Any insurance that AEye carries may not be sufficient or it may not apply to all situations. Similarly, AEye’s customers could be subjected to claims as a result of such accidents and bring legal claims against AEye to attempt to hold it liable. In addition, if lawmakers or governmental agencies were to determine that the use of AEye’s products or autonomous driving or ADAS applications increased the risk of injury to all or a subset of its customers, they may pass laws or adopt regulations that limit the use of AEye’s products or increase the liability associated with the use of its products or that regulate the use of or delay the deployment of autonomous driving and ADAS technology. Any of these events could adversely affect AEye’s brand, relationships with customers, operating results or financial condition.

Suppliers to OEMs may require that AEye provide a warranty, either directly or indirectly, on its products, including its embedded software. The occurrence of any material defects in its products during the warranty period could make AEye liable for damages and warranty claims. In addition, AEye could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls. Any negative publicity related to the perceived quality of AEye’s products could affect its brand image, partner and customer demand, and adversely affect its operating results and financial condition. Also, warranty, recall and product liability claims may result in litigation, including class actions, the occurrence of which could be costly, lengthy and distracting and adversely affect AEye’s business and operating results.

If AEye does not maintain sufficient inventory or if it does not adequately manage its inventory, it could lose sales or incur higher inventory-related expenses, which could negatively affect AEye’s operating results.

To ensure adequate inventory, AEye must forecast inventory needs and expenses, place orders sufficiently in advance with its suppliers and manufacturing partners and manufacture products based on its estimates of future demand for particular products. Fluctuations in the adoption of lidar products may affect AEye’s ability to forecast its future operating results, including revenue, gross margins, cash flows and profitability. AEye’s ability to accurately forecast demand for its products could be affected by many factors, including the accuracy of the forecasts that AEye receives from its customers, the rapidly changing nature of the autonomous driving and ADAS markets in which it operates, the uncertainty surrounding the market acceptance and commercialization of lidar technology, the emergence of new markets, an increase or decrease in customer demand for AEye’s products or for products and services of its competitors, product introductions by competitors, the COVID-19 pandemic, other epidemics or outbreaks of other contagions, any work stoppages or interruptions, unanticipated changes in general

market conditions and the general weakening of economic conditions or consumer confidence. If its lidar products are commercialized in autonomous driving and ADAS applications, both of which are experiencing rapid growth in demand, AEye may face challenges acquiring adequate supplies to manufacture its products and/or AEye and its manufacturing partners may not be able to manufacture its products at a rate necessary to satisfy the levels of demand, which would negatively affect AEye’s revenue. This risk may be exacerbated by the fact that AEye may not carry or be able to obtain for its manufacturers a significant amount of inventory to satisfy short-term demand increases. If it fails to accurately forecast customer demand, AEye 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 AEye’s financial results, including its gross margin, and have a negative effect on its brand. Conversely, if AEye underestimates customer demand for its products, AEye, or its manufacturing partners, may not be able to deliver products to meet its requirements, and this could result in damage to AEye’s brand and customer relationships and adversely affect its revenue and operating results.

AEye’s forecasts and projections are based upon assumptions, analyses and internal estimates developed by AEye’s management. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, AEye’s actual operating results may differ materially from those forecasted or projected.

AEye’s forecasts and projections included in this proxy statement/prospectus are subject to significant uncertainty and are based on assumptions, analyses and internal estimates developed by AEye’s management, any or all of which may not prove to be correct or accurate. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, AEye’s actual operating results may differ materially from those forecasted or projected.

The forecasts and projections in this proxy statement/prospectus include forecasts and estimates relating to the expected size and growth of the markets for which AEye operates or seeks to enter, and assume that AEye is able to achieve a certain projected market share of the total addressable market. Such markets may not develop or grow, or may develop and grow at a lower rate than expected, and even if these markets experience the forecasted growth described in this proxy statement/prospectus, AEye may not achieve such projected market share. AEye’s future growth is subject to many factors, including, among others, its ability to develop and commercialize its products and the market’s adoption of its products, both of which are subject to risks and uncertainties, many of which are beyond AEye’s control. Accordingly, the forecasts and estimates of market size and growth described in this proxy statement/prospectus should not be taken as indicative of AEye’s future outlook. In addition, these forecasts do not take into account the impact of the current global COVID-19 pandemic, and AEye cannot assure you that these forecasts will not be materially and adversely affected as a result of the COVID-19 pandemic.

The average selling prices of AEye’s products or AEye’s fees or royalties from technology licenses could decrease rapidly over the life of the product or license term, which may negatively affect AEye’s revenue and gross margin.

AEye may experience declines in the average selling prices of its products generally as its customers seek to commercialize autonomous 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, AEye will need to continually reduce product and manufacturing costs. To manage manufacturing costs, AEye and its Tier 1 partners must engineer the most cost-effective design for its products. In addition, AEye continuously drives initiatives to reduce labor 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 cost. AEye also needs to continually introduce competitive new products in order to maintain its overall gross margin. AEye may also experience declines in fees or royalties from licensing its technology as customers reduce the prices of products incorporating AEye’s licensed technology in order to achieve market acceptance or due to competitive pressures. If AEye is unable to manage the cost structure of its products, successfully introduce new products with higher gross margins, and develop new technology that it can license at attractive royalty rates, its revenue and overall gross margin would likely decline.

Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on AEye’s results of operations.

While AEye makes its strategic planning decisions based on the assumption that the markets it is targeting will grow, AEye’s 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 and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets. In addition, automotive production and sales can be affected by AEye’s OEM and Tier 1 supplier customers’ ability to continue operating in response to 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 is the current shortage of semiconductors necessary for automobile production. The volume of automotive production in North America, Europe and the rest of the world has fluctuated, sometimes significantly, from year to year, and AEye expects such fluctuations to give rise to fluctuations in the demand for its products and licenses of its technology. Any significant adverse change in any of these factors may result in a reduction in automotive sales and production by AEye’s OEM and Tier 1 supplier customers and could have a material adverse effect on its business, results of operations and financial condition.

Customers with which AEye enters into supply agreements may require changes to AEye’s products or may be subject to renegotiation or termination in a short time period, which would materially and adversely affect AEye’s business.

If AEye and its partners are able to secure design wins so that AEye’s solutions are included in autonomous driving and ADAS products, AEye expects it, or its Tier 1 partners will enter into supply agreements with the relevant customer. Market practice dictates that these supply agreements typically require AEye 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 AEye is successful in obtaining design wins, and it or its Tier 1 partners are able to enter into definitive agreements with OEMs, and the systems into which its 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 AEye is a significant supplier could mean that the expected sales of AEye’s products will not materialize, materially and adversely affecting its business.

Since many of the markets in which AEye competes are new and rapidly evolving, it is difficult to forecast long-term end-customer adoption rates and demand for AEye’s products.

AEye is 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. AEye is in the process of developing necessary relationships with commercial partners which may not result in the commercialization of AEye’s technology immediately, or at all. Regulatory, safety or reliability developments, many of which are outside of AEye’s control, could also cause delays or otherwise impair commercial adoption of these new technologies, which will adversely affect AEye’s growth. AEye’s future financial performance will depend on its ability to make timely investments in emerging market opportunities. If one or more of these markets experience a shift in customer or prospective customer demand, AEye’s 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 AEye operates, it is difficult to predict customer demand or adoption rates for its products or the future growth of these markets. As a result, the financial projections in this proxy statement/prospectus necessarily reflect various estimates and assumptions that may not prove accurate and these projections could differ materially from actual results due to the risks included in “Risk Factors,” among others. If demand does not develop or if AEye cannot accurately forecast customer demand, the size or timing of its markets, inventory requirements or its future financial results, its business, results of operations and financial condition will be adversely affected.

AEye currently has and targets many customers that are large corporations with substantial negotiating power, have exacting product standards and potentially competitive internal solutions. If AEye is unable to sell its products to these customers, its prospects and results of operations will be adversely affected.

Many of AEye’s customers and potential customers are large, multinational corporations with substantial negotiating power relative to it and, in some instances, may have internal solutions that are competitive to AEye’s products. These large, multinational corporations also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Meeting the technical requirements and securing design wins with any of these companies will require a substantial investment of AEye’s time and resources. AEye cannot assure you that its products will secure design wins from these or other companies or that it will generate meaningful revenue from the sales of its products to these key potential customers. If AEye’s products are not selected by these potential customers or if these potential customers develop or acquire competitive technology, it will have an adverse effect on AEye’s business.

AEye’s business could be materially and adversely affected if it lost any of its large customers or strategic partners if their demand for AEye’s products declined due to factors outside of AEye’s control, including component shortages (whether related to AEye’s products or otherwise) that impact our customers’ overall production plans or product development plans, or if AEye’s customers were unable to pay their invoices.

Although AEye has and continues to pursue a broad customer base, it is dependent on a collection of customer relationships which are currently in development with strong purchasing power. In 2020, ZKW Group GmbH (an affiliate of LG Electronics) accounted for approximately 66% of AEye’s annual revenue and Hella accounted for approximately 68% of AEye’s annual revenue in 2019. The loss of business from any of AEye’s major customers (whether by lower overall demand for its products, component shortages that impact their production plans or product development plans, cancellation of existing contracts or product orders or the failure to design in its products or award AEye initial or new business) could have a material adverse effect on its business.

To the extent autonomous vehicle and ADAS systems become accepted by major OEMs, AEye expects that it will rely increasingly for its revenue on Tier 1 suppliers through which OEMs procure components. AEye expects that these Tier 1 suppliers will be responsible for certain hardware and software configuration activities specific to each OEM, and they may not exclusively carry AEye’s solutions.

There is also a risk that one or more of its major customers could be unable to pay AEye’s invoices as they become due or that a customer will simply refuse to make such payments if it experiences financial difficulties. If AEye’s customers face financial difficulties, they may also cancel current or future product programs that could materially and adversely impact our financial results. If a major customer were to enter into bankruptcy proceedings or similar proceedings whereby contractual commitments are subject to a stay of execution and the possibility of legal or other modification, AEye could be forced to record a substantial loss.

AEye is substantially relying on its relationship with Continental, and its business could be materially and adversely affected if its relationship with Continental was terminated, or if AEye, through its relationship with Continental, is unable to a sufficient number of design wins and successfully enter into definitive agreements or other commercial arrangements with OEMs in respect of such design wins.

AEye’s business prospects and projections are substantially based on its relationship with Continental. AEye has entered into a memorandum of understanding with Continental pursuant to which Continental will license from AEye the rights to manufacture and integrate AEye’s lidar product into OEM model lines through long-term series production contracts with OEMs. There can be no assurance that AEye will be able to maintain or further its relationship with Continental and or that Continental will secure orders for AEye product designs and software. If AEye is unable to maintain or progress its relationship with Continental, or enter into a definitive arrangement with Continental with economic terms that are sufficiently favorable to AEye, or if Continental is unable to secure a sufficient number of design wins and successfully enter into definitive agreements or other commercial arrangements with OEMs, then AEye’s business could be materially and adversely affected.

If AEye is unable to establish and maintain confidence in its long-term business prospects among customers and analysts and within its industry or is subject to negative publicity, then AEye’s financial condition, operating results, business prospects and access to capital may suffer materially.

