What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-24 compared with 2022-02-28 · 458 added, 461 removed, 873 unchanged (51% of the section changed)

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Notes to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

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In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Acquisition of Sense Photonics, Inc.

– Valuation of Developed Technology

As described in Note 3 to the consolidated financial statements, on October 22, 2021, the Company completed the acquisition of Sense Photonics, Inc.

for total consideration of $72.8 million, of which $15.9 million related to developed technology.

As disclosed by management, the Company recognizes the assets acquired and liabilities assumed in business combinations on the basis of their fair values at the date of acquisition.

Management assesses the fair value of assets acquired, including intangible assets, and liabilities assumed using a variety of methods.

The fair values assigned to developed technology was determined using the relief from royalty rate method.

Management applied significant judgment in estimating the fair value of the developed technology, which involved significant assumptions related to the revenue growth rates, the relief-from-royalty rate, the discount rate and the economic life.

The principal considerations for our determination that performing procedures relating to the valuation of developed technology acquired as part of the acquisition of Sense Photonics, Inc.

is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures relating to the fair value of the developed technology acquired due to the significant judgment by management when developing the estimate;

(ii) significant audit effort in evaluating the significant assumptions related to the revenue growth rates, the relief-from-royalty rate, the discount rate, and the economic life;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Interim Goodwill Impairment Assessments

As described in Notes 2 and 5 to the consolidated financial statements, the Company has a single reporting unit and the goodwill balance was $51.2 million as of December 31, 2022.

Goodwill is tested by management for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired.

The quantitative impairment test involves comparing the fair value of the reporting unit to the carrying value.

In addition to its annual test, management performed an interim goodwill impairment test as of September 30, 2022, as a result of the decline in market conditions and the impact of market uncertainties that prolonged the sales cycle, and an interim goodwill impairment test as of December 31, 2022 as a result of the continuing market volatility resulting in a decline in the Company’s stock price.

Management determined the estimated fair value of the reporting unit exceeded its carrying value and that goodwill was not impaired as of September 30, 2022 and December 31, 2022.

The Company’s reporting unit estimated fair value was determined by management based on a discounted future cash flow model (income approach) and a market approach.

Management’s estimate of fair value included significant judgments and assumptions relating to an implied control premium and comparable company market transactions.

The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessments is a critical audit matter are (i) the significant judgment by management when developing the fair value

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estimates of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the implied control premiums and comparable company market transactions;

and (iii) the audit effort involved in the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others (i) reading the acquisition agreement and (ii) testing management’s process for estimating the fair value of the developed technology.

Testing management’s process included evaluating the appropriateness of the relief from royalty rate method, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of significant assumptions related to the revenue growth rates, the relief-from-royalty rate, the discount rate, and the economic life.

Evaluating the reasonableness of the revenue growth rates significant assumption involved considering (i) the past performance of the acquired business;

(ii) the consistency with external market and industry data;

and (iii) whether the significant assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s relief from royalty rate method and the reasonableness of the relief-from-royalty rate, the discount rate, and the economic life significant assumptions.

These procedures included, among others (i) testing management’s process for developing the fair value estimates of the reporting unit;

(ii) evaluating the appropriateness of the market approach;

(iii) testing the completeness and accuracy of underlying data used in the market approach;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to the implied control premiums and comparable company market transactions.

Evaluating management’s significant assumption related to the implied control premiums involved evaluating whether the assumption used by management was reasonable considering (i) the current and past performance of the reporting unit;

(ii) the synergies which a market participant could achieve;

(iii) the consistency with external market and industry data;

and (iv) whether this assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skills and knowledge were used to assist in evaluating (i) the appropriateness of the market approach and (ii) the reasonableness of the implied control premiums and comparable company market transactions significant assumptions.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 28, 2022

March 24, 2023

We have served as the Company’s auditor since 2019.

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CONSOLIDATED BALANCE SHEETS

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Cash and cash equivalents $ 122,932 $ 182,644

$ 182,644 $ 11,362

Restricted cash, current 257 977

Accounts receivable, net 11,233 10,723

Inventory 19,533 7,448

Prepaid expenses and other current assets 8,543 5,566

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Total assets $ 256,137 $ 307,702

Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

Liabilities, redeemable convertible preferred stock and stockholders’ equity

Current liabilities:

Accounts payable $ 8,798 $ 4,863

$ 4,863 $ 6,894

Accrued and other current liabilities 17,473 14,173

Short-term debt

Operating lease liability, current portion 3,221 3,067

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Operating lease liability, long-term portion 13,400 16,208

Warrant liabilities (At December 31, 2021 and 2020 related party $ 2,669 and Nil , respectively)

Warrant liabilities (At December 31, 2022 and 2021 related party $ 63 and $ 2,669 , respectively)

Debt 39,574 —

Other non-current liabilities 1,872 1,065

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Redeemable convertible preferred stock, $ 0.0001 par value per share;

100,000,000 and 131,411,372 shares authorized at December 31, 2021 and 2020;

Nil and 88,434,754 shares issued and outstanding at December 31, 2021 and 2020, respectively (aggregate liquidation preference of Nil and $ 41,791 at December 31, 2021 and 2020, respectively)

Stockholders’ equity (deficit):

100,000,000 shares authorized at December 31, 2022 and 2021;

Nil shares issued and outstanding at December 31, 2022 and 2021, respectively (aggregate liquidation preference of nil at December 31, 2022 and 2021, respectively)

Stockholders’ equity:

Common stock, $ 0.0001 par value;

1,000,000,000 and 210,956,516 shares authorized at December 31, 2021 and 2020, respectively;

172,200,417 and 33,327,294 issued and outstanding at December 31, 2021 and December 31, 2020, respectively

1,000,000,000 shares authorized at December 31, 2022 and 2021;

186,587,986 and 172,200,417 issued and outstanding at December 31, 2022 and 2021, respectively

Additional paid-in capital 613,665 564,045

564,045 133,468

Accumulated deficit ( 441,916 ) ( 303,356 )

( 303,356 ) ( 209,375 )

