Ouster, Inc. [OUST] Filings

10-Q 1 oust-20230930.htm 10-Q oust-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

_______________________

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39463

_______________________

Ouster, Inc.

(Exact name of registrant as specified in its charter)

_______________________

Delaware

86-2528989

(State or other jurisdiction

of incorporation)

(I.R.S. Employer

Identification No.)

350 Treat Avenue

San Francisco, California 94110

(Address of principal executive offices) (Zip Code)

(415) 949-0108

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

_______________________

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common stock, $0.0001 par value per share

OUST

New York Stock Exchange

Warrants to purchase common stock

OUST WS

New York Stock Exchange

Warrants to purchase common stock expiring 2025

OUST WSA

NYSE American

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2023, the registrant had 40,692,290 shares of common stock, $0.0001 par value per share, outstanding.

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TABLE OF CONTENTS


		Page
	Part I - Financial Information
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	9
	Notes to Condensed Consolidated Financial Statement s (Unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	50

	Part II - Other Information
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signature		56

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Ouster, Inc. (the “Company”, “Ouster,” or “we”) intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report other than statements of historical fact, including statements regarding the anticipated interest expense savings from the prepayment of the term loan facility with Hercules Capital, Inc.; the projected operational flexibility afforded to Ouster under its credit agreement with UBS Bank USA and UBS Financial Services Inc.; Ouster’s future restricted cash balances; the anticipated benefits of and costs associated with the Velodyne Merger (as defined herein) and related restructuring initiatives; Ouster’s expectations surrounding the Velodyne Merger and its ability to grow the Company’s sales and bolster the Company’s financial position; expected contractual obligations and capital expenditures; the capabilities of and demand for Ouster’s products; Ouster’s anticipated new product launches and developments, including software-related solution systems; Ouster’s ability to grow its sales and marketing organization; Ouster’s future results of operations and financial position; industry and business trends; the remediation of material weaknesses; potential risks of inventory obsolescence; Ouster’s expectations regarding the Hesai intellectual property patent infringement cases; the impact of market conditions and other macroeconomic factors on Ouster’s business, financial condition and results of operation; Ouster’s future business strategy, plans, distribution partnerships, market growth and its objectives for future operations; and Ouster’s competitive market position within its industry, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” “aim,” “forecast,” “should,” “can have,” “likely,” and similar expressions are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions that may cause actual results to differ materially from those that Ouster expected, including, but not limited to, Ouster’s limited operating history and history of losses; its ability to successfully integrate its business with Velodyne and achieve the anticipated benefits and synergies of the Velodyne Merger; substantial research and development costs needed to develop and commercialize new products; fluctuations in its operating results; Ouster’s ability to maintain competitive average selling prices or high sales volumes or reduce product costs; conditions in its customers’ industries; the competitive environment in which Ouster operates; the negotiating power and product standards of its customers; the creditworthiness of Ouster’s customers; the ability of its lidar technology roadmap and new software solutions to catalyze growth; the selection of Ouster’s products for inclusion in target markets; risks of product delivery problems or defects; costs associated with product warranties; Ouster’s future capital needs and ability to secure additional capital on favorable terms or at all; inaccurate forecasts of market growth; Ouster’s ability to manage growth; Ouster’s ability to grow its sales and marketing organization; risks related to acquisitions; risks related to international operations and compliance; cancellation or postponement of contracts or unsuccessful implementations; Ouster’s ability to maintain inventory and the risk of inventory write-downs; its ability to use tax attributes; Ouster’s dependence on key third-party suppliers, in particular Benchmark Electronics, Inc. and Fabrinet; supply chain constraints and challenges; risks related to Ouster’s indebtedness; Ouster’s ability to recruit and retain key personnel; Ouster’s ability to effectively respond to evolving regulations and standards; Ouster’s ability to adequately protect and enforce its intellectual property rights, including as relates to Hesai; risks related to operating as a public company; and other important factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, that are further updated from time to time in the Company’s other filings with the Securities and Exchange Commission (the “SEC”) that may cause its actual results, performance or achievements to differ materially and adversely from those expressed or implied by the forward-looking statements.

Any forward-looking statements made herein speak only as of the date of this Quarterly Report, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or achievements reflected in the forward-looking statements will be achieved or occur. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or revised expectations.

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GENERAL

Unless the context otherwise indicates, references in this Quarterly Report to the terms “Ouster,” “the Company,” “we,” “our” and “us” refer to Ouster, Inc.

We may announce material business and financial information to our investors using our investor relations website at https://investors.ouster.com/overview. We therefore encourage investors and others interested in Ouster to review the information that we make available on our website, in addition to following our SEC filings, webcasts, press releases and conference calls. Information contained on our website is not part of this Quarterly Report.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OUSTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	75,585	$	122,932
Restricted cash, current	540		257
Short-term investments	124,913		—
Accounts receivable, net	13,404		11,233
Inventory	26,474		19,533
Prepaid expenses and other current assets	11,971		8,543
Total current assets	252,887		162,498
Property and equipment, net	11,529		9,695
Unbilled receivable, long-term portion	7,583		—
Operating lease, right-of-use assets	19,812		12,997
Goodwill	—		51,152
Intangible assets, net	26,053		18,165
Restricted cash, non-current	1,090		1,089
Other non-current assets	2,877		541
Total assets	$	321,831	$	256,137
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,932	$	8,798
Accrued and other current liabilities	35,793		17,071
Contract liabilities	10,776		402
Operating lease liability, current portion	7,078		3,221
Total current liabilities	61,579		29,492
Operating lease liability, long-term portion	20,376		13,400
Debt	40,422		39,574
Contract liabilities, long-term portion	3,914		342
Other non-current liabilities	1,493		1,710
Total liabilities	127,784		84,518
Commitments and contingencies (Note 8 )
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized at September 30, 2023 and December 31, 2022; 40,626,201 and 18,658,799 issued and outstanding at September 30, 2023 and December 31, 2022, respectively.	39		19
Additional paid-in capital	971,419		613,665
Accumulated deficit	(777,031)		(441,916)
Accumulated other comprehensive loss	(380)		(149)
Total stockholders’ equity	194,047		171,619
Total liabilities and stockholders’ equity	$	321,831	$	256,137