Customers may be less likely to purchase AEye’s lidar solutions if they are not convinced that AEye’s business will succeed or that its service and support and other operations will continue in the long term.

Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with AEye if they are not convinced that its business will succeed. Accordingly, in order to build and maintain its business, AEye must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in its products, long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of AEye’s control, such as its limited operating history, customer unfamiliarity with its lidar solutions, any delays in scaling production, delivery and service operations to meet demand, competition and uncertainty regarding the future of autonomous vehicles or AEye’s other services and its production and sales performance compared with market expectations.

AEye’s investments in educating its customers and potential customers about the advantages of lidar and its applications may not result in sales of AEye’s products.

Educating AEye’s prospective customers, and to a lesser extent, its existing customers, about lidar, its advantages over other sensing technologies and lidar’s ability to convey value in different industries and deployments is an integral part of developing new business and the lidar market generally. If prospective customers have a negative perception of, or experience with, lidar or a competitor’s lidar products they may be reluctant to adopt lidar in general or specifically AEye’s products. Adverse statements about lidar by influential market participants may also deter adoption. Some of AEye’s competitors have significant financial or marketing resources that may allow them to engage in public marketing campaigns about their alternative technology, lidar generally or AEye’s solutions specifically. AEye’s efforts to educate potential customers and the market generally and to counter any adverse statements made by competitors or other market participants will require significant financial and personnel resources. These educational efforts may not be successful and AEye may not offset the costs of such efforts with revenue from the new customers. If AEye is unable to acquire new customers to offset these expenses or if the market accepts such adverse statements, its financial condition will be adversely affected.

The period of time from a design win to implementation is long and AEye is subject to the risks of cancellation or postponement of the contract or unsuccessful implementation.

Prospective customers, including those in the automotive industry, generally must make significant commitments of resources to test and validate AEye’s products and confirm that they can integrate with other technologies before including them in any particular system, product or model. The development cycles of AEye’s products with new customers varies widely depending on the application, market, customer and the complexity of the product. In the Automotive market, for example, this development cycle can be five to seven years (or more). The development cycle in certain other markets can be months to one or two years. These development cycles result in AEye investing its resources prior to the opportunity to realize any revenue from commercialization. Further, AEye is subject to the risk that customers cancel or postpone implementation of its technology, as well as that it will not be able to integrate its technology successfully into a larger system with other sensing modalities. If AEye’s customers face financial difficulties, they may also cancel current or future product programs that could materially and adversely impact our financial results. Further, AEye’s revenue could be less than forecasted if the system, product or vehicle model that includes its lidar products is unsuccessful, including for reasons unrelated to its technology. Long development cycles and product cancellations or postponements may adversely affect AEye’s business, results of operations and financial condition.

AEye operates in a highly competitive market involving emerging technology. AEye competes against a number of competitors, some of whom have substantially greater resources than AEye.

The markets for sensing technology applicable to autonomous solutions across numerous industries are highly competitive. AEye’s future success will depend on its ability to achieve a leadership position in its targeted markets by continuing to develop, and protect from infringement, advanced lidar technology in a timely manner

and to stay ahead of existing and new competitors. AEye’s competitors compete with AEye directly by offering lidar products and indirectly by attempting to solve some of the same challenges with different technologies. AEye’s 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. AEye faces 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, AEye’s competitors have commercialized both lidar and non-lidar-based ADAS technology that has achieved market adoption, strong brand recognition and may continue to improve. Other competitors are working towards commercializing autonomous driving technology and either by themselves, or with a publicly announced partner, and have substantial financial, marketing, R&D and other resources. Some of AEye’s 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 AEye’s solutions. AEye does not know how close these competitors are to commercializing autonomous driving systems or novel ADAS applications. In markets outside of the automotive industry, AEye’s competitors seek to develop new sensing applications across industries. Even in these emerging markets, AEye faces substantial competition from numerous competitors seeking to prove the value of their technology.

Additionally, competition may result in pricing pressure and reduced margins and may impede AEye’s ability to secure design wins, successfully enter into definitive agreements or other commercial arrangements, or successfully commercialize its products at scale, which may prevent AEye from achieving its projected market share. In particular, AEye’s competitors have in the past offered, and may in the future offer, their products and services on terms that AEye and/or its Tier 1 partners are unwilling to match or could introduce new products with competitive price and performance characteristics, which may adversely affect AEye’s market share

The markets in which AEye competes are characterized by rapid technological change, which requires it to continue to develop new products and product innovations and could adversely affect market adoption of its products.

While AEye intends 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 AEye’s products, either generally or for particular applications. AEye’s future success will depend upon its ability to develop and introduce a variety of new capabilities and innovations to its existing product offerings, as well as introduce a variety of new product offerings, to address the changing needs of the markets in which AEye offers its products. AEye 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 AEye’s relationships with customers and lead them to seek alternative sources of supply. In addition, to date AEye has focused on the delivery of its solutions to R&D programs in which developers are investing substantial capital to develop new systems that incorporate AEye’s solutions. AEye’s 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, AEye 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 AEye’s competitors’ products or turn to alternative sensing technology.

If AEye is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with alternatives, its products could lose market share, its revenue will decline, it may experience operating losses and its business and prospects will be adversely affected.

Developments in alternative technology may adversely affect the demand for AEye’s technology.

Significant developments in alternative technologies, such as cameras and radar, may materially and adversely affect AEye’s business, prospects, financial condition and operating results in ways AEye does not currently anticipate. Existing and future camera and radar technologies may emerge as customers’ preferred alternative to AEye’s solutions. Any failure by AEye to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay AEye’s development and introduction of new and enhanced products in the autonomous vehicle industry, which could result in the loss of competitiveness of AEye’s lidar solutions,

decreased revenue and a loss of market share to competitors (or a failure to increase revenue and/or market share). AEye’s R&D efforts may not be sufficient to adapt to changes in technology. As technologies change, AEye plans to upgrade or adapt its lidar solutions with the latest technology. However, AEye’s solutions may not compete effectively with alternative systems if AEye is not able to source and integrate the latest technology into its existing lidar solutions.

Because lidar is new in most of the markets AEye is seeking to enter, forecasts of market growth in this proxy statement/prospectus may not be accurate.

Market opportunity estimates and growth forecasts included in this proxy statement/prospectus are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The forecasts and estimates in this proxy statement/prospectus relating to the expected size and growth of the markets for lidar-based technology may prove to be inaccurate. Even if these markets experience the forecasted growth described in this proxy statement/prospectus, AEye may not grow its business at similar rates, or at all. AEye’s future growth is subject to many factors, including market adoption of its products, which is subject to many risks and uncertainties. Accordingly, the forecasts and estimates of market size and growth described in this proxy statement/prospectus, including AEye’s estimates that the size of its total addressable market is expected to grow from approximately $3 billion currently to $42 billion by 2030, should not be taken as indicative of AEye’s future growth. In addition, these forecasts do not take into account the impact of the current global COVID-19 pandemic, and AEye cannot assure you that these forecasts will not be materially and adversely affected as a result.

AEye may need to raise capital in excess of its current projections, in order to execute its business plan or respond to changing market conditions, which may not be available on terms acceptable to AEye, or at all.

In the future, AEye may need to raise capital in excess of its current projections, in order to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances and it may determine to engage in equity or debt financings or enter into credit facilities for other reasons. In order to further business relationships with current or potential customers or partners, AEye may issue equity or equity-linked securities to such current or potential customers or partners. AEye may not be able to timely secure additional debt or equity financing on favorable terms, or at all. If AEye raises additional funds through the issuance of equity or convertible debt or other equity-linked securities or if it issues equity or equity-linked securities to current or potential customers to further business relationships, its existing stockholders could experience significant dilution. Any debt financing obtained by AEye in the future could involve restrictive covenants relating to its capital raising activities and other financial and operational matters, which may make it more difficult for AEye to obtain additional capital and to pursue business opportunities, including potential acquisitions. If AEye is unable to obtain adequate financing or financing on terms satisfactory to AEye, when AEye requires it, AEye’s ability to continue to grow or support its business and to respond to business challenges could be significantly limited. These same risks will apply to the Combined Entity following the closing of the Business Combination.

AEye has identified a material weakness in its internal control over financial reporting as of December 31, 2020. If AEye fails to develop and maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in the Post-Combination Company.

In connection with AEye’s financial statement close process for the year ended December 31, 2020, AEye identified a material weakness in the design and operating effectiveness of its internal control over financial reporting. The material weakness AEye identified resulted from a lack of sufficient number of personnel within its accounting function who possessed an appropriate level of expertise to timely identify, select, and apply GAAP sufficiently to provide reasonable assurance that transactions were appropriately recorded. This also resulted in AEye not having adequate risk assessment and design of internal control activities surrounding the financial close and reporting process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to its consolidated financial statements that could not be prevented or detected on a timely basis.

AEye’s management is in the process of developing a remediation plan which shall include, without limitation, the hiring of additional accounting and finance personnel with technical public company accounting and financial reporting experience. The material weakness will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. The Post-Combination Company’s management will monitor the effectiveness of the Post-Combination Company’s remediation plans and will make changes management determines to be appropriate.

If not remediated, this material weakness could result in material misstatements to the Post-Combination Company’s annual or interim financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If the Post-Combination Company is unable to assert that its internal control over financial reporting is effective, or when required in the future, if the Post-Combination Company’s independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of the Post-Combination Company’s financial reports, the market price of the common stock could be adversely affected and the Post-Combination Company could become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources.

If AEye fails to maintain an effective system of internal controls, its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected.

Following the closing of the Business Combination, the Combined Entity will carry out AEye’s business and will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. AEye expects that the requirements of these rules and regulations will continue to increase its legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on its personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that AEye maintain effective disclosure controls and procedures and internal control over financial reporting. AEye is continuing to develop and refine its disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by it in the reports that it will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to AEye’s principal executive and financial officers.

AEye’s current controls, and any new controls that it develops, may be inadequate because of changes in conditions in its business. Further, weaknesses in AEye’s 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 AEye’s operating results or cause it to fail to meet its reporting obligations and may result in a restatement of AEye’s 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 AEye’s internal control over financial reporting that it is required to include in the periodic reports AEye will file with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in AEye’s reported financial and other information.

In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, AEye has expended and anticipates that it will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of its internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase AEye’s operating costs and could materially and adversely affect its ability to operate its

business. If AEye’s internal controls are perceived as inadequate or that it is unable to produce timely or accurate financial statements, investors may lose confidence in AEye’s operating results and the stock price of the Combined Entity could decline.

The Combined Entity’s independent registered public accounting firm is not required to formally attest to the effectiveness of its internal control over financial reporting until after the Combined Entity is no longer an emerging growth company. At such time, the Combined Entity’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which AEye’s 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 the Combined Entity’s business and operating results.

Changes in tax laws or exposure to additional income tax liabilities could affect AEye’s future profitability.

Factors that could materially affect AEye’s future effective tax rates include but are not limited to:

•        changes in tax laws (including tax rates) or the regulatory environment;

•        changes in accounting and tax standards or practices;

•        changes in the composition of operating income by tax jurisdiction; and

•        AEye’s operating results before taxes.