Accumulated other comprehensive loss ( 149 ) ( 6 )

Total stockholders’ equity (deficit) 260,700 ( 75,907 )

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit) $ 307,702 $ 46,414

Total stockholders’ equity 171,619 260,700

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity $ 256,137 $ 307,702

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

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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Product revenue $ 41,029 $ 33,578 $ 16,886

$ 33,578 $ 16,886 $ 9,804

Service revenue — — 2,018

— 2,018 1,609

Total revenue 41,029 33,578 18,904

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Cost of product 30,099 24,492 17,365

24,492 17,365 17,120

Cost of services — — 26

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Research and development 64,317 34,579 23,317

34,579 23,317 23,297

Sales and marketing 30,833 22,258 8,998

22,258 8,998 4,505

General and administrative 61,203 51,959 20,960

51,959 20,960 14,546

Total operating expenses 156,353 108,796 53,275

Loss from operations ( 145,423 ) ( 99,710 ) ( 51,762 )

Other income (expense):

Other (expense) income:

Interest income 2,208 471 24

Interest expense ( 2,694 ) ( 504 ) ( 2,517 )

( 504 ) ( 2,517 ) ( 3,582 )

Other income (expense), net 7,654 2,968 ( 52,150 )

2,968 ( 52,150 ) 7

Total other income (expense), net 7,168 2,935 ( 54,643 )

Loss before income taxes ( 138,255 ) ( 96,775 ) ( 106,405 )

(Benefit from) provision for income taxes ( 2,794 ) 375 1

Provision (benefit from) for income tax expense 305 ( 2,794 ) 375

Net loss $ ( 138,560 ) $ ( 93,981 ) $ ( 106,780 )

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Net loss per common share, basic and diluted $ ( 0.78 ) $ ( 0.70 ) $ ( 5.98 )

Weighted-average shares used to compute basic and diluted net

loss per share 133,917,571 17,858,976 7,390,456

Weighted-average shares used to compute basic and diluted net loss per share 177,923,156 133,917,571 17,858,976

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

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CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

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Balance — January 1, 2020

Cumulative-effect adjustment from adoption of ASC 842 — — — — — — 199 — 199

Issuance of common stock upon exercise of stock options — — 8,545 — 51 — — — 51

Issuance of common stock upon vesting of restricted stock awards — — 3,340 — 28 — — — 28

Stock-based compensation expense — — — — 1,293 — — — 1,293

Issuance of notes to stockholders — — — — — ( 44 ) — — ( 44 )

Vesting of early exercised stock options — — — — 51 — — — 51

Net loss — — — — — — ( 51,661 ) — ( 51,661 )

Balance — December 31, 2019

4,384,348 $ 40,016 7,902,407 $ — $ 2,320 $ ( 44 ) $ ( 102,595 ) $ — $ ( 100,319 )

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Repurchase of common stock — — ( 406,845 ) — ( 45 ) — — — ( 45 )

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Issuance of redeemable convertible preferred stock upon exercise of warrants 4,232,947 58,097 — — — — — — —

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Issuance of common stock in connection with acquisition — — 9,163,982 1 60,023 — — — 60,024

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Issuance of replacement equity awards in connection with acquisition — — — — 1,081 — — — 1,081

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17 564,045 — ( 303,356 ) ( 6 ) 260,700

Proceeds from at-the-market offering, net of commissions and fees of $ 505 and issuance costs of $ 546

— — 7,833,709 1 15,775 — — — 15,776

Issuance of common stock upon exercise of stock options — — 2,158,503 — 470 — — — 470

Issuance of common stock upon exercise of restricted stock units - net of tax withholding — — 4,439,713 1 ( 59 ) — — — ( 58 )

Issuance of common stock to employees under employee stock purchase plan — — 322,010 — 378 — — — 378

Repurchase of common stock — — ( 311,236 ) — ( 45 ) — — — ( 45 )

Cancellation of Sense acquisition shares — — ( 55,130 ) — ( 358 ) — — — ( 358 )

Vesting of early exercised stock options — — — — 138 — — — 138

Stock-based compensation expense — — — — 33,321 — — — 33,321

Net loss — — — — — — ( 138,560 ) — ( 138,560 )

Other Comprehensive loss — — — — — — — ( 143 ) ( 143 )

Balance — December 31, 2022 — $ — 186,587,986 $ 19 $ 613,665 $ — $ ( 441,916 ) $ ( 149 ) $ 171,619

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 93,981 ) $ ( 106,780 ) $ ( 51,661 )

Net loss $ ( 138,560 ) $ ( 93,981 ) $ ( 106,780 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 9,456 5,477 3,718

5,477 3,718 2,032

Stock-based compensation 33,321 25,363 12,057

25,363 12,057 1,235

Deferred income taxes — ( 2,477 ) —

Change in right-of-use asset 2,730 2,180 1,887

2,180 1,887 1,291

Interest expense on notes and convertible debt

36 1,030 2,446

Interest expense 799 36 1,030

Amortization of debt issuance costs and debt discount 160 250 258

Change in fair value of warrant liabilities ( 7,446 ) ( 2,947 ) 48,440

( 2,947 ) 48,440 6

Change in fair value of derivative liability — — 5,308

Gain on extinguishment of tranche right liability — — ( 1,610 )

— ( 1,610 ) —

Provision for doubtful accounts 379 67 169

Inventory write down 1,600 808 797

808 797 4,764

Write-off of property and equipment — — 555

Services exchanged for common stock — — 28

Provision for doubtful accounts 346 379 67

Loss from disposal of property and equipment 430 — —

Changes in operating assets and liabilities:

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CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property & equipment 275 — —

Purchases of property and equipment ( 5,422 ) ( 4,283 ) ( 3,509 )

( 4,283 ) ( 3,509 ) ( 7,494 )

Acquisition, net of cash acquired — ( 10,946 )

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Proceeds from exercise of stock options 470 526 1,337

Proceeds from ESPP purchase 378 — —

Proceeds from exercise of warrants — 1 —

Proceeds from issuance of redeemable convertible preferred stock, net off issuance cost of 265