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

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OUSTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Revenue	$	22,209	$	11,204	$	58,835	$	30,091



Cost of revenue	19,116		7,488		55,932		21,002


Gross (loss) profit	3,093		3,716		2,903		9,089
Operating expenses:
Research and development	16,678		17,212		75,584		49,011
Sales and marketing	7,887		8,541		33,086		23,194
General and administrative	14,270		14,008		63,437		40,306
Goodwill impairment charges	—		—		166,675		—
Total operating expenses	38,835		39,761		338,782		112,511
Loss from operations	(35,742)		(36,045)		(335,879)		(103,422)
Other income (expense):
Interest income	2,495		733		6,459		1,231
Interest expense	(1,825)		(699)		(5,222)		(1,143)
Other income (expense), net	(13)		61		(124)		7,071
Total other income, net	657		95		1,113		7,159
Loss before income taxes	(35,085)		(35,950)		(334,766)		(96,263)
Provision for income tax expense	17		37		349		121
Net loss	$	(35,102)	$	(35,987)	$	(335,115)	$	(96,384)
Other comprehensive loss
Changes in unrealized loss on available for sale securities	63		—		40		—
Foreign currency translation adjustments	(213)		(87)		(271)		(175)
Total comprehensive loss	$	(35,252)	$	(36,074)	$	(335,346)	$	(96,559)
Net loss per common share, basic and diluted	$	(0.89)	$	(1.98)	$	(9.39)	$	(5.48)
Weighted-average shares used to compute basic and diluted net loss per share	39,228,118		18,136,135		35,670,408		17,576,509

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

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OUSTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share data)


	Common Stock		Additional Paid-in- Capital			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ Equity
		Shares			Amount
Balance — December 31, 2022		18,658,799	$	19		$	613,665	$	(441,916)	$	(149)	$	171,619
Issuance of common stock upon Velodyne Merger		19,483,269	20			306,582		—		—		306,602
Issuance of common stock upon exercise of stock options		10,007	—			18		—		—		18
Issuance of common stock upon vesting of restricted stock		568,675	—			—		—		—		—
Repurchase of common stock		(3,753)	—			—		—		—		—
Vesting of early exercised stock options		—	—			27		—		—		27
Stock-based compensation expense		—	—			21,780		—		—		21,780
Net loss		—	—			—		(177,280)		—		(177,280)
Other Comprehensive loss		—	—			—		—		(30)		(30)
Balance — March 31, 2023		38,716,997	39			942,072		(619,196)		(179)		322,736
Common Stock adjustment reflected as a result of the one-for-10 reverse stock split effectuated on April 6, 2023		85,893	—			—		—		—		—
Issuance of common stock upon exercise of stock options		69,080	—			131		—		—		131
Issuance of common stock upon vesting of restricted stock		385,865	—			—		—		—		—
Issuance of common stock to employees under employee stock purchase plan		62,880	—			310		—		—		310
Common stock warrants issuable to customer		—	—			61		—		—		61
Vesting of early exercised stock options		—	—			71		—		—		71
Stock-based compensation expense		—	—			16,466		—		—		16,466
Net loss		—	—			—		(122,733)		—		(122,733)
Other Comprehensive loss		—	—			—		—		(51)		(51)
Balance — June 30, 2023		39,320,715	39			959,111		(741,929)		(230)		216,991
Proceeds from at-the-market offering, net of commissions and fees of $122 and issuance costs of $327		802,832	—			3,616		—		—		3,616
Issuance of common stock upon exercise of stock options		47,710	—			93		—		—		93
Issuance of common stock upon exercise of restricted stock		454,944	—			—		—		—		—


Common stock warrants issuable to customer		—	—			227		—		—		227
Vesting of early exercised stock options		—	—			—		—		—		—
Stock-based compensation expense		—	—			8,372		—		—		8,372
Net loss		—	—			—		(35,102)		—		(35,102)
Other Comprehensive loss		—	—			—		—		(150)		(150)
Balance — September 30, 2023		40,626,201	$	39		$	971,419	$	(777,031)	$	(380)	$	194,047

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	Common Stock		Additional Paid-in- Capital			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ Equity
		Shares			Amount
Balance — December 31, 2021		17,220,042	$	17		$	564,045	$	(303,356)	$	(6)	260,700
Issuance of common stock upon exercise of stock options		82,270	—			209		—		—		209
Issuance of common stock upon vesting of restricted stock - net of tax withholding		81,249	—			(59)		—		—		(59)
Repurchase of common stock		(23,311)	—			(31)		—		—		(31)


Vesting of early exercised stock options		—	—			19		—		—		19
Stock-based compensation expense		—	—			8,750		—		—		8,750
Net loss		—	—			—		(32,397)		—		(32,397)
Other Comprehensive loss		—	—			—		—		(12)		(12)
Balance — March 31, 2022		17,360,250	17			572,933		(335,753)		(18)		237,179
Proceeds from at-the-market offering, net of commissions and fees of $451 and issuance costs of $873		674,934	1			14,021		—		—		14,022
Issuance of common stock upon exercise of stock options		23,424	—			45		—		—		45
Issuance of common stock upon exercise of restricted stock awards		95,086	—			—		—		—		—
Repurchase of common stock		(5,730)	—			(12)		—		—		(12)
Vesting of early exercised stock options		—	—			52		—		—		52
Cancellation of Sense acquisition shares		(5,513)	—			(358)		—		—		(358)
Stock-based compensation expense		—	—			8,119		—		—		8,119
Net loss		—	—			—		(28,000)		—		(28,000)
Other Comprehensive loss		—	—			—		—		(76)		(76)
Balance — June 30, 2022		18,142,451	$	18		$	594,800	$	(363,753)	$	(94)	$	230,971
Proceeds from at-the-market offering, net of commissions and fees of $54		108,437				1,754		—		—		1,754
Issuance of common stock upon exercise of stock options		72,209	—			146		—		—		146
Issuance of common stock upon exercise of restricted stock awards		97,515	—			—		—		—		—
Repurchase of common stock		(1,610)	—			(3)		—		—		(3)
Vesting of early exercised stock options		—	—			43		—		—		43
Stock-based compensation expense		—	—			8,455		—		—		8,455
Net loss		—	—			—		(35,987)		—		(35,987)
Other Comprehensive loss		—	—			—		—		(87)		(87)
Balance — September 30, 2022		18,419,002	$	18		$	605,195	$	(399,740)	$	(181)	$	205,292