Because AEye does not have a long history of operating at its present scale and it has significant expansion plans, AEye’s effective tax rate may fluctuate in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under GAAP, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the U.S. Tax Code. In particular, sweeping changes were made to the U.S. taxation of foreign operations. Changes include, but are not limited to, a permanent reduction to the corporate income tax rate, limiting interest deductions, adopting elements of a territorial tax system, assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions, including a new minimum tax on global intangible low-taxed income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”). The new legislation had no effect on AEye’s 2019 and 2020, and 2021 provision for income taxes because AEye generated net tax losses and offset its deferred tax assets on the balance sheet with a full valuation allowance due to its current loss position and forecasted losses for the near future. The overall impact of this tax reform is uncertain, and AEye’s business and financial condition, including with respect to its non-U.S. operations, could be adversely affected.

In addition to the impact of the Tax Act on AEye’s federal taxes, the Tax Act may impact its taxation in other jurisdictions, including with respect to state income taxes. State legislatures have not had sufficient time to respond to the Tax Act. Accordingly, there is uncertainty as to how the laws will apply in the various state jurisdictions. Additionally, other foreign governing bodies may enact changes to their tax laws in reaction to the Tax Act that could result in changes to AEye’s global tax position and materially adversely affect its business, results of operations and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with AEye’s future intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If AEye does not prevail in any such disagreements, its profitability may be affected.

AEye’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2020, AEye had approximately $69.2 million of U.S. federal and approximately $44.6 million of state net operating loss carryforwards available to reduce future taxable income. Of the approximately $69.2 million in U.S. federal operating loss carryforwards, approximately $57.0 million will be carried forward indefinitely for U.S. federal tax purposes and approximately $12.3 million will expire between 2033 and 2037. Approximately $44.2 million of AEye’s U.S. state net operating loss carryforwards will expire between 2035 and 2040. It is possible that AEye will not generate taxable income in time to use these net operating loss

carryforwards before their expiration, or at all. Under legislative changes made in December 2017, U.S. federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such net operating losses is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In addition, the federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the U.S. Tax Code, respectively, and similar provisions of state law. Under those sections of the U.S. Tax Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. AEye has not yet undertaken an analysis of whether the Business Combination constitutes an “ownership change” for purposes of Section 382 and Section 383 of the U.S. Tax Code. If the Business Combination is determined to constitute an “ownership change,” AEye’s profitability may be impacted.

AEye is highly dependent on the services of its executive officers, in particular Luis Dussan, one of its founders, President and Chief Technology Officer, and Blair LaCorte, its Chief Executive Officer.

AEye is highly dependent on its executive officers, in particular, one of its founders, Luis Dussan, its President and Chief Technology Officer and Blair LaCorte, its Chief Executive Officer. Mr. Dussan created AEye’s artificial perception platform and remains deeply involved in AEye’s business, particularly in technology development. Mr. LaCorte has successfully led AEye’s growth and expansion strategy and his unparalleled leadership skills and industry insight are critical to AEye.

In addition, AEye is also dependent on the services of its other executive officers, Robert Brown, its Chief Financial Officer, Thomas R. Tewell, its Chief Operating Officer, and Andrew S. Hughes, its General Counsel. The loss of any of AEye’s executive officers could adversely affect AEye’s 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 AEye’s executive officers may adversely affect AEye’s brand, relationship with customers or standing in the industry.

AEye’s business depends substantially on the efforts of its executive officers and highly skilled personnel, and its operations may be severely disrupted if it lost their services.

Competition for highly skilled personnel is often intense, especially in the San Francisco Bay Area, where AEye is headquartered, and AEye may incur significant costs to attract the highly-skilled personnel it requires. AEye may not be successful in attracting, integrating, or retaining qualified personnel to fulfill its current or future needs. AEye has, from time to time, experienced, and it expects to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications, especially those with engineering skills.

In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of AEye’s equity or equity awards declines, including those of the Combined Entity after the closing of the Business Combination, it may adversely affect AEye’s ability to retain highly skilled employees. If AEye fails to attract new personnel or fails to retain and motivate its current personnel, its business and future growth prospects could be adversely affected.

AEye’s business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, pandemics, and interruptions by man-made problems, such as terrorism. Material disruptions of AEye’s business or information systems resulting from these events could adversely affect its operating results.

A significant natural disaster, such as an earthquake, fire, flood, hurricane or significant power outage or other similar events, such as infectious disease outbreaks or pandemic events, including the ongoing COVID-19 pandemic, could have an adverse effect on AEye’s business and operating results. The ongoing COVID-19 pandemic may have the effect of heightening many of the other risks described in this “Risk Factors” section, such as the demand for AEye’s products, its ability to achieve or maintain profitability and its ability to raise additional capital in the future. AEye’s corporate headquarters and major operations are located in the San Francisco Bay Area of California, which has experienced, and could experience again, a high number of COVID-19 pandemic cases and is also a region

known for significant seismic activity. In addition, natural disasters, acts of terrorism or war could cause disruptions in AEye’s operations, AEye’s or its customers’ or channel partners’ businesses, AEye’s suppliers’ or the economy as a whole. AEye also relies on information technology systems to communicate among its workforce and with third parties. Any disruption to AEye’s communications, whether caused by a natural disaster or by manmade problems, such as power disruptions, could adversely affect its business. AEye does not have a formal disaster recovery plan or policy in place and does not currently require that its suppliers’ partners have such plans or policies in place. To the extent that any such disruptions result in delays or cancellations of orders or impede its suppliers’ ability to timely deliver components, or the deployment of its products, AEye’s business, operating results and financial condition would be adversely affected.

Interruption or failure of AEye’s information technology and communications systems could impact AEye’s ability to effectively provide services it may implement in the future.

AEye may, in the future, include in-vehicle services and functionality that utilize data connectivity to monitor performance and timely capture opportunities to enhance performance and functionality. The availability and effectiveness of AEye’s services depend on the continued operation of information technology and communications systems. AEye’s systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failure, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm AEye’s systems. AEye primarily utilizes reputable third-party service providers or vendors for its data (including among others financial data, human resources data, manufacturing and production data, sales data, and electronic mail), other than for its source code and related materials that are managed internally. These third-party providers could also be vulnerable to harms similar to those that could damage AEye’s systems, including sabotage and intentional acts of vandalism causing potential disruptions. Some of AEye’s systems will not be fully redundant, and AEye’s disaster recovery planning cannot account for all eventualities. Any problems with AEye’s third-party cloud hosting providers could result in lengthy interruptions in AEye’s business. In addition, AEye’s future in-vehicle services and functionality are expected to be highly technical and complex technology which may contain errors or vulnerabilities that could result in interruptions in AEye’s business or the failure of its systems.

AEye is subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software in its lidar solutions and the data processed by those solutions, and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent AEye from effectively operating its business.

AEye is at risk for interruptions, outages and breaches of: its operational systems, including business, financial, accounting, product development or production processes, owned by AEye or its suppliers; its facility security systems, owned by AEye or its suppliers; its in-product technology owned by AEye or its suppliers; the integrated software in AEye’s lidar solutions; or the data that AEye processes or its or suppliers process on its behalf. Such cyber incidents could materially disrupt operational systems; result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of employees, suppliers, or others; jeopardize the security of AEye’s facilities; or affect the performance of in-product technology and the integrated software in AEye’s lidar solutions. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery, phishing, or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although AEye maintains information technology measures designed to protect itself against intellectual property theft, data breaches and other cyber incidents, such measures will require continual updates and improvements, and AEye cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance, segregation and improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current systems, including the disruption of AEye’s data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect AEye’s ability to manage its data and inventory, procure parts or supplies or produce, sell, deliver and service its solutions, adequately protect its intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. AEye cannot be sure that the systems upon which it relies, including those of its third-party vendors or suppliers, will be

effectively implemented, maintained or expanded as planned. If AEye does not successfully implement, maintain or expand these systems as planned, its operations may be disrupted, its ability to accurately and timely report its financial results could be impaired, and deficiencies may arise in its internal control over financial reporting, which may impact AEye’s ability to certify its financial results. Moreover, AEye’s proprietary information or intellectual property could be compromised or misappropriated and its reputation may be adversely affected. If these systems do not operate as AEye expects them to, AEye may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

A significant cyber incident could impact production capability, harm AEye’s reputation, cause AEye to breach its contracts with other parties or subject AEye to regulatory actions and litigation, any of which could materially affect AEye’s business, prospects, financial condition and operating results. In addition, AEye’s insurance coverage for cyber-attacks may not be sufficient to cover all the losses it may experience as a result of a cyber incident.

Legal and Regulatory Risks Related to AEye’s Business

AEye is subject to governmental export and import control laws and regulations. AEye’s failure to comply with these laws and regulations could have an adverse effect on its business, prospects, financial condition and results of operations.

AEye’s products and solutions are subject to import and export laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. U.S. export control laws and regulations and economic sanctions prohibit the shipment of certain products and services to U.S. embargoed or sanctioned countries, governments and persons. In addition, complying with export control and sanctions regulations for a particular sale may be time-consuming and result in the delay or loss of sales opportunities. Exports of AEye’s products and technology must be made in compliance with these laws and regulations. If AEye fails to comply with these laws and regulations, AEye and certain of its employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, and fines, which may be imposed on AEye and responsible employees or managers and, in extreme cases, the incarceration of responsible employees or managers.

Changes to trade policy, tariffs and import/export regulations may have a material adverse effect on AEye’s business, financial condition and results of operations.

Changes in global political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where AEye currently purchases its components, sells its products or conducts its business could adversely affect AEye’s business. The U.S. has recently instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where AEye conducts its business. A number of other nations have proposed or instituted similar measures directed at trade with the United States in response. As a result of these developments, there may be greater restrictions and economic disincentives on international trade that could adversely affect AEye’s business. For example, such changes could adversely affect the Automotive market, AEye’s ability to access key components or raw materials needed to manufacture its products (including rare-earth metals), AEye’s ability to sell its products or license its product designs and software to customers outside of the U.S. and the demand for its products. It may be time-consuming and expensive for AEye to alter its business operations to adapt to or comply with any such changes, and any failure to do so could have a material adverse effect on its business, financial condition and results of operations.

AEye has and may become involved in legal and regulatory proceedings and commercial or contractual disputes, which could have an adverse effect on its profitability and consolidated financial position.

AEye has been and may be, from time to time, involved in litigation, regulatory proceedings and commercial or contractual disputes that may be significant. These matters may include disputes with AEye’s suppliers and customers, intellectual property claims, stockholder litigation, government investigations, class action lawsuits, personal injury claims, environmental issues, customs and value-added tax disputes and employment and tax issues.

In particular, AEye has been named in a lawsuit filed on February 24, 2021, in the Third Judicial Circuit Court of Wayne, Michigan, by a company called Orfin, LLC (“Orfin”). In the suit, Orfin alleges that it entered into an enforceable agreement with AEye to invest $2.5 million in a convertible note to be issued by AEye. Based on this and other allegations, Orfin asserts claims against AEye for breach of contract and promissory estoppel. The suit was subsequently transferred to the United States District Court for the District of Delaware on April 21, 2021 and is currently pending. While AEye disputes the existence of any such agreement with Orfin, believes that Orfin’s claims lack merit, and intends to defend the lawsuit, AEye, cannot guarantee a favorable outcome in the litigation.