Proceeds from issuance of convertible notes — — 40,498

Proceeds from issuance of debt — — 10,000

Proceeds from borrowings, net of debt discount and issuance costs 39,077 — —

Proceeds from the issuance of common stock under at-the-market offering, net of commissions and fees 16,322 — —

At-the-market offering costs for the issuance of common stock ( 541 ) — —

Taxes paid related to net share settlement of restricted stock units ( 59 ) — —

Net cash provided by financing activities 55,602 258,304 39,863

Effect of exchange rates on cash and cash equivalents ( 143 ) — —

Net increase (decrease) in cash, cash equivalents and restricted cash ( 60,378 ) 172,014 ( 5,763 )

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Cash paid for interest $ 1,735 $ 635 $ 1,228

$ 635 $ 1,228 $ 792

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

Property and equipment purchases included in accounts payable and accrued liabilities $ 269 $ 377 $ 232

Right-of-use assets obtained in exchange for operating lease liability $ 6,265 $ 6,409 $ 3,939

Equity issued in connection with acquisition $ — $ 61,105 $ —

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Conversion of redeemable convertible preferred stock to common stock $ — $ 97,322 $ 40,016

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Issuance of common stock pursuant to the conversion of convertible notes and accrued interest $ — $ 78,311 $ —

Deferred transaction costs not yet paid $ — $ 3,373 $ —

Reclassification of common stock on exercise of stock options with notes receivable from stockholders $ — $ 44 $ —

Issuance of warrants per loan agreement amendment $ — $ — $ 53

Issuance of common stock on exercise of stock options with notes receivable from stockholders $ — $ — $ 44

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Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets as of December 31,

2021 2020 2019

Cash and cash equivalents

$ 182,644 $ 11,362 $ 16,848

Restricted cash, current

Restricted cash, non-current

1,035 1,004 1,281

Total cash, cash equivalents and restricted cash

$ 184,656 $ 12,642 $ 18,405

Right-of-use assets obtained in exchange for operating lease liability $ 571 $ 6,265 $ 6,409

Unpaid at-the-market offering costs $ 5 $ — $ —

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

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Description of Business

was incorporated in the state of Delaware on June 4, 2020.

The Company’s operating subsidiary, Ouster Technologies, Inc.

(“OTI” and prior to the Merger (as defined below), named Ouster, Inc.), was incorporated in the state of Delaware on June 30, 2015.

was incorporated in the Cayman Islands on June 4, 2020 as “Colonnade Acquisition Corp”.

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”), 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 Colonnade Acquisition Corp.) and its consolidated subsidiaries following the consummation of the Merger.

(formerly known as Colonnade Acquisition Corp.) and its consolidated subsidiaries following the consummation of the Colonnade Merger.

Colonnade Acquisition Corp.

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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 with the Company pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of December 21, 2020, details of which are included below.

On March 11, 2021, CLA consummated a merger with the Company (the “Colonnade Merger”) pursuant to an Agreement and Plan of Merger (the “Colonnade Merger Agreement”) dated as of December 21, 2020, details of which are included below.

Basis of Presentation and Principles of Consolidation

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Impact of the COVID-19 Pandemic

The Company has been actively monitoring the ongoing COVID-19 pandemic situation and its impact on the Company’s business.

In response to the pandemic, numerous state and local jurisdictions have imposed “shelter-in-place” orders, quarantines and other restrictions.

In the United States, governmental authorities have, at times, recommended, and in certain cases required, that elective, specialty and other procedures and appointments, be suspended or canceled.

In the United States, COVID-19 restrictions continue to vary state by state as the measures depend greatly on the political landscape and the resurgence of new cases.

In California, where the Company’s headquarters are located, face coverings indoors are still recommended regardless of vaccination status, and some counties continue to have mask mandates.

Such orders or restrictions have, at times during the pandemic, resulted in reduced operations at the Company’s headquarters (including its manufacturing facility), work stoppages, slowdowns and delays, travel restrictions and cancellation of events and have restricted the efforts of the Company’s sales representatives, thereby significantly and negatively impacting the Company’s operations.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, including variants, the progression and effectiveness of vaccination roll-outs, vaccination hesitancy, and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

The situation surrounding COVID-19 remains fluid and the potential for a material impact on the Company increases the longer the virus impacts the level of economic activity in the United States and globally.

Given the ongoing evolution of the COVID-19 and the global responses to curb its impact, the Company is not able to estimate the future effects of the COVID-19 on its results of operations, financial condition, or liquidity.

Ouster has been actively monitoring the COVID-19 pandemic on a global scale and continues to evaluate the long-term impacts on the business while keeping abreast of the latest developments, particularly the variants of the virus, to ensure preparedness for Ouster’s employees and its business.

We maintain our commitment to protecting the health and safety of our employees and customers.

We continue to adapt and enhance our safety protocols as we follow the guidance from local authorities.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future events that are uncertain, including as a result of new information that continues to emerge concerning the virus, its variants, the deployment and effectiveness of vaccination roll-outs, vaccination hesitancy, therapeutics, and the actions taken to contain the virus or treat it, as well as the economic impact on local, regional, national and international customers and markets.

Thus, the Company is not able to estimate the future consequences on its operations, its financial condition, or its liquidity.

The accompanying consolidated financial statements have been prepared on a going concern basis.

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As of December 31, 2022, the Company had an accumulated deficit of approximately $ 441.9 million.

The Company has historically financed its operations primarily through the Merger and related transactions, the sale of convertible notes, equity securities, proceeds

from debt and, to a lesser extent, cash received from sales.

The Company has historically financed its operations primarily through the Colonnade Merger and related transactions, the sale of convertible notes, equity securities, proceeds from debt and, to a lesser extent, cash received from sales.

Management expects significant operating losses and negative cash flows from operations to continue for the foreseeable future.

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The long-term continuation of the Company’s business plan is dependent upon the generation of sufficient revenues from its products to offset expenses.

In the event that the Company does not generate sufficient cash flows from operations and is unable to obtain funding, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue operations.