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

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OUSTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(335,115)	$	(96,384)
Adjustments to reconcile net loss to net cash used in operating activities:
Goodwill impairment charges	166,675		—
Depreciation and amortization	14,290		7,070
Loss on write-off of construction in progress and right-of-use asset impairment	1,423

Gain on lease termination	(807)		—
Stock-based compensation	46,618		25,324
Reduction of revenue related to stock warrant issued to customer	288		—
Amortization of right-of-use asset	3,268		2,075
Interest expense	1,112		290
Amortization of debt issuance costs and debt discount	190		104
Accretion or amortization on short-term investments	(3,303)		—
Change in fair value of warrant liabilities	(67)		(7,350)
Inventory write-downs and purchase commitment losses	8,223		894
Provision for doubtful accounts	1,015		9
Gain from disposal of property and equipment	(248)		(100)

Changes in operating assets and liabilities, net of acquisition effects:
Accounts receivable	4,498		(69)
Inventory	(4,474)		(14,249)
Prepaid expenses and other assets	676		(1,540)

Accounts payable	(4,112)		3,225
Accrued and other liabilities	(10,229)		(158)
Contract liabilities	410		—
Operating lease liability	(4,034)		(2,431)
Net cash used in operating activities	(113,703)		(83,290)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment	560		275
Purchases of property and equipment	(2,633)		(2,353)
Purchase of short-term investments	(82,021)		—
Proceeds from sales of short-term investments	115,481		—
Cash and cash equivalents acquired in the Velodyne Merger	32,137		—
Net cash provided by (used in) investing activities	63,524		(2,078)
CASH FLOWS FROM FINANCING ACTIVITIES





Repurchase of common stock	—		(46)
Proceeds from ESPP purchase	310		—
Proceeds from exercise of stock options	243		398
Proceeds from borrowings, net of debt discount and issuance costs	—		19,077
Proceeds from the issuance of common stock under at-the-market offering, net of commissions and fees	2,936		16,322
At-the-market offering costs for the issuance of common stock	(104)		(278)
Taxes paid related to net share settlement of restricted stock units	—		(59)
Net cash provided by financing activities	3,385		35,414
Effect of exchange rates on cash and cash equivalents	(269)		(175)
Net decrease in cash, cash equivalents and restricted cash	(47,063)		(50,129)
Cash, cash equivalents and restricted cash at beginning of period	124,278		184,656
Cash, cash equivalents and restricted cash at end of period	$	77,215	$	134,527

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OUSTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
SUPPLEMENTAL DISCLOSURES OF OPERATING ACTIVITIES:
Cash paid for interest	$	4,362	$	750
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Property and equipment purchases included in accounts payable and accrued liabilities	$	470	$	45
Common stock shares issued in the Velodyne Merger	$	297,425	$	—
Common stock warrants issued in the Velodyne Merger	$	9,177	$	—
Unpaid at-the-market offering costs	$	223	$	267
Right-of-use assets obtained in exchange for operating lease liability	$	—	$	571

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

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OUSTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 – Description of Business and Basis of Presentation

Description of Business

Ouster, Inc. was incorporated in the Cayman Islands on June 4, 2020 as “Colonnade Acquisition Corp.” (“CLA”). Following the closing of the business combination in March 2021, the Company domesticated as a Delaware corporation and changed its name to “Ouster, Inc.” The Company’s prior operating subsidiary, Ouster Technologies, Inc. (“OTI” and prior to the Merger (as defined below)), was incorporated in the state of Delaware on June 30, 2015. The Company is a leading provider of high-resolution digital lidar sensors that offer advanced 3D vision to machinery, vehicles, robots, and fixed infrastructure assets, allowing each to understand and visualize the surrounding world and ultimately enabling safe operation and ubiquitous autonomy. Unless the context otherwise requires, references in this subsection to “the Company” refer to the business and operations of OTI (formerly known as Ouster, Inc.) and its consolidated subsidiaries prior to the Merger (as defined below) and to Ouster, Inc. (formerly known as CLA) and its consolidated subsidiaries following the consummation of the Merger.

CLA, the Company’s legal predecessor, was originally a blank check company incorporated as a Cayman Islands exempted company on June 4, 2020. CLA was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On March 11, 2021, CLA consummated a merger (the “Merger”) with OTI pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of December 21, 2020. The Merger was accounted for as a reverse recapitalization, CLA is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of OTI with the Merger being treated as the equivalent of OTI issuing stock for the net assets of CLA, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded.

On February 10, 2023, the Company completed the merger with Velodyne Lidar, Inc., a Delaware corporation (“Velodyne”) pursuant to the terms of the Agreement and Plan of Merger (the “Velodyne Merger Agreement”) with Velodyne, Oban Merger Sub, Inc. (“Merger Sub I”) and Oban Merger Sub II LLC (“Merger Sub II”) (the “Velodyne Merger”) dated as of November 4, 2022, accounted for as a business combination with the Company being an accounting acquiror (Note 3).

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries (all of which are wholly owned) and have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) applicable to interim periods. All intercompany balances and transactions have been eliminated in consolidation. The presentation of certain prior period amounts has been reclassified to conform with current year presentation.

The unaudited condensed consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the results of operations for the periods shown. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022 and the notes related thereto, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 24, 2023. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with US GAAP have been condensed or omitted from this report, as is permitted by applicable rules and regulations. The results of operations for any interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future years or interim periods.

On April 6, 2023, the Board of Directors approved a one-for-10 reverse stock split and a corresponding reduction in authorized shares of common stock (the “Reverse Stock Split”). On April 20, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to effect the one-for-10 Reverse Stock Split of the Company’s common stock and a corresponding reduction in authorized shares of common stock. The par value of the Company’s common stock was not adjusted as a result of the Reverse Stock Split. All share and per share amounts and related stockholders’ equity balances presented herein have been retroactively adjusted to reflect the Reverse Stock Split.