In addition, AEye could face in the future, a variety of labor and employment claims against it, which could include but is not limited to general discrimination, wage and hour, privacy, ERISA or disability claims. In such matters, government agencies or private parties may seek to recover from AEye very large, indeterminate amounts in penalties or monetary damages (including, in some cases, treble or punitive damages) or seek to limit AEye’s operations in some way.

Any of these types of lawsuits, whether initiated by AEye or a third party, could require significant management time and attention or could involve substantial legal liability, adverse regulatory outcomes, and/or substantial expenses to defend. Often these cases raise complex factual and legal issues and create risks and uncertainties. No assurances can be given that any proceedings or claims will not have a material adverse impact on AEye’s operating results and consolidated financial position or that its established reserves or its available insurance will mitigate this impact.

Unforeseen issues could result in damage to certain property which could result in adverse effects on AEye’s business and reputation.

AEye’s lidar utilizes lasers for performing 3D sensing. While AEye has developed system components designed to prevent its lidar lasers from causing property damage (including to cameras), in the event that an unforeseen issue arises that results in property damage, AEye’s reputation or brand may be damaged and AEye could face material legal claims for breach of contract, product liability, tort or breach of warranty as a result of these problems. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of AEye and its products. In addition, AEye’s business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms, or at all.

AEye is subject to, and must remain in compliance with, numerous laws and governmental regulations concerning the manufacturing, use, distribution and sale of its products. Some of AEye’s customers also require that it comply with their own unique requirements relating to these matters.

AEye manufactures and sells products that contain electronic components, and such components may contain materials that are subject to government regulation in both the locations where AEye manufactures and assembles its products, as well as the locations where AEye sells its products. For example, certain regulations limit the use of lead in electronic components. Since AEye operates on a global basis, ensuring simultaneous compliance in multiple jurisdictions is a complex process which requires continual monitoring of regulations and an ongoing compliance process to ensure that AEye and its suppliers are in compliance with existing regulations in each market where it operates. If there is an unanticipated new regulation that significantly impacts AEye’s use and sourcing of various components or requires more expensive components, that regulation could materially adversely affect its business, results of operations and financial condition.

AEye’s products are used for autonomous driving and ADAS applications, which are subject to complicated regulatory schemes that vary from jurisdiction to jurisdiction. These are rapidly evolving areas where new regulations could impose limitations on the use of lidar generally or AEye’s products specifically. If AEye fails to adhere to these new regulations or fails to continually monitor the updates, it may be subject to litigation, loss of customers or negative publicity and its business, results of operations and financial condition will be adversely affected.

AEye is subject to various environmental laws and regulations that could impose substantial costs upon AEye and cause delays in building its production facilities.

Concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts on a global basis, and AEye believes this will continue both in scope and in the number of countries participating. In addition, as climate change issues become more prevalent, foreign, federal, state and local governments and AEye’s customers have been responding to these issues. The increased focus on environmental sustainability may result in new regulations and customer requirements, or changes in current regulations and customer requirements, which could materially adversely impact AEye’s business, results of operations and financial condition. If AEye is unable to effectively manage real or perceived issues, including concerns about environmental impacts or similar matters, sentiments toward AEye or its products could be negatively impacted, and its business, results of operations or financial condition could suffer.

AEye’s operations are and will be subject to international, federal, state and local environmental laws and regulations, and such laws and regulations could directly increase the cost of energy, which may have an effect on the way AEye manufactures products or utilizes energy to produce its products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or key components AEye uses in its products. Environmental regulations require AEye to reduce product energy usage, monitor and exclude an expanding list of restricted substances and to participate in required recovery and recycling of its products. Environmental and health and safety laws and regulations can be complex, and AEye has limited experience complying with them. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension of production or a cessation of AEye’s operations.

Contamination at properties AEye currently operates at, where AEye formerly operated or to which hazardous substances were sent by AEye, may result in liability for AEye under environmental laws and regulations, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on AEye’s financial condition or operating results. AEye may face unexpected delays in obtaining the required permits and approvals in connection with its planned production facilities that could require significant time and financial resources and delay its ability to operate these facilities, which would adversely impact AEye’s business, prospects, financial condition and operating results.

AEye is subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations. AEye can face criminal liability and other serious consequences for violations, which can harm its business.

AEye is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and possibly other anti-bribery and anti-money laundering laws in countries in which AEye conducts activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. AEye can be held liable for the corrupt or other illegal activities of its employees, agents, contractors and other collaborators, even if AEye does not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

AEye’s business may be adversely affected by changes in automotive and laser regulations or concerns that drive further regulation of the automobile and laser market.

Government product safety regulations are an important factor for AEye’s business. Historically, these regulations have imposed ever-more stringent safety regulations for vehicles and laser products. These safety regulations often require, or customers demand that, vehicles have more safety features per vehicle and more advanced safety products.

While AEye believes increasing automotive and laser safety standards will present a market opportunity for its products, government safety regulations are subject to change based on a number of factors that are not within AEye’s control, including new scientific or technological data, adverse publicity regarding industry recalls and safety risks of autonomous driving and ADAS products, accidents involving its products, domestic and foreign political developments or considerations, and litigation relating to its products and its competitors’ products. Changes in government regulations, especially in the autonomous driving and ADAS industries could adversely affect AEye’s business. If government priorities shift and AEye is unable to adapt to changing regulations, its business may be materially and adversely affected.

Federal, state and local regulators impose more stringent compliance and reporting requirements in response to product recalls and safety issues in the automotive industry. As the cars that carry AEye’s sensors go into production, it is subject to the existing stringent requirements under the National Traffic and Motor Vehicle Safety Act of 1966, or the Vehicle Safety Act, including a duty to report, subject to strict timing requirements, safety defects with its products. The Vehicle Safety Act imposes potentially significant civil penalties for violations including the failure to comply with such reporting actions. AEye is also subject to the existing U.S. Transportation Recall Enhancement, Accountability and Documentation Act, or TREAD, which requires equipment manufacturers, such as AEye, to comply with “Early Warning” requirements by reporting certain information to the National Highway Traffic Safety Administration, or NHTSA, such as information related to defects or reports of injury related to its products. TREAD imposes criminal liability for violating such requirements if a defect subsequently causes death or bodily injury. In addition, the Motor Vehicle Safety Act authorizes the NHTSA to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with U.S. federal motor vehicle safety standards. Sales into foreign countries may be subject to similar regulations. If AEye cannot rapidly address any safety concerns or defects with its products, its business, results of operations and financial condition may be adversely affected.

Autonomous and ADAS features may be delayed in adoption by OEMs, and AEye’s business impacted, as additional emissions and safety requirements are imposed on vehicle manufacturers.

Vehicle regulators globally continue to consider new and enhanced emissions requirements, including electrification, to meet environmental and economic needs as well as pursue new safety standards to address emerging traffic risks. To control new vehicle prices, among other concerns, OEMs may need to dedicate technology and cost additions to new vehicle designs to meet these emissions and safety requirements and postpone the consumer cost pressures of new autonomous and ADAS features.

AEye’s business may be adversely affected if it fails to comply with the regulatory requirements under the Federal Food, Drug, and Cosmetic Act or other requirements imposed by the Food and Drug Administration (the “FDA”).

As a lidar technology company, AEye is subject to the Electronic Product Radiation Control Provisions of the Federal Food, Drug, and Cosmetic Act. These requirements are enforced by the FDA. Electronic product radiation includes laser technology. Regulations governing these products are intended to protect the public from hazardous or unnecessary exposure. Manufacturers are required to certify in product labeling and reports to the FDA that their products comply with applicable performance standards as well as maintain manufacturing, testing, and distribution records for their products. Failure to comply with these requirements could result in enforcement action by the FDA, which could require AEye to cease distribution of its products, recall or remediate products already distributed to customers, or subject AEye to FDA enforcement actions.

Failures, or perceived failures, to comply with privacy, data protection, and information security requirements in the variety of jurisdictions in which AEye operates may adversely impact its business, and such legal requirements are evolving, uncertain and may require improvements in, or changes to, AEye’s policies and operations.

AEye’s current and potential future operations and sales subject it to existing and future laws and regulations addressing privacy and the collection, use, storage, disclosure, transfer and protection of a variety of types of data. For example, the European Commission has adopted the General Data Protection Regulation and California enacted the California Consumer Privacy Act of 2018, both of which provide for potentially material penalties for non-compliance. These regimes may, among other things, impose data security requirements, disclosure requirements, and restrictions on data collection, uses, and sharing that may impact AEye’s operations and the development of its business. While, generally, AEye does not have access to, collect, store, process, or share

information collected by its solutions unless its customers choose to proactively provide such information to AEye, AEye’s products may evolve both to address potential customer requirements or to add new features and functionality. Therefore, the full impact of these privacy regimes on AEye’s business is rapidly evolving across jurisdictions and remains uncertain at this time.

AEye may also be affected by cyber-attacks and other means of gaining unauthorized access to its products, systems, and data. For instance, cyber criminals or insiders may target AEye or third parties with which it has business relationships to obtain data, or in a manner that disrupts AEye’s operations or compromises its products or the systems into which its products are integrated.

AEye is assessing the continually evolving privacy and data security regimes and measures it believes are appropriate in response. Since these data security regimes are evolving, uncertain and complex, especially for a global business like AEye’s, it may need to update or enhance its compliance measures as its products, markets and customer demands further develop, and these updates or enhancements may require implementation costs. In addition, AEye may not be able to monitor and react to all developments in a timely manner. The compliance measures AEye does adopt may prove ineffective. Any failure, or perceived failure, by AEye to comply with current and future regulatory or customer-driven privacy, data protection, and information security requirements, or to prevent or mitigate security breaches, cyber-attacks, or improper access to, use of, or disclosure of data, or any security issues or cyber-attacks affecting AEye, could result in significant liability, costs (including the costs of mitigation and recovery), and a material loss of revenue resulting from the adverse impact on its reputation and brand, loss of proprietary information and data, disruption to its business and relationships, and diminished ability to retain or attract customers and business partners. Such events may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity, and could cause customers and business partners to lose trust in AEye, which could have an adverse effect on its reputation and business.

Regulations related to conflict minerals may cause AEye to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of its products.

AEye is subject to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, that will require it to determine, disclose and report whether its products contain metals sourced from specified geographies, and are referred to as “conflict minerals.” The implementation of these requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in AEye’s products. In addition, AEye will incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in or necessary to the production of its products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such verification activities. It is also possible that its reputation may be adversely affected if AEye determines that certain of its products contain minerals not determined to be conflict-free or if AEye is unable to alter its products, processes or sources of supply to avoid use of such materials.

Risks Related to AEye’s Intellectual Property

Despite the actions AEye is taking to defend and protect its intellectual property, AEye may not be able to adequately protect or enforce its intellectual property rights or prevent unauthorized parties from copying or reverse engineering its solutions. AEye’s efforts to protect and enforce its intellectual property rights and prevent third parties from violating its rights may be costly.