The Company has concluded that its cash and cash equivalents as of December 31, 2021 are sufficient for the Company to continue as a going concern for at least one year from the date these consolidated financial statements are available for issuance.

spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue operations.

The Company has concluded that it has sufficient capital to fund its obligations after closing the Velodyne Merger (as defined below, for additional information, Note 18), as they become due, in the ordinary course of business for at least one year from the date these consolidated financial statements are available for issuance.

Merger Agreement with Velodyne Lidar, Inc.

On November 4, 2022, the Company entered into an Agreement and Plan of Merger (the “Velodyne Merger Agreement”) with Velodyne Lidar, Inc., a Delaware corporation (“Velodyne”), Oban Merger Sub, Inc., a Delaware corporation and one of the Company’s direct, wholly owned subsidiaries (“Velodyne Merger Sub I”) and Oban Merger Sub II LLC, a Delaware limited liability company and one of the Company’s direct, wholly owned subsidiaries (“Velodyne Merger Sub II”).

On February 10, 2023, the Company completed the merger of equals with Velodyne pursuant to the terms of the Agreement and Plan of Merger with Velodyne, Merger Sub I and Merger Sub II (the “Velodyne Merger”).

In connection with the closing of the Velodyne Merger, the Company and Velodyne now operate as a single combined company.

Merger Agreement with Colonnade Acquisition Corp.

and Beam Merger Sub, Inc.

On December 21, 2020, OTI entered into the Merger Agreement with CLA and Beam Merger Sub, Inc.

On December 21, 2020, OTI entered into the Colonnade Merger Agreement with CLA and Beam Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and subsidiary of CLA.

OTI’s board of directors unanimously approved OTI’s entry into the Merger Agreement, and on March 11, 2021, the transactions contemplated by the Merger Agreement were consummated.

Pursuant to the terms of the Merger Agreement, (i) CLA domesticated as a corporation incorporated under the laws of the State of Delaware and changed its name to “Ouster, Inc.” and (ii) Merger Sub merged with and into OTI (such transactions contemplated by the Merger Agreement, the “Merger”), with OTI surviving the Merger.

As a result of the Merger, among other things, (1) each of the then issued and outstanding 5,000,000 CLA Class B ordinary shares, par value $ 0.0001 per share, of CLA (the “CLA Class B ordinary shares”) converted automatically, on a one -for-one basis, into a CLA Class A ordinary share (as defined below), (2) immediately following the conversion described in clause (1), each of the then issued and outstanding 25,000,000 Class A ordinary shares, par value $ 0.0001 per share, of CLA (the “CLA Class A ordinary shares”), converted automatically, on a one -for-one basis, into a share of common stock, par value $ 0.0001 per share, of Ouster (the “Ouster common stock”), (3) each of the then issued and outstanding 10,000,000 redeemable warrants of CLA (the “CLA warrants”) converted automatically into a redeemable warrant to purchase one share of Ouster common stock (the “Public warrants”) pursuant to the Warrant Agreement, dated August 20, 2020 (the “Warrant Agreement”), between CLA and Continental Stock Transfer & Trust Company (“Continental”), as warrant agent, and (4) each of the then issued and outstanding units of CLA that had not been previously separated into the underlying CLA Class A ordinary shares and underlying CLA warrants upon the request of the holder thereof (the “CLA units”), were cancelled and entitled the holder thereof to one share of Ouster common stock and one-half of one Public warrant, and (5) each of the then issued and outstanding 6,000,000 private placement warrants of CLA (the “Private Placement warrants”) converted automatically into a warrant to purchase one share of Ouster common stock pursuant to the Warrant Agreement.

OTI’s board of directors unanimously approved OTI’s entry into the Colonnade Merger Agreement, and on March 11, 2021, the transactions contemplated by the Colonnade Merger Agreement were consummated.

Pursuant to the terms of the Colonnade Merger Agreement, (i) CLA domesticated as a corporation incorporated under the laws of the State of Delaware and changed its name to “Ouster, Inc.” and (ii) Merger Sub merged with and into OTI (such transactions contemplated by the Colonnade Merger Agreement, the “Colonnade Merger”), with OTI surviving the Colonnade Merger.

As a result of the Colonnade Merger, among other things, (1) each of the then issued and outstanding 5,000,000 CLA Class B ordinary shares, par value $ 0.0001 per share, of CLA (the “CLA Class B ordinary shares”) converted automatically, on a one -for-one basis, into a CLA Class A ordinary share (as defined below), (2) immediately following the conversion described in clause (1), each of the then issued and outstanding 25,000,000 Class A ordinary shares, par value $ 0.0001 per share, of CLA (the “CLA Class A ordinary shares”), converted automatically, on a one -for-one basis, into a share of common stock, par value $ 0.0001 per share, of Ouster (the “Ouster common stock”), (3) each of the then issued and outstanding 10,000,000 redeemable warrants of CLA (the “CLA warrants”) converted automatically into a redeemable warrant to purchase one share of Ouster common stock (the “Public warrants”) pursuant to the Warrant Agreement, dated August 20, 2020 (the “Warrant Agreement”), between CLA and Continental Stock Transfer & Trust Company (“Continental”), as warrant agent, and (4) each of the then issued and outstanding units of CLA that had not been previously separated into the underlying CLA Class A ordinary shares and underlying CLA warrants upon the request of the holder thereof (the “CLA units”), were cancelled and entitled the holder thereof to one share of Ouster common stock and one-half of one Public warrant, and (5) each of the then issued and outstanding 6,000,000 private placement warrants of CLA (the “Private Placement warrants”) converted automatically into a Public warrant pursuant to the Warrant Agreement.

No fractional Public warrants were issued upon separation of the CLA units.

Immediately prior to the effective time of the Merger, (1) each share of OTI’s Series B Preferred Stock, par value $ 0.00001 per share (the “OTI Preferred Stock”), converted into one share of common stock, par value $ 0.00001 per share, of OTI (the “OTI common stock” and, together with OTI Preferred Stock, the “OTI Capital Stock”) (such conversion, the “OTI Preferred Conversion”) and (2) all of the outstanding warrants to purchase shares of OTI Capital Stock were exercised in full or terminated in accordance with their respective terms (the “OTI Warrant Settlement”).