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Liquidity

The Company’s principal sources of liquidity are its cash and cash equivalents and short-term investments funded from the Merger and the Velodyne Merger, cash generated from revenues, sales of common stock under its at-the-market equity offering program and debt financing.

As of September 30, 2023, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $200.5 million. The Company has incurred losses and negative cash flows from operations for several years. If the Company continues to incur losses in the future, it may need to improve liquidity and raise additional capital through the issuance of equity and/or debt. There can be no assurance that the Company would be able to raise such capital. However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least twelve months from the date the condensed consolidated financial statements herein were available for issuance.

Note 2 – Summary of Significant Accounting Policies

During the nine months ended September 30, 2023, there were no significant changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2023, except for the changes described below. The Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements.

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised products or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these products or services. To achieve the core principle of this standard, the Company performs the following five steps:

1) Identify the contract with a customer

A contract with a customer exists when the contract is approved, each party’s rights regarding the product or services to be transferred and the payment terms for the product or services can be identified, it is determined that the customer has the ability and intent to pay and the contract has commercial substance. The Company applies judgement in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. Accounts receivable are due under normal trade terms, typically three months or less.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the product or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the product or services is separately identifiable from other promises in the contract.

3) Determine the transaction price

The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring product or services to the customer. Royalties from the license of IP are included in the transaction price in the period the sales occur. Other forms of variable consideration are included in the transaction price if the Company judges that it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component. All taxes assessed by a governmental authority on a specific revenue-producing transaction collected by the Company from a customer are excluded from the transaction price.

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). In the three and nine months ended September 30, 2023 and 2022, respectively, the Company did not have a material volume of contracts that required the allocation of transaction price to multiple performance obligations.

5) Recognize revenue when or as the Company satisfies a performance obligation

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to a customer.

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Product revenue

The majority of the Company’s revenue comes from product sales of lidar sensors to direct customers and distributors. Revenue is recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery dependent upon the terms of the underlying contract. Product sales to certain customers may require customer acceptance due to performance acceptance criteria that is considered more than a formality. For these product sales, revenue is recognized upon the expiration of the customer acceptance period. For custom products that require engineering and development based on customer requirements, the Company recognizes revenue over time using an output method based on units of product shipped to date relative to total production units under the contract. Amounts billed to customers for shipping and handling are included in revenue, and the Company has elected to recognize the cost of shipping activities that occur after control has transferred to the customer as a fulfillment cost rather than a separate performance obligation. All related shipping costs are accrued and recognized within cost of revenue when the related revenue is recognized.

Services

The Company’s services revenue consists primarily of product development, validation services and providing maintenance services under our extended warranty contracts. The obligation to provide services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For product development and validation service projects, the Company bills and recognizes revenue as the services are performed. For these arrangements, control is transferred over as the Company’s inputs incurred to complete the project; therefore, revenue is recognized over the service period with the measure of progress using the input method based on labor costs incurred to total labor cost (“cost-to-cost”) as the services are provided. The revenue from the sale of extended warranties is recognized over the warranty period on a ratable basis as the Company stands ready to provide services as needed.

Licenses

The Company licenses rights to its IP to certain third parties and collects royalties based on the third parties’ product sales. IP revenue recognition is dependent on the nature and terms of each agreement. The Company recognizes license revenue upon the later of (a) delivery of the IP or (b) commencement of the license term if there are no substantive future obligations to perform under the arrangement. Revenue for licenses to future technology developed on a when-and-if -available basis is recognized straight-line over the license period as long as customers continue to have access to the future technology. Royalties from the license of IP are recognized at the later of the period the sales occur or the satisfaction of the performance obligation to which some or all of the royalties have been allocated.

Product Warranties

The Company provides standard product warranties for a term of typically one to two years depending on the product to ensure that its products comply with agreed-upon specifications. Standard warranties are considered to be assurance type warranties and are not accounted for as separate performance obligations. The Company also provides service type extended warranties for typically an additional term ranging up to two additional years. For service type extended warranty contracts, the Company allocates revenue to this performance obligation on a relative standalone selling price basis and recognizes the revenue on a ratable basis over time during the effective period of the services.

Costs to obtain a contract

The Company expenses the incremental costs of obtaining a contract when incurred because the amortization period for these costs would be less than one year. These costs primarily relate to sales commissions and are expensed as incurred in sales and marketing expense in the Company’s consolidated statements of operations and comprehensive loss.

Remaining performance obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the customer is not committed. The customer is not considered committed where they are able to terminate for convenience without payment of a substantive penalty under the contract.

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Investments

The Company considers investments with an original maturity greater than three months and remaining maturities less than one year to be short-term investments. The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as long-term investments.

The Company classifies its investments as available for sale and reports them at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss. For investments sold prior to maturity, the cost of investments sold is based on the specific identification method. Realized gains and losses on the sale of investments are recorded in other income, net in the condensed consolidated statement of operations.

Amazon Warrant

The Amazon Warrant (as defined in Note 7) is accounted for as an equity instrument. To determine the fair value of the Amazon Warrant on its issuance date, the Company used the Black-Scholes option pricing model.

For awards granted to a customer, which are not in exchange for distinct goods or services, the fair value of the awards earned based on service or performance conditions is recorded as a reduction of the transaction price. Accordingly, when Amazon purchases goods or services and vesting conditions become probable of being achieved, the Company records a non-cash stock-based reduction to revenue associated with the Amazon Warrant, which is calculated based on the fair value of the Amazon Warrant shares as of the Velodyne Merger date.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company considers the applicability and impact of all ASUs. ASUs not referenced below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s condensed consolidated financial statements.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. Cash, cash equivalents, restricted cash and short-term investments are deposited with federally insured commercial banks. At times, cash balances in the U.S. may be in excess of federal insurance limits. As of September 30, 2023 and December 31, 2022, the Company had cash, cash equivalents and restricted cash with financial institutions in the U.S. of $72.8 million and $123.5 million, respectively. As of September 30, 2023 and December 31, 2022, the Company also had cash on deposit with financial institutions in countries other than the U.S. of approximately $4.4 million and $0.8 million, respectively, that was not federally insured.