The success of AEye’s products and its business depends in large part on AEye’s ability to obtain patents and other intellectual property rights and maintain adequate legal protection for its products in the United States and other foreign jurisdictions. AEye relies on a combination of patent, trademark, copyright and trade secret laws, as well as confidentiality agreements and other contractual restrictions, to establish and protect its proprietary rights, all of which can only provide limited protection.

AEye cannot assure you that any patents will be issued with respect to its currently pending patent applications or that any trademarks will be registered with respect to its currently pending applications in a manner that gives AEye adequate defensive protection or competitive advantages, if at all, or that any patents issued to AEye or any trademarks registered by it will not be challenged, invalidated or circumvented. AEye has filed for patents, service

marks and trademarks in the United States and in certain international jurisdictions, but such protections may not be available in all countries in which it operates or in which AEye seeks to enforce its intellectual property rights, or may be difficult to enforce in practice. AEye’s currently-issued patents and trademarks and any patents and trademarks that may be issued or registered, as applicable, in the future with respect to pending or future applications may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. AEye cannot be certain that the steps it has taken will prevent unauthorized use of its technology or the reverse engineering of its technology. Moreover, others may independently develop technologies that are competitive to AEye or infringe AEye’s intellectual property.

Protecting against the unauthorized use of AEye’s intellectual property, products and other proprietary rights is expensive and can be difficult, particularly outside of the United States. Unauthorized parties may attempt to copy or reverse engineer AEye’s lidar technology or certain aspects of AEye’s solutions that it considers proprietary. Litigation may be necessary in the future to enforce or defend AEye’s intellectual property rights, to prevent unauthorized parties from copying or reverse engineering its solutions, to determine the validity and scope of the proprietary rights of others or to block the importation of infringing products into the United States.

Any such litigation, whether initiated by AEye or a third party, could result in substantial costs and diversion of management resources, either of which could adversely affect AEye’s business, operating results and financial condition. Even if it obtains favorable outcomes in litigation, AEye may not be able to obtain adequate remedies, especially in the context of unauthorized parties copying or reverse engineering its solutions.

Further, many of AEye’s current and potential competitors may have the ability to dedicate substantially greater resources to defending intellectual property infringement claims and to enforcing their intellectual property rights than AEye has. Attempts to enforce its rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against AEye or result in a decision that invalidates or narrows the scope of AEye’s rights, in whole or in part. Effective patent, trademark, copyright and trade secret protection may not be available in every country in which AEye’s products are available and competitors based in other countries may sell infringing products in one or more markets. Failure to adequately protect AEye’s intellectual property rights could result in AEye’s competitors offering similar products, potentially resulting in the loss of some of AEye’s competitive advantage and a decrease in its revenue, which would adversely affect AEye’s business, operating results, financial condition and prospects.

Third-party claims that AEye is infringing intellectual property, whether successful or not, could subject it to costly and time-consuming litigation or expensive licenses, and its business could be adversely affected.

Although AEye believes it holds key patents related to its products, a number of companies, both within and outside of the lidar industry, hold other patents covering various aspects of lidar products. In addition to these patents, participants in this industry typically also protect their technology, especially embedded software, through copyrights and trade secrets. As a result, there is frequent litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. AEye has received, and in the future may receive, inquiries from other intellectual property holders and may become subject to claims that it infringes their intellectual property rights, particularly as AEye expands its presence in the market, expands to new use cases and faces increasing competition. In addition, parties may claim that the names and branding of AEye’s products infringe their trademark rights in certain countries or territories. If such a claim were to prevail, AEye may have to change the names and branding of its products in the affected territories and it could incur other costs.

AEye currently has a number of agreements in effect pursuant to which it has agreed to defend, indemnify and hold harmless its customers, suppliers, and channel partners and other partners from damages and costs which may arise from the infringement by AEye’s products of third-party patents or other intellectual property rights. The scope of these indemnity obligations varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. AEye’s insurance may not cover all intellectual property infringement claims. A claim that its products infringe a third party’s intellectual property rights, even if untrue, could adversely affect AEye’s relationships with its customers, may deter future customers from purchasing its products and could expose AEye to costly litigation and settlement expenses. Even if AEye is not a party to any litigation between a customer and a third party relating to infringement by its products, an adverse outcome in any such litigation could make it more difficult for AEye to defend its products against intellectual property infringement claims in any subsequent litigation in which it is a named party. Any of these results could adversely affect AEye’s brand and operating results.

AEye’s defense of intellectual property rights claims brought against it or its customers, suppliers and channel partners, with or without merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention and force AEye to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments and may not be available on acceptable terms, or at all. Further, a party making such a claim, if successful, could secure a judgment that requires AEye to pay substantial damages or obtain an injunction. An adverse determination also could invalidate AEye’s intellectual property rights and adversely affect its ability to offer its products to its customers and may require that AEye procure or develop substitute products that do not infringe, which could require significant effort and expense. Any of these events could adversely affect AEye’s business, operating results, financial condition and prospects.

AEye’s intellectual property applications for registration may not issue or be registered, which may have a material adverse effect on AEye’s ability to prevent others from commercially exploiting products similar to AEye’s.

AEye cannot be certain that it is the first inventor of the subject matter to which it has filed a particular patent application, or if it is the first party to file such a patent application. If another party has filed a patent application to the same subject matter as AEye has, AEye may not be entitled to the protection sought by the patent application. AEye also cannot be certain whether the claims included in a patent application will ultimately be allowed in the applicable issued patent. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, AEye cannot be certain that the patent applications that it files will issue, or that its issued patents will afford protection against competitors with similar technology. In addition, AEye’s competitors may design around AEye’s issued patents, which may adversely affect AEye’s business, prospects, financial condition and operating results.

In addition to patented technology, AEye relies on its unpatented proprietary technology, trade secrets, processes and know-how.

AEye relies on trade secrets, designs, manufacturing know-how, and confidential information to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection, or that AEye believes is best protected by means that do not require public disclosure. AEye generally seeks to protect this information by entering into confidentiality agreements, or consulting, services or employment agreements that contain non-disclosure and non-use provisions with its employees, consultants, contractors, commercial partners, vendors and third parties. However, AEye may fail to enter into the necessary agreements, and even if entered into, these agreements may be breached or may otherwise fail to provide adequate protection, prevent disclosure, third-party infringement or misappropriation of its trade secrets, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. AEye has limited control over the protection of trade secrets used by its current or future manufacturing partners and suppliers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, AEye’s proprietary information may otherwise become known or be independently developed by its competitors or other third parties. To the extent that its employees, consultants, contractors, advisors and other third parties use intellectual property owned by others in their work for AEye or designated in the agreements between such parties and AEye to be jointly owned, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of AEye’s proprietary rights, and failure to obtain or maintain protection for its proprietary information could adversely affect its competitive business position. Furthermore, laws regarding trade secret rights in certain markets where AEye operates may afford little or no protection to its trade secrets.

AEye also relies on physical and electronic security measures to protect its proprietary information, but it cannot provide assurance that these security measures will not be breached or provide adequate protection for its property. There is a risk that third parties may obtain and improperly utilize AEye’s proprietary information to its competitive disadvantage. AEye may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce its intellectual property rights.

AEye employs third-party licensed software for use in its business, and the inability to maintain these licenses, errors in the software, or the terms of open source licenses could result in increased costs or reduced service levels, which would adversely affect AEye’s business.

AEye’s business relies on certain third-party software obtained under licenses from other companies. AEye anticipates that it will continue to rely on such third-party software in the future. Although AEye believes that there

are commercially reasonable alternatives to the third-party software AEye currently licenses, this may not always be the case, or it may be difficult or costly to replace. In addition, integration of new third-party software may require significant work and require substantial investment of AEye’s time and resources. AEye’s use of additional or alternative third-party software would require us to enter into license agreements with third parties, which may not be available on commercially reasonable terms, or at all. Many of the risks associated with the use of third-party software cannot be eliminated, and these risks could negatively affect AEye’s business.

Some of the third-party software used by AEye is licensed under the terms of open source software licenses. Companies that incorporate open source software into their technologies have, from time to time, faced claims challenging the use of open source software and/or compliance with open source license terms. As a result, AEye could be subject to lawsuits by parties claiming ownership of what AEye believes to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code, which could include valuable proprietary code of the user, on unfavorable terms or at no cost. While AEye monitors the use of open source software and attempts to ensure that none is used in a manner that would require AEye to disclose our internally developed source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur. Any requirement to disclose AEye’s internally developed source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of operations and could help AEye’s competitors develop services that are similar to or better than AEye’s.

AEye may be subject to damages resulting from claims that it or its employees have wrongfully used or disclosed alleged trade secrets of its employees’ former employers.

AEye may be subject to claims that it or its employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of an employee’s former employers. Litigation may be necessary to defend against these claims. If AEye fails in defending such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent AEye’s ability to commercialize its products, which could severely harm its business. Even if AEye is successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

Risks Related to Being a Public Company

AEye will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives.

If AEye completes the business combination and becomes a public company, it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may increase even more after AEye is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company, AEye will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq. AEye’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, AEye expects these rules and regulations to substantially increase its legal and financial compliance costs and to make some activities more time-consuming and costly. These increased costs will increase AEye’s net loss. For example, AEye expects these rules and regulations to make it more difficult and more expensive for it to obtain director and officer liability insurance and it may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. AEye cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of these requirements could also make it more difficult for AEye to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers.

Additionally, there continues to be public interest and increased legislative pressure related to environmental, social and governance, or ESG, activities of public companies. For example, there is a growing number of states requiring organizations to report their board composition as well or mandating gender diversity and representation from underrepresented communities, including New York and California. We risk negative stockholder reaction, including from proxy advisory services, as well as damage to our brand and reputation, if we do not act

The CF III Board may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to the public stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations.

While CF III currently expects that its independent directors would take legal action on CF III’s behalf against the Sponsor to enforce its indemnification obligations to CF III, it is possible that CF III’s independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If CF III’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to the public stockholders may be reduced below $10.00 per share.

Since the Sponsor and CF III’s officers and directors have interests that are different, or in addition to (and which may conflict with), the interests of CF III’s stockholders, a conflict of interest may have existed in determining whether the Business Combination is appropriate as CF III’s initial business combination. Such interests include that the Sponsor will lose its entire investment in CF III if a business combination is not completed.