As a result of and upon the closing of the Merger, among other things, all shares of OTI Capital Stock (after giving effect to the OTI Warrant Settlement) outstanding immediately prior to the closing of the Merger together with shares of OTI common stock reserved in respect of options to purchase shares of OTI common stock and restricted shares of OTI common stock (together, the “OTI Awards”) outstanding immediately prior to the closing of the Merger that were converted into awards based on Ouster common stock, were cancelled in exchange for the right to receive, or the reservation of, an aggregate of 150,000,000 shares of Ouster common stock (at a deemed value of $ 10.00 per share), which, in the case of OTI Awards, were shares underlying awards based on Ouster common stock, representing a fully-diluted pre-transaction.

Upon closing of the Merger, the Company received gross proceeds of $ 299.9 million from the Merger and private offering, offset by $ 8.5 million of pre-merger costs relating to CLA and offerings costs of $ 26.6 million.

The Merger was accounted for as a reverse recapitalization.

Immediately prior to the effective time of the Colonnade Merger, (1) each share of OTI’s Series B Preferred Stock, par value $ 0.00001 per share (the “OTI Preferred Stock”), converted into one share of common stock, par value $ 0.00001 per share, of OTI (the “OTI common stock” and, together with OTI Preferred Stock, the “OTI Capital Stock”) (such conversion, the “OTI Preferred Conversion”) and (2) all of the outstanding warrants to purchase shares of OTI Capital Stock were exercised in full or terminated in accordance with their respective terms (the “OTI Warrant Settlement”).

As a result of and upon the closing of the Colonnade Merger, among other things, all shares of OTI Capital Stock (after giving effect to the OTI Warrant Settlement) outstanding immediately prior to the closing of the Colonnade Merger together with shares of OTI common stock reserved in respect of options to purchase shares of OTI common stock and restricted shares of OTI common stock (together, the “OTI Awards”) outstanding immediately prior to the closing of the Colonnade Merger that were converted into awards based on Ouster common stock, were cancelled in exchange for the right to receive, or the reservation of, an aggregate of 150,000,000 shares of Ouster common stock (at a deemed value of $ 10.00 per share), which, in the case of OTI Awards, were shares underlying awards based on Ouster common stock, representing a fully-diluted pre-transaction.

Upon closing of the Colonnade Merger, the Company received gross proceeds of $ 299.9 million from the Colonnade Merger and private offering, offset by $ 8.5 million of pre-merger costs relating to CLA and offerings costs of $ 26.6 million.

The Colonnade Merger was accounted for as a reverse recapitalization under US GAAP.

Under this method of accounting, CLA is treated as the “acquired” company for financial reporting purposes.

This determination is primarily based on OTI stockholders comprising a relative majority of the voting power of the Company and having the ability to nominate the members of the board of directors of the Company after the Merger, OTI’s operations prior to the Merger comprising the only ongoing operations of the Company following the Merger, and OTI’s senior management prior to the Merger comprising a majority of the senior management of the Company following the Merger.

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.

Transactions and balances prior to the Merger are those of OTI.

The shares and net loss per share available to holders of OTI’s common stock prior to the Merger have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement.

This determination is primarily based on OTI stockholders comprising a relative majority of the voting power of the Company and having the ability to nominate the members of the board of directors of the Company after the Colonnade Merger, OTI’s operations prior to the Colonnade Merger comprising the only ongoing operations of the Company following the Colonnade Merger, and OTI’s senior management prior to the Colonnade Merger comprising a majority of the senior management of the Company following the Colonnade Merger.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of OTI with the Colonnade 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.

Transactions and balances prior to the Colonnade Merger are those of OTI.

The shares and net loss per share available to holders of OTI’s common stock prior to the Colonnade Merger have been retroactively restated as shares reflecting the exchange ratio established in the Colonnade Merger Agreement.

PIPE Investment

On December 21, 2020, concurrently with the execution of the Merger Agreement, CLA entered into subscription agreements with certain institutional and accredited investors (collectively, the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, in the aggregate, 10,000,000 shares of Ouster common stock at $ 10.00 per share for an aggregate commitment amount of $ 100,000,000 (the “PIPE Investment”), a portion of which was funded by certain affiliates of Colonnade Sponsor LLC, CLA’s sponsor (the “Sponsor”).

The PIPE Investment was consummated substantially concurrently with the closing of the Merger.

On December 21, 2020, concurrently with the execution of the Colonnade Merger Agreement, CLA entered into subscription agreements with certain institutional and accredited investors (collectively, the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, in the aggregate, 10,000,000 shares of Ouster common stock at $ 10.00 per share for an aggregate commitment amount of $ 100,000,000 (the “PIPE Investment”), a portion of which was funded by certain affiliates of Colonnade Sponsor LLC, CLA’s sponsor (the “Sponsor”).

The PIPE Investment was consummated substantially concurrently with the closing of the Colonnade Merger.

At the Market Issuance Sales Agreement

On April 29, 2022, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B.

Riley Securities, Inc., Cantor Fitzgerald & Co.

and Oppenheimer & Co.

Inc., pursuant to which the Company may offer and sell, from time to time, through or to the agents, acting as agent or principal, shares of the Company’s common stock having an aggregate offering price of up to $ 150.0 million under the Company’s Form S-3 registration statement.

From the date of the ATM Agreement through December 31, 2022, the Company sold 7,833,709 shares at a weighted-average sales price of $ 2.08 per share, resulting in cumulative gross proceeds to the Company totaling approximately $ 16.8 million before deducting offering costs, sales commissions and fees.

Loan and Security Agreement

On April 29, 2022, the Company entered into the Loan and Security Agreement (as amended by the First Amendment to Loan and Security Agreement, dated as of August 5, 2022, the Consent and Second Amendment to Loan and Security Agreement, dated as of November 1, 2022 (the “Second Amendment”), and the Third Amendment to Loan and Security Agreement, dated as of February 10, 2023 (the “Third Amendment”), the “Loan Agreement”) with Hercules Capital, Inc.

as administrative agent and collateral agent (“Hercules”).