The Company generally does not require collateral or other security deposits for accounts receivable.

To reduce credit risk, the Company considers customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms when determining the collectability of specific customer accounts. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

Accounts receivable, from the Company’s major customers representing 10% or more of total accounts and unbilled receivable was as follows:


	September 30, 2023		December 31, 2022
Customer A	36	%	*
Customer B	19	%	*

*Customer accounted for less than 10% of total accounts and unbilled receivable in the period.

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Revenue from the Company’s major customers representing 10% or more of total revenue was as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2023		2022	2023	2022
Customer E	16	%	*	*	*
Customer F	11	%	*	*	*

* Customer accounted for less than 10% of total revenue in the period.

Concentrations of Supplier Risk

Purchases from the Company’s major suppliers representing 10% or more of total purchases were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Supplier A	15	%	*		12	%	*
Supplier B	18	%	29	%	20	%	33	%

*Accounted for less than 10% of total purchases.

Accounts payable to the Company’s major suppliers and professional services vendors representing 10% or more of total accounts payable were as follows:


	September 30, 2023		December 31, 2022
Supplier A	20	%	*
Supplier B	49	%	39	%
Professional Services Vendor A	*		14	%

*Accounted for less than 10% of total accounts payable.

Note 3. Business Combination

On February 10, 2023, the Company completed the Velodyne Merger. Velodyne shares ceased trading on the Nasdaq Stock Market LLC after market close on February 10, 2023, and each Velodyne share was exchanged for 0.8204 shares of the Company’s common stock. Velodyne is treated as the acquired company for financial reporting purposes. This determination is primarily based on the Company’s senior management prior to Velodyne Merger comprising a majority of the senior management of the Company following Velodyne Merger, the Company being the initiator of acquiring Velodyne and the Company being the party issuing shares in the Velodyne Merger. The acquisition price for the Velodyne Merger was $306.6 million, primarily consisting of fair value of the Company’s common stock issued in exchange for Velodyne shares and fair value of the Amazon Warrant (Note 7) of $8.6 million. Through September 30, 2023, transaction costs incurred by the Company in connection with the Velodyne Merger, including professional fees, were $13.0 million.

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Under the acquisition method of accounting in accordance with ASC 805, the total purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their respective estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. The following table provides the assets acquired and liabilities assumed as of the date of acquisition (in thousands):


	Estimated Fair Value
Purchase consideration	$	306,602
Preliminary amounts of identifiable assets and liabilities assumed
Cash and cash equivalents	$	32,137
Short-term investments	155,031
Accounts receivable, net	8,611
Inventory	9,700
Prepaid expenses and other current assets	4,387
Unbilled receivable, long-term portion	6,657
Property and equipment, net	9,900
Operating lease, right-of-use assets	10,887
Intangible assets, net	13,000
Other non-current assets	1,047
Accounts payable	(3,356)
Accrued and other current liabilities	(32,821)
Contract liabilities	(5,475)
Operating lease liability, current portion	(3,735)
Operating lease liability, long-term portion	(11,940)
Contract liabilities, long-term portion	(2,206)
Other non-current liabilities	(745)
Total identifiable net assets	$	191,079
Goodwill	$	115,523
	$	306,602

Under the acquisition method of accounting in accordance with ASC 805, the total purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. The initial purchase accounting, including the identification and allocation of consideration to assets acquired, is not complete and the preliminary purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed.

Identified intangible assets acquired and their estimated useful lives as of February 10, 2023, were (in thousands, except years):


	Estimated Useful Life (in years)	Estimated Fair Value
Developed technology - Hardware	3	$	2,500
Developed technology - Software	5	5,100
Customer relationships	8	5,400
Intangible assets, net	5.9	$	13,000

Developed technology relates to Velodyne’s lidar sensors and BlueCity AI software used to monitor traffic networks and public spaces. The Company valued the hardware developed technology using the relief-from-royalty method under the income approach. Software developed technology was valued using the excess earnings method. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecasted period.

The estimated fair value of the customer relationships was determined using the distributor method with the estimated useful life of 8 years that approximates the pattern in which the economic benefits are expected to be realized.

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The estimated fair value of the inventory was determined using the comparative sales method, which estimated the expected sales price of the product, reduced by all costs expected to be incurred to complete or dispose of the inventory, as well as a profit on the sale.

The estimated fair value of property and equipment utilized a replacement cost method incorporating the age, quality and condition of the assets.

The excess of the purchase consideration and the fair value of identifiable assets acquired and liabilities assumed at the acquisition date over the fair value of net tangible and identified intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributable to the assembled workforce and the anticipated operational synergies at the time of the Velodyne Merger.

The Company’s consolidated statement of operations as of September 30, 2023, includes Velodyne revenue of $21.5 million for the period from the acquisition date of February 10, 2023 to September 30, 2023. Due to the continued integration of the combined businesses, it was impractical to determine the earnings.

The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company and Velodyne as if the Velodyne Merger had been completed as of January 1, 2022 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	22,209	$	20,845	$	58,835	$	57,419
Net loss	$	(35,102)	$	(78,228)	$	(335,115)	$	(255,392)

The unaudited supplemental pro forma information above includes the following adjustments to net loss in the appropriate pro forma periods (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
An increase in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results	$	—	$	(678)	$	(277)	$	(2,186)
A decrease (increase) in expenses related to the transaction expenses	$	—	$	—	$	6,058	$	(6,058)
A net increase in revenue related to the impact of the acceleration of the Amazon Warrant vesting recognized by Velodyne at the close of the Velodyne Merger transaction	$	—	$	—	$	3,656	$	—
A decrease in expenses related to the impact of the acceleration of the Amazon Warrant vesting recognized by Velodyne at the close of the Velodyne Merger transaction	$	—	$	—	$	26,704	$	—
Represents decrease (increase) in additional stock-based compensation expense related to Ouster employee terminations due to change in control.	$	—	$	—	$	6,383	$	(5,195)
Represents a decrease (increase) in severance expense in connection with the Velodyne Merger transaction	$	—	$	—	$	10,586	(10,586)

The unaudited supplemental pro forma information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the Velodyne Merger taken place on the date indicated, or of the Company’s future consolidated results of operations. The supplemental pro forma information presented above has been derived from the Company’s historical consolidated financial statements and from historical consolidated financial statements and the historical accounting records of Velodyne.