When you consider the recommendation of the CF III Board in favor of approval of the Business Combination Proposal and the other Proposals included herein, you should keep in mind that the Sponsor and CF III’s officers and directors have interests in such Proposals that are different from, or in addition to, those of CF III stockholders and warrant holders generally. The CF III Board was aware of and considered these interests, among other matters, in evaluating and negotiating the business combination and transaction agreements and in recommending to CF III’s stockholders that they vote in favor of the Proposals presented at the Special Meeting of stockholders, including the Business Combination Proposal. CF III stockholders should take these interests into account in deciding whether to approve the Proposals, including the Business Combination Proposal. These interests include, among other things:

•        unless CF III consummates an initial business combination, CF III’s officers and directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them on behalf of CF III (no such expenses have been incurred as of June 30, 2021 which have not been reimbursed by CF III) to the extent that such expenses exceed the amount of available proceeds not deposited in the Trust Account;

•        the Placement Units, including the Placement Shares, and Placement Warrants, purchased by the Sponsor for $5,000,000 in the Private Placement will be worthless if a business combination is not consummated;

•        the Sponsor has agreed that the Placement Units, and all of their underlying securities, will not be sold or transferred by it until 30 days after CF III has completed a business combination, subject to limited exceptions;

•        the fact that the Sponsor paid an aggregate of $25,000 for its Founders Shares, which such Founder Shares (excluding the 40,000 Founder Shares transferred to CF III’s two independent directors), if unrestricted and freely tradeable, would be valued at approximately $57.3 million, based on the closing price of Class A Common Stock on June 30, 2021, and that such shares will be worthless if a business combination is not consummated;

•        the fact that Sponsor has agreed not to redeem any of the Founders Shares or Placement Shares in connection with a stockholder vote to approve a proposed initial business combination;

•        if CF III does not complete an initial business combination by September 17, 2021, which date the Sponsor has agreed to extend to January 17, 2022, if necessary, and as may be further extended by the Sponsor to up to September 17, 2022 in accordance with the Existing Charter (or a later date approved

by the stockholders of CF III pursuant to the Existing Charter), the proceeds from the sale of the Placement Units will be included in the liquidating distribution to CF III’s public stockholders and the Placement Warrants will expire worthless;

•        the fact that upon completion of the Business Combination, an aggregate amount of $8.65 million in business combination marketing fees, $10.0 million of M&A advisory fees and $6.75 million of placement agent fees (payable in connection with the PIPE Offering) will be payable to CF&Co., an affiliate of CF III and the Sponsor;

•        if the Trust Account is liquidated, including in the event CF III is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify CF III to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Share by the claims of prospective target businesses with which CF III has entered into an acquisition agreement or claims of any third party for services rendered or products sold to CF III, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

•        the fact that the Sponsor and CF III’s officers and directors will lose their entire investment in CF III, including loans in the aggregate amount of approximately $3,460,955 as June 30, 2021, if an initial business combination is not completed;

•        the fact that CF III’s two independent directors own an aggregate of 40,000 Founder Shares that were transferred by the Sponsor at no cost, which if unrestricted and freely tradeable would be valued at $401,200, based on the closing price of CF III Class A Common Stock on June 30, 2021;

•        the fact that CF III’s officers and directors will be eligible for continued indemnification and continued coverage under a directors’ and officers’ liability insurance policy after the business combination and pursuant to the Merger Agreement.

The existence of financial and personal interests of one or more of CF III’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of CF III and its stockholders and what he or they may believe is best for himself or themselves in determining to recommend that stockholders vote for the Proposals. See the section titled “The Business Combination Proposal — Interests of the Sponsor and CF III’s Directors, Officers and Affiliates in the Business Combination” for a further discussion of these considerations.

The financial and personal interests of the Sponsor and CF III’s officers and directors may have influenced their motivation in identifying and selecting AEye as a business combination target, completing an initial business combination with AEye and influencing the operation of the business following the initial business combination. In considering the recommendations of the CF III Board to vote for the Proposals, its stockholders should consider these interests.

The exercise of the CF III Board’s discretion in agreeing to changes or waivers in the terms of the Merger Agreement and related agreements, including closing conditions, may result in a conflict of interest when determining whether such changes to the terms or waivers of conditions are appropriate and in CF III’s stockholders’ best interest.

In the period leading up to the Closing, events may occur that, pursuant to the Merger Agreement, would require CF III to agree to amend the Merger Agreement, to consent to certain actions taken by AEye or to waive rights that CF III is entitled to under the Merger Agreement, including those related to closing conditions. Such events could arise because of changes in the course of AEye’s businesses or a request by AEye to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on AEye’s business and would entitle CF III to terminate the Merger Agreement. In any of such circumstances, it would be at CF III’s discretion, acting through the CF III Board, to grant its consent or waive those rights. The existence of financial and personal interests of one or more of the directors described in the preceding risk factors (and described elsewhere in this proxy statement/prospectus) may result in a conflict of interest on the part of such director(s) between what he or they may believe is best for CF III and its stockholders and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, CF III does not believe there will be any changes or waivers that the CF III Board would be likely to make after stockholder approval of the Business

Combination Proposal has been obtained. While certain changes could be made without further stockholder approval, CF III will circulate a new or amended proxy statement/prospectus and resolicit CF III’s stockholders if changes to the terms of the transaction that would have a material impact on its stockholders are required prior to the vote on the Business Combination Proposal.

Subsequent to consummation of the Business Combination, the Combined Entity may be exposed to unknown or contingent liabilities and may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on the Combined Entity’s financial condition, results of operations and the price of its securities, which could cause you to lose some or all of your investment.

CF III cannot assure you that the due diligence conducted in relation to AEye has identified all material issues or risks associated with AEye, its business or the industry in which it competes. Furthermore, CF III cannot assure you that factors outside of AEye’s and CF III’s control will not later arise. As a result of these factors, the Combined Entity may be exposed to liabilities and incur additional costs and expenses and it may be forced to later write down or write off assets, restructure its operations, or incur impairment or other charges that could result in the Combined Entity reporting losses. Even if CF III’s due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with its preliminary risk analysis. If any of these risks materialize, this could have a material adverse effect on the Combined Entity’s financial condition and results of operations and could contribute to negative market perceptions about the Combined Entity or its securities. Additionally, CF III has no indemnification rights against the AEye Stockholders under the Merger Agreement and all of the purchase price consideration will be delivered to the AEye Stockholders at the Closing. Accordingly, any stockholders or warrant holders of CF III who choose to remain the Combined Entity’s stockholders or warrant holders following the Business Combination could suffer a reduction in the value of their shares or warrants. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.

The historical financial results of AEye and unaudited pro forma financial information included elsewhere in this proxy statement/prospectus may not be indicative of what AEye’s actual financial position or results of operations would have been if it were a public company.

The historical financial results of AEye included in this proxy statement/prospectus do not reflect the financial condition, results of operations or cash flows it would have achieved as a public company during the periods presented or those the Combined Entity will achieve in the future. The Combined Entity’s financial condition and future results of operations could be materially different from amounts reflected in AEye’s historical financial statements included elsewhere in this proxy statement/prospectus, so it may be difficult for investors to compare the Combined Entity’s future results to historical results or to evaluate its relative performance or trends in its business.

As a privately held company, AEye has not been required to comply with many corporate governance and financial reporting practices and policies required of a publicly traded company. As a result of the Merger, the Combined Entity will be a public company with significant operations, and as such (and particularly after it is no longer an “emerging growth company” or “smaller reporting company”), will face increased legal, accounting, administrative and other costs and expenses as a public company that it did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations implemented by the SEC, the Public Company Accounting Oversight Board and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require it to carry out activities the Combined Entity has not done previously. In addition, expenses associated with SEC reporting requirements will be incurred. If any issues in complying with those requirements are identified (for example, if the auditors identify a significant deficiency or additional material weaknesses in the internal control over financial reporting), the Combined Entity could incur additional costs to rectify those issues, and the existence of those issues could adversely affect its reputation or investor perceptions. In addition, the Combined Entity will purchase director and officer liability insurance, which has substantial additional premiums. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs. The additional reporting and other obligations associated with being a public company will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities.

Similarly, the unaudited pro forma financial information in this proxy statement/prospectus is presented for illustrative purposes only and has been prepared based on a number of assumptions including, but not limited to, the Combined Entity being treated as the “acquiror” for financial reporting purposes in the Business Combination, the total debt obligations and the cash and cash equivalents of AEye on the date the Business Combination closes and the number of CF III’s Public Shares that are redeemed in connection with the Business Combination. Accordingly, such pro forma financial information may not be indicative of the Combined Entity’s future operating or financial performance and the Combined Entity’s actual financial condition and results of operations may vary materially from the pro forma results of operations and balance sheet contained elsewhere in this proxy statement/prospectus, including as a result of such assumptions not being accurate. See “Unaudited Pro Forma Condensed Combined Financial Information.”

Financial projections with respect to AEye may not prove to be reflective of actual financial results.

In connection with the Business Combination, the CF III Board considered, among other things, internal financial forecasts prepared by, or at the direction of, the management of AEye, the key elements of which are set forth in the section titled “The Business Combination Proposal — CF III Board’s Reasons for the Approval of the Business Combination.” AEye does not, as a matter of general practice, publicly disclose long-term forecasts or internal projections of its future performance, revenue, financial condition or other results. None of these projections or forecasts were prepared with a view towards public disclosure or compliance with the published guidelines of the SEC, GAAP or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts. These projections and forecasts are inherently based on various estimates and assumptions that are subject to the judgment of those preparing them. These projections and forecasts are also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of AEye. There can be no assurance that the Combined Entity’s financial condition, including its cash flows or results of operations, will be consistent with those set forth in such projections and forecasts, which could have an adverse impact on the market price of the Class A Common Stock or the business, financial condition and results of operations of the Combined Entity following the Closing.

The Merger Agreement contains a minimum cash requirement for CF III. This requirement may make it more difficult for CF III to complete the Business Combination as contemplated.

The Merger Agreement provides that AEye’s obligation to consummate the Business Combination is conditioned on, among other things, a minimum cash requirement, which requires that, at or as of immediately prior to the Closing, the aggregate amount of available cash of CF III, after deducting the aggregate amount of all payments required to be made by CF III in connection with the Redemptions and certain indebtedness of CF III immediately prior to Closing, equal to at least $225 million, which is the amount of the PIPE Investment.

In addition, pursuant to the Existing Charter, in no event will CF III redeem Public Shares in an amount that would cause its net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001 both immediately prior to and after the consummation of a business combination. If such conditions are not met, and such conditions are not or cannot be waived by the parties to the Merger Agreement, then the Merger Agreement could terminate and the proposed Business Combination may not be consummated.

If such conditions are waived and the Business Combination is consummated, the cash held by the Combined Entity and its subsidiaries in the aggregate, after the Closing may not be sufficient to allow them to operate and pay their expenses and liabilities as they become due. Furthermore, the Combined Entity’s affiliates are not obligated to make loans to it or invest in it in the future after the Business Combination. The additional exercise of redemption rights with respect to a large number of CF III’s public stockholders may make the Combined Entity unable to take such actions as may be desirable in order to optimize its capital structure after the Closing and it may not be able to raise additional financing from unaffiliated parties necessary to fund its expenses and liabilities after the Closing.

The Sponsor or CF III’s or AEye’s respective directors, officers, advisors or respective affiliates may elect to purchase shares from public stockholders prior to the consummation of the Business Combination, which may influence the vote on the Business Combination and reduce the public “float” of the Class A Common Stock.

At any time at or prior to the Business Combination, subject to applicable securities laws, the Sponsor or CF III’s or AEye’s respective directors, officers, advisors or respective affiliates may (1) purchase Public Shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Proposals, or elect to redeem, or indicate an intention to redeem, Public Shares, (2) execute agreements to purchase such shares from such investors in the future, or (3) enter into transactions with such investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of the Proposals or not redeem their Public Shares. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of the shares of CF III Common Stock, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that the Sponsor or CF III’s or AEye’s respective directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to (1) increase the likelihood of approving the Proposals and (2) limit the number of Public Shares electing to redeem.