The Loan Agreement provides the Company with a term loan of up to $ 50.0 million, subject to 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.

For additional information, see Note 7.

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Items subject to such estimates and assumptions include, but are not limited to, the useful lives of long-lived assets, revenue recognition, sales return reserve, inventory write downs, the realizability of deferred tax assets, the measurement of stock-based compensation, and the valuation of the Company’s various financial instruments.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances.

On an ongoing basis, the Company evaluates these assumptions, judgments and estimates.

Actual results may differ from these estimates.

Due to the novel coronavirus (“COVID-19”) pandemic, there is ongoing uncertainty and significant disruption in the global economy and financial markets.

The Company is not aware of any specific event or circumstances that would require an update to estimates, judgments or assumptions or a revision to the carrying value of the Company’s assets or liabilities as of the date these financial statements were available to be issued.

These estimates, judgments and assumptions may change in the future, as new events occur, or additional information is obtained.

The preparation of consolidated financial statements in conformity with US GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.

The most significant estimates included in these consolidated financial statements are the useful lives of long-lived assets, revenue recognition, sales return reserve, inventory write downs, the realizability of deferred tax assets, the measurement of stock-based compensation, and the valuation of the Company’s various financial instruments.

The complexity of the estimation process and factors relating to assumptions, risks and uncertainties inherent with the use of the estimates affect the amount of revenue and related expenses reported in the Company’s consolidated financial statements.

Internal and external factors can affect the Company’s estimates.

Actual results could differ from these estimates under different assumptions or conditions.

Business Combinations

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dollars using historical rates.

The revenues and expenses are translated using the average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive loss in the consolidated balance sheets.

The revenues and expenses are translated using the weighted-average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive loss in the consolidated balance sheets.

Foreign currency translation adjustments are recorded in other comprehensive loss in the consolidated statements of operations and comprehensive loss.

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Segment Information

The Company operates as one reportable and operating segment, which relates to the sale of lidar sensor kits.

The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

The Company operates as one reportable and operating segment, which relates to the sale and production of lidar sensor kits.

The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

The profitability of the Company’s product group is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company.

Revenue Recognition

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It is determined that 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.

The Company applies judgment 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 that are 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.

either on its own or together with other resources that are 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.

The Company’s performance obligations consist of (i) sale of lidar sensor kits and (ii) product development and validation services.

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

Revenue is recognized when control of products or services is transferred to customers, in

an amount that reflects the consideration that the Company expects to receive in exchange for those products or services.

Revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those products or services.

The Company generates all of its revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.

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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 Company did not have any revenue from services that were recognized over time in 2021.

Revenue from services that were recognized over time were not material to date.

Costs to obtain a contract

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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.

The incremental cost of obtaining a contract for the years ended December 31, 2021 and 2020 was $ 2.2 million and $ 0.3 million, respectively.

No commission plan was in place and no expense was recognized for 2019.

The incremental cost of obtaining a contract for the years ended December 31, 2022 and 2021 was $ 2.9 million, $ 2.2 million and $ 0.3 million, respectively.

Right of return

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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.

Additionally, as a practical expedient, the Company has not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

The deferred revenue balance represents the remaining performance obligations for contracts with an original duration of greater than one year.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized less than $ 0.1 million, $ 0.5 million and less than $ 0.1 million of revenue that was deferred as of December 31, 2020, 2019 and 2018 respectively.

Deferred revenue was $ 0.2 million as of December 31, 2021, relating primarily to the development and validation services.

All of the deferred revenue balance at December 31, 2021 is expected to be recognized in the year ending December 31, 2022.

Disaggregation of Revenues

The following table presents total revenues by geographic area based on the location products were shipped to and services provided (in thousands):

2021 2020 2019

United States $ 14,790 $ 8,328 $ 7,035

Americas, excluding United States 866 436 361

Europe, Middle East and Africa 10,588 5,870 2,368

Asia and Pacific 7,334 4,270 1,649

$ 33,578 $ 18,904 $ 11,413

Cost of Revenue

Cost of revenue consists of the manufacturing cost of digital lidar sensors, which primarily consists of sensor components, personnel-related costs directly associated with the manufacturing, and amounts paid to our third-party contract manufacturer and vendors.

Cost of revenue also includes depreciation of manufacturing equipment, an allocated portion of overhead, facility and IT costs, stock-based compensation for manufacturing personnel, reserves for estimated warranty expenses, excess and obsolete inventory and shipping costs.

Research and development

Expenditures incurred in the research and development of new products and enhancements to existing products are charged to expense as incurred.

Research and development costs include, but are not limited to payroll and personnel expenses, laboratory supplies, prototype materials consumed during product development and the inventory materials consumed during pilot manufacturing runs, and consulting costs.

Sales and marketing

Selling and marketing expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, for all personnel directly involved in business development, customer support, and marketing activities, and marketing expenses including trade shows, advertising, and demonstration equipment.

Sales and marketing costs are charged to expense as incurred.

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied at the reporting date.

The composition of unsatisfied performance obligations consists mainly of the Company’s deferred extended warranty services, and to a lesser extent, deferred product revenue and development and validation services for which the Company has an obligation to perform, and has not yet recognized as revenue in the consolidated financial statements.

The following table presents the breakdown of remaining performance obligations (in thousands):

Current $ 224 $ 172

Noncurrent 342 47

Total $ 566 $ 219

Net loss per common share

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Changes in the Company’s allowance for expected credit losses were as follows (in thousands):

December 31, 2021

December 31, 2020

December 31, 2019

Year Ended December 31,

2022 2021 2020

Beginning balance $ 507 $ 128 $ 117

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Uncollectible accounts written off, net of recoveries — — ( 56 )

— ( 56 ) ( 52 )

Ending balance $ 853 $ 507 $ 128

$ 507 $ 128 $ 117

Inventory consists principally of raw materials, work-in-process, and finished goods and is stated at the lower of cost or estimated net realizable value.