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Note 4. Fair Value of Financial Instruments

The following table provides information by level for the Company’s assets and liabilities that were measured at fair value on a recurring basis (in thousands):


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	45,974	$	—	$	—	$	45,974
Short-term investments:
Commercial paper	—		$	73,159	—		73,159
Corporate debt and U.S. government agency securities	—		$	51,754	—		51,754
Total short-term investments	—		124,913		—		124,913
Total financial assets	$	45,974	$	124,913	$	—	$	170,887
Liabilities
Warrant liabilities	$	—	$	—	$	113	$	113
Total financial liabilities	$	—	$	—	$	113	$	113


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	121,100	$	—	$	—	$	121,100
Total financial assets	$	121,100	$	—	$	—	$	121,100
Liabilities
Warrant liabilities	$	—	$	—	$	180	$	180
Total financial liabilities	$	—	$	—	$	180	$	180

Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

Commercial paper, corporate debt and U.S. government agency securities are included within Level 2 of the fair value hierarchy because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.

The fair value of the warrant liabilities from the private placement warrants issued by CLA (“Private Placement warrants”) is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the warrant liabilities, the Company used the Black-Scholes option pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate and dividend yield (see Note 7).

The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):


	Private Placement Warrant Liability
Fair value as of December 31, 2022	180
Change in the fair value included in other income, net	(67)
Fair value as of September 30, 2023	113

Fair value as of December 31, 2021	$	7,626

Change in the fair value included in other income, net	(7,350)

Fair value as of September 30, 2022	$	276

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Non-Recurring Fair Value Measurements

The Company has certain assets, including intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used.

Disclosure of Fair Values

Financial instruments that are not re-measured at fair value include accounts receivable, accounts payable, accrued and other current liabilities and debt. The carrying values of these financial instruments approximate their fair values.

Note 5. Balance Sheet Components

Cash, Cash Equivalents and Short-Term Investments

The Company’s cash and cash equivalents consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Cash	$	29,611	$	1,832
Cash equivalents:
Money market funds(1)	45,974		121,100

Total cash and cash equivalents	$	75,585	$	122,932

(1)The Company maintains a cash sweep account, which is included in money market funds as of September 30, 2023 and December 31, 2022. Cash is invested in short-term money market funds that earn interest.

The Company acquired short-term investments consisting of commercial paper, corporate debt and U.S. government agency securities as a result of the merger with Velodyne that closed on February 10, 2023 (see Note 3). Short-term investments were $124.9 million as of September 30, 2023. Unrealized gains and losses on the Company’s short-term investments were not significant as of September 30, 2023 and therefore, the amortized cost of the Company’s short-term investments approximated their fair value.

Cash, Cash Equivalents and Restricted Cash

Restricted cash consists of collateral to merchant credit card and certificates of deposit held by a bank as security for outstanding letters of credit.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheets to the amounts reported in the condensed consolidated statements of cash flows (in thousands):


	September 30, 2023		September 30, 2022
Cash and cash equivalents	$	75,585	$	133,189
Restricted cash, current	540		250
Restricted cash, non-current	1,090		1,088
Total cash, cash equivalents and restricted cash	$	77,215	$	134,527

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Inventory

Inventory, consisting of material, direct and indirect labor, and manufacturing overhead, consists of the following (in thousands):


	September 30, 2023		December 31, 2022
Raw materials	$	9,768	$	6,971
Work in process	2,916		3,857
Finished goods	13,790		8,705
Total inventory	$	26,474	$	19,533

Total inventory balance as of September 30, 2023 includes remaining inventory balance acquired as part of the Velodyne Merger at its fair value as of February 10, 2023. During the nine months ended September 30, 2023 and 2022, the Company recorded the inventory write-downs of $7.2 million and $0.9 million, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Prepaid expenses	$	7,426	$	3,944

Receivable from contract manufacturer	2,083		2,526
Other current assets	2,462		2,073
Total prepaid and other current assets	$	11,971	$	8,543

As of September 30, 2023, prepaid expenses included a $2.5 million prepayment made by the Company to a contract manufacturer for the purchase of inventories which the Company expects to be converted to finished goods.

Property and Equipment, Net

Property and equipment consists of the following (in thousands):


	Estimated Useful Life (in years)	September 30, 2023		December 31, 2022
Machinery and equipment	3	$	15,710	$	8,716
Computer equipment	3	1,101		340
Automotive and vehicle hardware	5	22		93
Software	3	593		85
Furniture and fixtures	7	943		848
Construction in progress		4,458		3,448
Leasehold improvements	Shorter of useful life or lease term	10,879		9,319
		33,706		22,849
Less: Accumulated depreciation		(22,177)		(13,154)
Property and equipment, net		$	11,529	$	9,695

Depreciation expense associated with property and equipment was $9.2 million and $3.7 million during the nine months ended September 30, 2023 and 2022, respectively.

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Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combinations. The following table displays the changes in the carrying amount of goodwill (in thousands):


	Goodwill
Balance - December 31, 2022	$	51,152
Goodwill addition related to Velodyne Merger	115,523
Goodwill impairment charges	(166,675)
Balance - September 30, 2023	$	—

Goodwill is not amortized and is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Since February 10, 2023, the date of the Velodyne Merger, the Company experienced a significant decline in its stock price. This decline resulted in the total market value of its shares of stock outstanding (“market capitalization”) being less than the carrying value of its reporting unit as of March 31, 2023 and June 30, 2023. The Company also considered the impact of current macroeconomic conditions in the lidar sensor industry that potentially impact the fair value of the Company’s reporting unit. The macroeconomic conditions considered include deterioration in the equity markets evidenced by sustained declines in the Company’s stock price, those of its peers, along with an increase in the weighted-average cost of capital primarily driven by an increase in interest rates. After considering all available evidence in the evaluation of goodwill impairment indicators, the Company determined it was appropriate to perform an interim quantitative assessment of its goodwill as of March 31, 2023 and June 30, 2023. In connection with the Company’s interim goodwill impairment assessments the Company recorded goodwill impairment charges of approximately $99.4 million in the three months ended March 31, 2023 and $67.3 million in the three months ended June 30, 2023. The Company’s goodwill impairment analysis included a comparison of the aggregate estimated fair value of our reporting unit to our total market capitalization.