Entering into any such arrangements may have a depressive effect on the Class A Common Stock (e.g., by giving an investor or holder the ability to effectively purchase shares at a price lower than market, such investor or holder may therefore become more likely to sell the shares he or she owns, either at or prior to the Business Combination). If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Proposals and would likely increase the chances that the Proposals would be approved. In addition, if such purchases are made, the public “float” of the Public Shares and the number of beneficial holders of CF III’s securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of CF III’s securities on a national securities exchange.

The Amended Charter will provide, subject to limited exceptions, that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the sole and exclusive forums for substantially all disputes between the Combined Entity and its stockholders, which could limit the Combined Entity’s stockholders’ ability to obtain a favorable judicial forum for disputes with the Combined Entity or its directors, officers, or employees.

The Amended Charter will require, unless the Combined Entity consents in writing to the selection of an alternative forum, that derivative actions brought in the Combined Entity’s name, actions against its directors, officers, and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) for which the Court of Chancery does not have subject matter jurisdiction. In regard to any action arising under the Exchange Act, the Amended Charter will provide that the federal district courts of the United States of America will be the sole and exclusive forum. In regard to any action arising under the Securities Act or the rules and regulations promulgated thereunder, the Amended Charter will provide that, unless the Combined Entity consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. The Amended Charter will provide that the exclusive forum provision will be applicable to the Securities Act to the fullest extent permitted by applicable law. We note that there is uncertainty as to whether a court would enforce the exclusive forum provision and that investors cannot waive, and this exclusive forum provision does not purport to waive, compliance with the federal securities laws and the rules

and regulations thereunder. If a court were to find such provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Amended Charter. This choice of forum provision may limit the ability of a Combined Entity stockholder to bring a claim in a judicial forum that such stockholder finds favorable for disputes with the Combined Entity or any of the Combined Entity’s directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although stockholders of the Combined Entity will not be deemed to have waived the Combined Entity’s compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in the Amended Charter to be inapplicable or unenforceable in an action, the Combined Entity may incur additional costs associated with resolving such action in other jurisdictions, which could harm the Combined Entity’s business, financial condition and results of operations.

If third parties bring claims against CF III, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by holders of Class A Common Stock may be less than the $10.10 per share currently held in the Trust Account.

CF III’s placing of funds in the Trust Account may not protect those funds from third-party claims against CF III. Although CF III seeks to have all vendors, service providers (other than its independent registered public accounting firm), prospective target businesses or other entities with which CF III does business execute agreements with CF III waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against CF III’s assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, CF III’s management will perform an analysis of the alternatives available to it and will enter into an agreement with a third-party that has not executed a waiver only if management believes that such third-party’s engagement would be significantly more beneficial to CF III than any alternative.

Examples of possible instances where CF III may engage a third-party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where CF III is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with CF III and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if CF III is unable to complete an initial business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with its initial business combination, CF III will be required to provide for payment of claims of creditors that were not waived that may be brought against CF III within the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholders could be less than the $10.10 per share currently held in the Trust Account, due to claims of such creditors.

The Sponsor has agreed that it will be liable to CF III if and to the extent any claims by a third-party (other than CF III’s independent registered public accounting firm) for services rendered or products sold to CF III, or a prospective target business with which CF III has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third-party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under CF III’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third-party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. CF III has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and CF III has not asked the Sponsor to reserve for such indemnification obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for CF III’s initial business combination and redemptions could be reduced to less

than $10.00 per Public Share. In such event, CF III may not be able to complete its initial business combination, and CF III’s public stockholders would receive such lesser amount per share in connection with any redemption of its Public Shares. No member of CF III’s management team will indemnify CF III for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

If, after CF III distributes the proceeds in the Trust Account to its public stockholders, it files a bankruptcy petition or an involuntary bankruptcy petition is filed against CF III that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of the CF III Board may be viewed as having breached their fiduciary duties to CF III’s creditors, thereby exposing the members of the CF III Board and CF III to claims of punitive damages.

If, after CF III distributes the proceeds in the Trust Account to its public stockholders, CF III files a bankruptcy petition or an involuntary bankruptcy petition is filed against CF III that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by CF III’s stockholders. In addition, the CF III Board may be viewed as having breached its fiduciary duty to CF III’s creditors and/or having acted in bad faith by paying public stockholders from the Trust Account prior to addressing the claims of creditors, thereby exposing itself and CF III to claims of punitive damages.

If, before distributing the proceeds in the Trust Account to CF III’s public stockholders, CF III files a bankruptcy petition or an involuntary bankruptcy petition is filed against CF III that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of CF III’s stockholders and the per-share amount that would otherwise be received by CF III stockholders in connection with CF III’s liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to CF III’s public stockholders, CF III files a bankruptcy petition or an involuntary bankruptcy petition is filed against CF III that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in CF III’s bankruptcy estate and subject to the claims of third parties with priority over the claims of CF III’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by CF III’s public stockholders in connection with its liquidation would be reduced.

CF III’s stockholders may be held liable for claims by third parties against CF III to the extent of distributions received by them upon redemption of their Public Shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to CF III’s public stockholders upon the redemption of the Public Shares in the event CF III does not complete an initial business combination within the required time period may be considered a liquidating distribution under the DGCL. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is CF III’s intention to redeem the Public Shares as soon as reasonably possible following the required time period in the event CF III does not complete an initial business combination and, therefore, it does not intend to comply with the foregoing procedures.

Because CF III does not intend to comply with Section 280 of the DGCL, Section 281(b) of the DGCL requires it to adopt a plan, based on facts known to it at such time that will provide for its payment of all existing and pending claims or claims that may be potentially brought against it within the 10 years following its dissolution. However, because CF III is a blank check company, rather than an operating company, and CF III’s operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from

CF III’s vendors (such as lawyers, investment bankers, consultants, etc.) or prospective target businesses. If CF III’s plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. CF III cannot assure you that it will properly assess all claims that may be potentially brought against it. As such, CF III’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of CF III’s stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of the Trust Account distributed to CF III’s public stockholders upon the redemption of the Public Shares in the event CF III does not complete an initial business combination within the required time period is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

There is uncertainty regarding the federal income tax consequences of the redemption to the holders of CF III Class A Common Stock.

There is some uncertainty regarding the federal income tax consequences to holders of Class A Common Stock who exercise their redemption rights. The uncertainty of tax consequences relates primarily to the individual circumstances of the taxpayer and include whether the redemption results in a dividend, taxable as ordinary income, or a sale, taxable as capital gain. Whether the redemption qualifies for sale treatment, resulting in taxation as capital gain rather than ordinary income, will depend largely on whether the holder owns (or is deemed to own) any shares of Class A Common Stock following the redemption, and if so, the total number of shares of Class A Common Stock held by the holder both before and after the redemption relative to all shares of Class A Common Stock outstanding both before and after the redemption. The redemption generally will be treated as a sale, rather than a dividend, if the redemption (i) is “substantially disproportionate” with respect to the holder, (ii) results in a “complete termination” of the holder’s interest in CF III or (iii) is “not essentially equivalent to a dividend” with respect to the holder. Due to the personal and subjective nature of certain of such tests and the absence of clear guidance from the IRS, there is uncertainty as to whether a holder who elects to exercise his, her or its redemption rights will be taxed on any gain from the redemption as ordinary income or capital gain. See the section entitled “United States Federal Income Tax Considerations of the Redemption”.

The public stockholders will experience dilution as a consequence of, among other transactions, the issuance of Class A Common Stock as consideration in the Business Combination and in connection with the PIPE Investment as well as future issuances pursuant to the Equity Incentive Plan. Having a minority share position may reduce the influence that CF III’s current stockholders have on the management of the Combined Entity.

The issuance of a significant number of shares of Class A Common Stock in the Business Combination and in connection with the PIPE Investment will dilute the equity interest of existing CF III stockholders in the Combined Entity and may adversely affect prevailing market prices for its Public Shares and/or Public Warrants.

It is anticipated that, upon the completion of the Business Combination, and assuming no redemptions by CF III’s public stockholders, (i) CF III’s public stockholders (other than the PIPE Investors) will retain an ownership interest of approximately 11.3% of the Combined Entity, (ii) the PIPE Investors (other than the Sponsor and holders of AEye Capital Stock and AEye Convertible Equity Instruments) will own approximately 10.1% of the Combined Entity, (iii) the Sponsor, the other initial stockholders and their affiliates, through their ownership of Founder Shares, Placement Units and the purchase by the Sponsor of Class A Common Stock in the PIPE Investment, will retain an ownership interest of approximately 3.3% of the Combined Entity, and (iv) existing holders of AEye Capital Stock and AEye Convertible Equity Instruments (including their shares of Class A Common Stock purchased in the PIPE Investment) will own approximately 75.4% of the Combined Entity. The ownership percentage with respect to the Combined Entity following the Business Combination is based upon the number of shares of AEye Capital Stock issued and outstanding as of June 30, 2021, assuming the issuance of Class A Common Stock underlying Assumed Options and Assumed Warrants using the Treasury Stock Method, but does not take into account (i) the redemption of any shares by CF III’s public stockholders, (ii) the exercise of the Warrants, or (iii) the exercise of any options or other securities under any incentive plans issued after June 30, 2021. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by CF III’s existing stockholders in the Combined Entity will be different.

Future issuances of shares of Class A Common Stock, including pursuant to the Equity Incentive Plan, may significantly dilute the equity interests of existing holders of CF III’s securities and may adversely affect prevailing market prices for the Combined Entity’s securities.

The provision of the Amended Charter that authorizes the Combined Entity Board to issue preferred stock from time to time based on terms approved by the Combined Entity Board may delay, defer or prevent a tender offer or takeover attempt that public stockholders might consider in their best interest.

The provision of the Amended Charter that authorizes the Combined Entity Board to issue preferred stock from time to time based on terms approved by the Combined Entity Board may delay, defer or prevent a tender offer or takeover attempt that you might consider in your best interest.

There can be no assurance that the Combined Entity will be able to comply with the continued listing standards of Nasdaq.

The Combined Entity’s continued eligibility for listing may depend on the number of CF III Public Shares that are redeemed. If, after the Business Combination, Nasdaq delists the Combined Entity’s shares from trading on its exchange for failure to meet the listing standards and the Combined Entity is not able to list such securities on another national securities exchange, the securities of the Combined Entity could be quoted on an over-the-counter market. If this were to occur, the Combined Entity and its stockholders could face significant material adverse consequences including:

•        a limited availability of market quotations for the Combined Entity’s securities;

•        reduced liquidity for Combined Entity’s securities;

•        a determination that the Combined Entity’s Class A Common Stock is a “penny stock,” which will require brokers trading the Class A Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of Class A Common Stock;

•        a limited amount of news and analyst coverage; and

•        a decreased ability to issue additional securities or obtain additional financing in the future.

The ability of the Combined Entity’s management to operate the business successfully thereafter will be largely dependent upon the efforts of certain key personnel of AEye. The loss of such key personnel could negatively impact the operations and financial results of the combined business.