Inventory consists primarily of raw materials, work-in-process, and finished goods and is stated at the lower of cost or estimated net realizable value.

Costs are computed under the standard cost method, which approximates actual costs determined on the first-in, first-out basis.

The Company charges cost of revenue for write-downs of inventories which are obsolete or in excess of anticipated demand based on purchase commitments, production needed to fulfil the warranty obligations, consideration of product marketability and product development plans, historical revenue and assumptions about future demand and market conditions.

The Company wrote down inventories of $ 0.8 million, $ 0.8 million and $ 4.8 million during the years ended December 31, 2021, 2020 and 2019, respectively, included in cost of revenue.

Property and Equipment

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

There were no triggering events identified.

The Company has not identified any such impairment losses to date.

Goodwill represents the excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in a business combination.

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Prior to performing the impairment test, the Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit was less than the carrying amount.

If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then the Company would perform a quantitative impairment test.

If after assessing the totality of events or circumstances, the Company were to determine that it is

more likely than not that the fair value of the reporting unit is less than the carrying amount, then the Company would perform a quantitative impairment test.

The quantitative impairment test involves comparing the fair value of the reporting unit to the carrying value.

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If the fair value of the reporting unit is less than the carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit.

As of December 31, 2021, no impairment of goodwill has been identified.

Intangible Assets

Intangible assets consist primarily of developed technology, vendor relationship and customer relationships.

Intangible assets consist of developed technology, vendor relationship and customer relationships.

Acquired intangible assets are initially recorded at the acquisition-date fair value.

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The fair value hierarchy consists of the following three levels:

• Level I - Quoted prices for identical instruments in active markets.

• Level II - Quoted prices for similar instruments in active markets;

• Level 1 - Quoted prices for identical instruments in active markets.

• Level 2 - Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

• Level III - Instruments whose significant value drivers are unobservable.

Redeemable Convertible Preferred Stock

The Company records redeemable convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs.

The redeemable convertible preferred stock is recorded outside of permanent equity because while it was not mandatorily redeemable, in the event of certain events considered not solely within the Company’s control, such as a merger, acquisition or sale of all or substantially all of the Company’s assets (each, a “deemed liquidation event”), the redeemable convertible preferred stock would become redeemable at the option of the holders of such shares.

The Company did not adjust the carrying values of the redeemable convertible preferred stock to the liquidation preferences of such shares because it was not probable that a deemed liquidation event would occur that would obligate the Company to pay the liquidation preferences to holders of shares of redeemable convertible preferred stock.

• Level 3 - Instruments whose significant value drivers are unobservable.

Warrant Liabilities

Warrant liabilities consist of redeemable convertible preferred stock warrants and Private Placement warrants.

The Company’s redeemable convertible preferred stock warrants were accounted for as a liability as the underlying redeemable convertible preferred stock were contingently redeemable and would obligate the Company to transfer assets to the holders at a future date upon occurrence of a deemed liquidation event.

Warrant liabilities consist of Private Placement warrants.

The Private Placement warrants are not redeemable for cash so long as they are held by the initial purchasers or their permitted transferees but may be redeemable for common stock if certain other conditions are met.

If the Private Placement warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement warrants are redeemable by the Company and exercisable by such holders subject to certain conditions, such as the reported closing price of our common stock equaling or exceeding $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending three business days before the Company sends the notice of redemption to the holders of Private Placement warrants.

evaluated the Private Placement warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity.

The Company evaluated the Private Placement warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity.

The agreement governing the Private Placement warrants includes a provision, the application of which could result in a different settlement value for the Private Placement warrants depending on their holder.

Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Private Placement warrants are not considered to be “indexed to the Company’s own stock.” This provision precludes the Company from classifying the Private Placement warrants in stockholders’ equity.

As the redeemable convertible preferred stock warrants and Private Placement warrants meet the definition of a derivative, the Company recorded these warrants as liabilities on the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statements of operations and comprehensive loss at each reporting date.

The Company’s redeemable convertible preferred stock warrants were exercised in 2021 and no redeemable convertible preferred stock warrants were outstanding as of December 31, 2021.

As the Private Placement warrants meet the definition of a derivative, the Company recorded these warrants as liabilities on the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statements of operations and comprehensive loss at each reporting date.

Concentrations of credit risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, and restricted cash, and accounts receivable.

Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable.

Cash, cash equivalents and restricted cash are deposited with federally insured commercial banks in the U.S.

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may be in excess of federal insurance limits.

As of December 31, 2021 and 2020, the Company had cash, cash equivalents and restricted cash on deposit with financial institutions in US of $ 184.2 million and $ 12.5 million.

As of December 31, 2022 and 2021, the Company had cash, cash equivalents and restricted cash with financial institutions in US of $ 123.5 million and $ 184.2 million, respectively.

As of December 31, 2022 and 2021, the Company also had cash on deposit with financial institutions in countries other than the US of approximately $ 0.8 million and $ 0.5 million, respectively, that was not federally insured.

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

2021 December 31,

Customer A * 11 %

Customer B * 23 %

Customer C * 13 %

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

There were no customers that accounted for more than 10% of revenue during the year ended December 31, 2021.

Revenue from customer D accounted for approximately 11 % and 22 % of total revenue during the year ended December 31, 2020 and 2019 .

There were no customers that accounted for more than 10% of revenue during the years ended December 31, 2022 and 2021 .

Revenue from customer D accounted for approximately 11 % of total revenue during the year ended December 31, 2020.

Concentrations of supplier risk

One supplier accounted for approximately 20 % of total purchases during the year ended December 31, 2021 and accounted for 55 % of total accounts payable balance as of December 31, 2021.

One supplier accounted for approximately 15 % of total purchases during the year ended December 31, 2020 and there were no suppliers that accounted for more than 23 % of total accounts payable balance as of December 31, 2020.

One supplier accounted for approximately 12 % of total purchases during the year ended December 31, 2019 and there were no suppliers that accounted for more than 10% of total accounts payable balance as of December 31, 2019.