As of September 30, 2023, remaining goodwill balance was nil. No goodwill impairment charges were recognized during the year ended December 31, 2022.

Intangible Assets, Net

The following tables present acquired intangible assets, net as of September 30, 2023 and December 31, 2022 (in thousands):


		September 30, 2023
	Estimated Useful Life (in years)	Gross Carrying amount		Accumulated Amortization		Net Book Value
Developed technology	3 - 8	$	23,500	$	(5,126)	$	18,374
Vendor relationship	3	6,600		(4,217)		2,383
Customer relationships	3 - 8	6,300		(1,004)		5,296
Intangible assets, net		$	36,400	$	(10,347)	$	26,053


		December 31, 2022
	Estimated Useful Life (in years)	Gross Carrying amount		Accumulated Amortization		Net Book Value
Developed technology	8	$	15,900	$	(2,318)	$	13,582
Vendor relationship	3	6,600		(2,567)		4,033
Customer relationships	3	900		(350)		550
Intangible assets, net		$	23,400	$	(5,235)	$	18,165

Amortization expense was $5.1 million and $3.4 million during the nine months ended September 30, 2023 and 2022, respectively.

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The following table summarizes estimated future amortization expense of finite-lived intangible assets-net (in thousands):


Years:	Amount
2023 (the remainder of 2023)	$	1,759
2024	6,604
2025	4,515
2026	3,776
2027	3,682
Thereafter	5,717
Total	$	26,053

Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Accrued compensation	$	6,433	$	3,758
Uninvoiced receipts	20,523		10,727


Warranty	3,319		937
Other	5,518		1,649
Total accrued and other current liabilities	$	35,793	$	17,071

Note 6. Debt

Loan and Security Agreement

On April 29, 2022, the Company entered into a Loan Agreement with Hercules Capital, Inc. (“Hercules”) (as amended, the “Loan Agreement”). The Loan Agreement provided the Company with a term loan facility of up to $50.0 million, subject to certain terms and conditions. The Company borrowed the initial tranche of $20.0 million on April 29, 2022. On October 17, 2022, the Company borrowed an additional $20.0 million. As of September 30, 2023, the Company did not achieve certain conditions relating to trailing twelve month revenue and profit milestones under the Loan Agreement therefore an additional $10.0 million is no longer available to the Company.

The Loan Agreement included a minimum liquidity financial covenant whereby the Company was required to maintain at least $60.0 million of cash in deposit accounts that are subject to an account control agreement in favor of Hercules.

On February 10, 2023, the Company entered into the Third Amendment, which amended the Loan Agreement to (i) increase the existing debt baskets for (a) purchase money debt and capital leases and (b) letter of credit obligations, (ii) provide for increased flexibility to maintain cash in non-US accounts, and (iii) provide for increased flexibility to relocate certain equipment.

Advances under the Loan Agreement bore interest at the rate of interest equal to greater of either (i) (x) the prime rate as reported in The Wall Street Journal plus (y) 6.15%, and (ii) 9.40%, subject to compliance with financial covenants and other conditions. The Loan Agreement included covenants, limitations, and events of default customary for similar facilities. Prior to its termination (see Note 16), the Loan Agreement would mature on May 1, 2026.

In connection with the Loan Agreement, the Company paid the lender a cash facility and legal fees of $0.6 million and incurred debt issuance costs to third parties that were directly related to issuing debt in the amount of $0.3 million. The effective interest rate on this debt was 17.9% after giving effect to the debt discount, debt issuance costs and the end of term charge. Amortization expense included in the interest expense related to debt discount and debt issuance costs of the Loan Agreement was not material for the three and nine months ended September 30, 2023.

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Interest on amounts borrowed under the Loan Agreement were payable on a monthly basis until June 1, 2025 (the “Amortization Date”). On and as of the Amortization Date, payments were to consist of equal monthly installments of principal and interest payable until the secured obligations were repaid in full. However, if the Company achieved certain equity proceeds, revenue or profit targets for the twelve-month period ending December 31, 2023, then the Amortization Date would have been extended to the Maturity Date. The entire principal balance and all accrued but unpaid interest would be due and payable on the Maturity Date. On the earliest to occur of May 1, 2026, the date on which the obligations under the Loan Agreement were to be paid and the date on which such obligations become due and payable, the Company was also required to pay Hercules an end of term fee in an amount equal to 7.45% of the aggregated amount of all Advances made under the Loan Agreement.

The Company was permitted to prepay the principal of any advance made pursuant to the terms of the Term Loan Facility at any time subject to a prepayment charge equal to: 2.50%, if such advance was prepaid in any of the first 12 months following the Closing Date, 1.50%, if such advance was prepaid after 12 months but prior to 24 months following the Closing Date, and 1.0%, if such advance was prepaid anytime thereafter.

As of September 30, 2023, the Company was in compliance with all financial covenants under the Loan Agreement.

Long-term debt outstanding is summarized below (in thousands):


	September 30, 2023
Long-term debt	$	40,000
End of term fee	994
Less: unamortized debt discount	(372)
Less: debt issuance costs	(200)
Total debt	$	40,422

The long-term debt was repaid with proceeds drawn under a credit line agreement with UBS Bank USA and UBS Financial Services Inc. on October 25, 2023 (see Note 16).