The ability of the Combined Entity’s management to operate the business successfully following the Closing is dependent upon the efforts of certain key personnel of AEye. Although CF III expects key personnel to remain with the Combined Entity following the Business Combination, there can be no assurance that they will do so. It is possible that AEye will lose some key personnel, the loss of which could negatively impact the operations and profitability of the Combined Entity. Furthermore, following the Closing, certain of the key personnel of AEye may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause the Combined Entity to have to expend time and resources helping them become familiar with such requirements.

The Combined Entity does not expect to declare any dividends in the foreseeable future.

After the Closing, the Combined Entity does not anticipate declaring any cash dividends to holders of its Common Stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the Combined Entity, its business, or its market, or if they change their recommendations regarding the Combined Entity’s securities adversely, the price and trading volume of the Combined Entity’s securities could decline.

The trading market for the Combined Entity’s securities will be influenced by the research and reports that industry or securities analysts may publish about the Combined Entity, its business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on the Combined Entity. If no securities

or industry analysts commence coverage of the Combined Entity, the Combined Entity’s share price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Combined Entity change their recommendation regarding the Combined Entity’s shares of common stock adversely, or provide more favorable relative recommendations about the Combined Entity’s competitors, the price of the Combined Entity’s shares of common stock would likely decline. If any analyst who may cover the Combined Entity were to cease coverage of the Combined Entity or fail to regularly publish reports on it, the Combined Entity could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.

CF III’s Warrants are accounted for as liabilities and the changes in value of its Warrants could have a material effect on its financial results.

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”)., wherein the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the SEC Staff Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Staff Statement, CF III reevaluated the accounting treatment of its Warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging (“ASC 815”), determined the Warrants should be classified as derivative liabilities measured at fair value on its balance sheet, with any changes in fair value to be reported each period in earnings on its statement of operations.

As a result of the recurring fair value measurement of the Warrants and any subsequent changes in fair value from a prior period, CF III’s results of operations in its financial statements may fluctuate quarterly based on factors which are outside of its control. Due to this recurring fair value measurement, CF III expects that it will recognize non-cash gains or losses on its Warrants each reporting period and that the amount of such gains or losses could be material.

CF III has identified a material weakness in its internal control over financial reporting as of December 31, 2020. If CF III is unable to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in CF III and materially and adversely affect its business and operating results.

Following the issuance of the SEC Staff Statement described in the risk factor entitled “CF III’s Warrants are accounted for as liabilities and the changes in value of its Warrants could have a material effect on its financial results” above, CF III’s management and its audit committee concluded that, in light of the SEC Staff Statement, it was appropriate to restate its previously issued financial statements as of and for the year ended December 31, 2020 (the “Restatement”). In connection with the foregoing development and as a result of the Restatement, CF III identified a material weakness in its internal controls over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.

Effective internal controls are necessary to provide reliable financial reports and prevent fraud. CF III continues to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

If CF III identifies any new material weaknesses in the future, any such newly identified material weakness could limit its ability to prevent or detect a misstatement of its accounts or disclosures that could result in a material misstatement of its annual or interim financial statements. In such case, CF III may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in its financial reporting and its stock price may decline as a result. There can be no assurances that the measures CF III has taken to date, or any measures it may take in the future, will be sufficient to avoid potential future material weaknesses.

Equity Incentive Plan. At the Effective Time, by virtue of the Merger and without any action on the part of CF III, Merger Sub, AEye or any holder of AEye Capital Stock and AEye Convertible Equity Instruments, the following will occur with respect to the AEye Capital Stock and AEye Convertible Equity Instruments:

•        the cancellation of each issued and outstanding share of AEye Preferred Stock and the conversion into the right to receive a number of shares of Class A Common Stock equal to the Exchange Ratio;

•        the cancellation of each issued and outstanding share of AEye Capital Stock (including shares of AEye Common Stock resulting from the conversion of the AEye Convertible Equity Instruments) and the conversion into the right to receive a number of shares of Class A Common Stock equal to the Exchange Ratio;

•        the conversion of all outstanding AEye Convertible Equity Instruments into a number of shares of AEye Common Stock equal to (i) the sum of the aggregate principal amount of the AEye Convertible Equity Instruments then outstanding plus all dividends accrued thereon, divided by (ii) the quotient obtained by dividing $250,000,000 by the Fully-Diluted AEye Shares, immediately prior to the Effective Time. At the Effective Time, the AEye Common Stock will then convert to Class A Common Stock based on the Exchange Ratio;

•        the conversion of each AEye Option that is outstanding, whether vested or unvested, will be assumed by the Combined Entity and converted into an option to purchase shares of Class A Common Stock based on the Exchange Ratio. Each Assumed Option shall have the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former AEye Option except for the number of shares exercisable and the exercise price, each of which will be adjusted using the Exchange Ratio;

•        the conversion of each AEye Warrant that is outstanding shall be assumed by the Combined Entity and converted into a warrant to purchase shares of Class A Common Stock based on the Exchange Ratio. Each Assumed Warrant shall continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former AEye Warrant except for the number of shares exercisable and the exercise price, each of which will be adjusted using the Exchange Ratio; and

•        each AEye RSU that is outstanding shall be assumed by the Combined Entity and converted into an RSU of the Combined Entity based on the Exchange Ratio. Each Assumed RSU shall continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former AEye RSU except for the number of shares exercisable, which will be adjusted using the Exchange Ratio.

Accounting for the Business Combination

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, CF III will be treated as the “accounting acquiree” and AEye as the “accounting acquirer” for financial reporting purposes. This determination was made considering both scenarios of no redemptions and maximum redemptions and is primarily based on:

•        Historical AEye stockholders comprising a relative majority of the voting power of the Combined Entity and having the ability to nominate the members of the Combined Entity Board;

•        Historical AEye Stockholders and holders of AEye Convertible Equity Instruments holding 74.7% (assuming no redemptions) of the Combined Entity;

•        AEye’s relative historical size (based on revenues, total assets (excluding cash held in the Trust Account) and number of employees) being significantly larger than CF III;

•        AEye’s historical operations prior to the acquisition comprising the only ongoing operations of the Combined Entity; and

•        AEye’s historical senior management comprising a majority of the senior management of the Combined Entity.

Accordingly, for accounting purposes, the financial statements of the Combined Entity will represent a continuation of the financial statements of AEye with the Business Combination treated as the equivalent of AEye issuing stock for the net assets of CF III, accompanied by a recapitalization. The net assets of CF III will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be presented as those of AEye.

Other Events in Connection with the Business Combination

In connection with the Business Combination:

•        CF III will issue and sell 22,500,000 shares of its Class A Common Stock at a purchase price of $10.00 per share pursuant to the PIPE Investment; and

•        Prior to Closing, AEye was to either repay the PPP Loan, including associated interest, or if the PPP Loan had not been previously repaid or forgiven, place an amount necessary to satisfy the repayment of the PPP Loan in an escrow account. On June 19, 2021, the Company received notice of the Paycheck Protection Program (PPP) forgiveness payment made to Silicon Valley Bank (SVB) by the Small Business Administration in the amount of $2,270 in principal and $26 in interest. This amount represents the forgiveness of the total PPP Loan from SVB and, as such, AEye is not required to repay the PPP Loan or place the amount required to repay the PPP Loan into an escrow account.

Basis of Pro Forma Presentation

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and reflects the adoption of Release No. 33-10786. The adjustments in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the Combined Entity upon consummation of the Business Combination and other events contemplated by the Merger Agreement. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial information are described in the accompanying notes.

The unaudited pro forma condensed combined financial information have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination and other events contemplated by the Merger Agreement occurred on the dates indicated, and does not reflect adjustments for any anticipated synergies, operating efficiencies, tax savings or cost savings. Any additional Business Combination proceeds remaining after the payment of all transaction costs related to the Business Combination are expected to be used for other general corporate purposes. Further, the unaudited pro forma combined financial information does not purport to project the future operating results or financial position of the Combined Entity following the completion of the Business Combination. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed financial information were prepared and are subject to change as additional information becomes available and analyses are performed. CF III and AEye have not had any historical relationship prior to the transactions. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The unaudited pro forma condensed information contained herein assumes that the CF III Stockholders approve the Business Combination. CF III’s public stockholders may elect to redeem their public shares for cash even if they approve the Business Combination. CF III cannot predict how many of its public stockholders will exercise their right to redeem their shares of CF III Class A Common Stock for cash. Therefore, the unaudited pro forma condensed financial information presents the following two redemption scenarios. The actual results may be within the parameters described by the two scenarios. However, there can be no assurance regarding which scenario will be closest to the actual results:

•        No Redemptions Scenario — This scenario assumes that no shares of CF III Class A Common Stock are redeemed; and

•        Maximum Redemptions Scenario — This scenario assumes that 21,359,584 shares of CF III Class A Common Stock are redeemed for an aggregate payment of $213,596 thousand, which is derived from the number of shares that could be redeemed in connection with the Business Combination at an assumed redemption price of approximately $10.00 per share based on the Trust Account balance as of March 31, 2021.

The following summarizes the pro forma shares of Class A Common Stock issued and outstanding immediately after the Business Combination:

____________

(1)      Amount reflects 5,750,000 shares of CF III Class B Common Stock held by the Sponsor and the other CF III initial stockholders and converted into Class A Common Stock at Closing and 500,000 shares of CF III Class A Common Stock purchased by the Sponsor in the Private Placement.

(2)      Amount is based on 40,898,193 AEye Shares outstanding as of March 31, 2021, by applying the Treasury Stock Method and converted at an Exchange Ratio (as of March 31, 2021) of 3.7220 pursuant to the Merger Agreement.

(3)     Number of outstanding shares assumes the issuance of approximately 29,950,480 shares of Class A Common Stock underlying Assumed Options and Assumed Warrants, by applying the Treasury Stock Method, that do not represent legally outstanding shares of Class A Common Stock at closing.

(4)      Reflects 1,450,000 shares of the Class A Common Stock subscribed for by current holders of AEye Capital Stock and AEye Convertible Equity Instruments in the PIPE Investment, 20,550,000 shares of Class A Common Stock subscribed for by third party investors in the PIPE Investment and 500,000 shares of Class A Common Stock subscribed for by the Sponsor in the PIPE Investment.

The figures in this table are presented only as illustrative examples and are based on the scenarios described above, which may be different from the actual amount of redemptions in connection with the Business Combination. In the event that CF III Class A Common Stock is redeemed in connection with the Business Combination, but the number of shares redeemed is less than 21,359,584, the ownership percentages set forth above will vary between the two scenarios.

The two alternative levels of redemptions assumed in the unaudited pro forma condensed combined balance sheets and statement of operations are based on the assumption that there are no adjustments for the outstanding CF III Warrants issued in connection with the IPO as such securities are not exercisable until 30 days after the Closing.

The following unaudited pro forma condensed balance sheet as of March 31, 2021 under the no redemptions scenario and maximum redemptions scenario and the unaudited pro forma condensed combined statement of operation for the three months ended March 31, 2021 and the year ended December 31, 2020 are based on the historical financial statements of CF III and AEye. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. If the actual facts are different than these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information that follows will be different and those changes could be material.

UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
AS OF MARCH 31, 2021
(In thousands, except share and per share data)

UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET — (Continued)
AS OF MARCH 31, 2021
(In thousands, except share and per share data)