Note 7. Warrants

Private Placement Warrants

Simultaneously with the closing of the Company’s initial public offering (the “IPO”) in August 2020, the sponsor of CLA, Colonnade Sponsor LLC, purchased an aggregate of 600,000 Private Placement warrants at a price of $10.00 per warrant, for an aggregate purchase price of $6,000,000. The Private Placement warrants became exercisable 12 months following the closing of the Company’s IPO, and will expire 5 years from the completion of the Merger, or earlier upon redemption or liquidation. On March 11, 2021, as adjusted to reflect the Reverse Stock Split, each outstanding Private Placement warrant automatically converted into a warrant to purchase one-tenth of a share of Ouster common stock pursuant to the Warrant Agreement. Each 10 Private Placement warrants is exercisable for one share of Ouster common stock at an exercise price of $115.00 per share, with no fractional shares being issuable upon exercise of a warrant.

The private placement warrant liability was remeasured to fair value as of September 30, 2023 and 2022, resulting in a loss of $0.1 million and $7.4 million gain for the nine months ended September 30, 2023 and 2022, respectively, classified within other income, net in the condensed consolidated statements of operations and comprehensive loss.

The Private Placement warrants were valued using the following assumptions under the Black-Scholes option-pricing model:


	September 30, 2022			December 31, 2022			September 30, 2023
Stock price	$	9.60		$	8.60		$	5.04
Exercise price of warrant	$	115.00		$	115.00		$	115.00
Expected term (years)	3.4			3.2			2.4
Expected volatility	69.2		%	70.0		%	93.00		%
Risk-free interest rate	4.21		%	4.39		%	4.93		%

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Public Warrants

CLA, in its IPO in August 2020, issued 2,000,000 units that each consisted of one Class A ordinary share and one-half warrant to purchase a Class A ordinary share (the “Public warrants”). The warrants became exercisable 12 months following the closing of the Company’s IPO, and will expire five years from the completion of the Merger, or earlier upon redemption or liquidation. As adjusted for the Reverse Stock Split, each 10 Public warrants is exercisable for one share of Ouster common stock at an exercise price of $115.00 per share, with no fractional shares issuable upon exercise of a warrant. The Public warrants were recognized as equity upon the Merger in the amount of $17.9 million.

Prior to their expiration, the Company may redeem the Public warrants at a price of $0.10 per warrant, provided that the closing price of the Company’s common stock equals or exceeds $180.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which the Company gives proper notice of such redemption to the warrants holders.

The Company also assumed 5,973,170 outstanding public warrants upon closing the Velodyne Merger to purchase shares of the Company’s common stock (the “Velodyne Public warrants”). Each warrant entitles the holder to purchase 0.06153 shares of the Company’s common stock. Each 10 Velodyne Public warrants is exercisable for 0.6153 shares of the Company’s common stock at an exercise price of $140.20 per 0.6153 share of common stock, with no fractional shares being issuable upon exercise of a warrant. The warrants are exercisable at any time and expire in September 2025. The Company may redeem the outstanding warrants in whole and not in part at a price of $0.10 per warrant at any time after they become exercisable, provided that the last sale price of the Company’s common stock equals or exceeds $219.41 per share, subject to adjustments, for any 20-trading days within a 30-trading day period ending three business days prior to the date on which the Company sends the notice of redemption to the warrant holders.

Amazon Warrant

On February 10, 2023, as part of the Velodyne Merger, the Company assumed a warrant agreement and a transaction agreement, pursuant to which Velodyne agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly-owned subsidiary of Amazon Inc. (“Amazon”), a warrant to acquire, following customary antidilution adjustments, up to an aggregate of 3,263,898 shares of the Company’s common stock at an exercise price of $50.71 per share (the “Amazon Warrant”). The exercise price and the warrant shares issuable upon exercise of the Amazon Warrant are subject to further antidilution adjustments, including in the event we make certain sales of common stock (or securities exercisable or convertible into or exchangeable for shares of our common stock) at a price less than the exercise price of the Amazon Warrant. As a result of the issuance and sale by the Company of an additional 802,832 shares of common stock in the three months ended September 30, 2023 pursuant to the At-Market-Issuance Sales Agreement at prices below the exercise price of the Amazon Warrant, an antidilution adjustment to the terms of the Amazon Warrant occurred (see Note 11), resulting in the increase in the number of shares issuable under the Amazon Warrant by 120 shares of common stock and a reduction to the original strike price of the Amazon Warrant to $50.70 per share. As of September 30, 2023, there were 3,264,018 shares of common stock issuable under the Amazon Warrant.

The Amazon Warrant is subject to vesting; 50% of the unvested Amazon Warrant as of the date of the Velodyne Merger vested as a result of the Velodyne Merger and the remainder will vest over time based on payments by Amazon or its affiliates to us in connection with Amazon’s purchase of goods and services from the Company. The vested portion of the Amazon Warrant, representing 1,848,694 shares of Ouster common stock with a fair value of $8.6 million, was included in the Velodyne Merger purchase price consideration on February 10, 2023.

The Amazon Warrant shares vest in multiple tranches over time based on payments of up to $100.0 million by Amazon or its affiliates (directly or indirectly through third parties) to the Company in connection with Amazon’s purchase of goods and services. The fair value of the unvested Amazon Warrant, representing 1,387,018 unvested Ouster common stock shares will be recognized as a non-cash stock-based reduction to revenue when Amazon makes payments and vesting conditions become probable of being achieved.

During the three and nine months ended September 30, 2023, 28,306 Amazon Warrant shares vested and the Company recognized non-cash stock-based reduction to revenue of $0.2 million and $0.3 million, respectively.

The fair value of the Amazon Warrant shares was estimated on February 10, 2023, the date of completion of the Velodyne Merger, using the Black-Scholes option pricing model on the remaining contractual term of 6.98 years, an expected volatility of 53.7

Ouster, Inc. [OUST] Filings
Ouster, Inc. [OUST-WT] Filings
Ouster, Inc. [OUST-WTA] Filings
10-Q	[2023-11-13]
10-Q	[2023-08-14]
10-Q	[2023-05-12]
10-K	[2023-03-24]
10-Q	[2022-11-08]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-28]
10-Q	[2021-11-12]
10-Q	[2021-08-10]
10-Q	[2021-05-14]
S-1	[2021-04-02]
10-K	[2021-03-09]
10-Q	[2020-11-13]
S-1	[2020-08-04]

Ouster, Inc. [OUST] Filings

Ouster, Inc. [OUST-WT] Filings

Ouster, Inc. [OUST-WTA] Filings