Deferred transaction costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly related to the Company’s in-process equity financings, including the merger with Colonnade Acquisition Corp, until such financings are consummated.

After consummation of the equity financing, these costs will be recorded as a reduction of the proceeds received as a result

of the equity financing.

In the event that a planned equity financing does not occur or is significantly delayed, all related deferred offering costs are expensed immediately within the Company’s consolidated statements of operations and comprehensive loss.

The Company capitalized $ 3.4 million of costs related to the merger with Colonnade Acquisition Corp.

at December 31, 2020 (included in other non-current assets in the consolidated balance sheets).

Upon the closing of the Merger the deferred transaction costs were recorded in the additional paid-in capital and there were no deferred transaction costs as of December 31, 2021.

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

Year Ended December 31,

2022 2021 2020

Supplier B 28 % 20 % 15 %

Supplier B accounted for 39 % and 55 % of total accounts payable balance as of December 31, 2022 and 2021.

One professional services vendor accounted for approximately 14 % of total accounts payable balance as of December 31, 2022.

There were no other vendors that accounted for more than 10% of total accounts payable balance as of December 31, 2021.

Stock-based compensation

The Company measures and recognizes stock-based compensation expense for stock-based awards granted to employees, directors, and consultants over the requisite service periods based on the estimated grant date fair value, which for options is using the Black-Scholes-Merton option pricing model using the following variables:

• Common Stock Valuation – The fair value of the shares of common stock underlying the Company’s stock-based awards issued after the Merger is based on the grant date closing fair market value of the Company’s common stock.

Before closing of the Merger, the fair value of the shares of common stock underlying the Company’s stock-based awards was historically determined by management and approved by the Board of Directors.

• Common Stock Valuation – The fair value of the shares of common stock underlying the Company’s stock-based awards issued after the Colonnade Merger is based on the grant date closing fair market value of the Company’s common stock.

Before closing of the Colonnade Merger, the fair value of the shares of common stock underlying the Company’s stock-based awards was historically determined by management and approved by the board of directors.

Because there was no public market for the Company’s common stock, the board of directors determined the fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors, including contemporaneous valuations performed by an unrelated third-party specialist, valuations of comparable public companies, operating and financial performance, the lack of liquidity of capital stock, and general and industry-specific economic outlook.

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The Company’s policy for issuing stock upon stock option exercise is to issue new common stock.

Employee loan notes for purchase of common stock

Certain executives and employees of the Company exercised stock options early or purchased stock in exchange for promissory notes in the year ended December 31, 2020.

These notes were secured by the underlying shares purchased (the notes were 50 % recourse and 50 % non-recourse) and the Company had the right to repurchase such unvested shares upon employee termination at the original issuance price.

The Company accounted for the notes as non-recourse in their entirety and did not record the notes in the consolidated financial statements as the Company did not consider the recourse rights to be substantive.

The half of the respective obligations under the promissory notes were forgiven and the remaining balance was repaid in 2021 (see Note 12).

Deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss (NOL) and

tax credit carryforwards.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Due to its history of operating losses, the Company has recorded a full valuation allowance against its deferred tax assets as of December 31, 2021 and December 31, 2020.

Due to its history of operating losses, the Company has recorded a full valuation allowance against its deferred tax assets as of December 31, 2022 and 2021.

The Company accounts for uncertainty in income taxes using a two-step approach to recognize and measure uncertain tax positions.

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Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASC 842, Leases, a new standard requiring lessees to recognize operating and finance lease liabilities on the balance sheet, as well as corresponding right-of-use (“ROU”) assets.

This standard also made some changes to lessor accounting and aligns key aspects of the lessor accounting model with the revenue recognition standard.

In addition, disclosures are required to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

ASC 842 requires adoption using the modified retrospective approach, with the option of applying the requirements of the standard either i) retrospectively to each prior comparative reporting period presented, or ii) retrospectively at the beginning of the period of adoption.

The new standard also eliminates the previous build-to-suit lease accounting guidance, which results in the derecognition of build-to-suit assets and liabilities that remained on the balance sheet as of the ASC 842 adoption date.

The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis, reflecting an immaterial cumulative effect as an adjustment to retained earnings.

The Company elected the permitted practical expedients not to reassess the following related to leases that commenced before the effective date of ASC 842:

(i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases.

The Company also elected the practical expedient to use hindsight in determining lease term and assessment of impairment of right of use assets.

The new standard also provides certain accounting elections for an entity’s ongoing accounting.

The Company elected the short-term lease recognition exemption for all leases that qualify.

This means that, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities for leases with an initial lease term of one year or less.

The Company also elected to not separate lease and nonlease components for its building leases.

The nonlease components are generally variable in nature and are expected to represent most of the Company’s variable lease costs.

Variable costs are

expensed as incurred.

The Company determines whether an arrangement is a lease, or contains a lease, at inception.

For the purpose of the adoption of ASC 842, the Company also performed an evaluation of its other contracts with customers and suppliers in accordance with ASC 842 and determined that, except for the leases described in Note 9, “Leases”, none of the Company’s contracts contain a lease.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“ECL”).

Under the new model, an entity is required to estimate ECL on available-for-sale (AFS) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”.

The new model also requires the impairment calculation on an individual security level and requires an entity to use the present value of cash flows when estimating the ECL.

The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other comprehensive income.

The Company adopted this ASU as of January 1, 2021, which did not have a material impact on its consolidated financial statements and related disclosures.

Recently Issued and Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

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2019-12, Income Taxes.

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by improving consistent application of

other areas of Topic 740.

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by improving consistent application of other areas of Topic 740.

The Company adopted this ASU as of January 1, 2021, which did not have a material impact on its consolidated financial statements and related disclosures.

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 consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06).

ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity.

In addition, the amendments in the ASU also simplify the guidance in ASC 815-40, Derivatives and Hedging:

Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities.

Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets.

The new standard is effective for the Company for annual periods beginning December 15, 2021.

The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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Early adoption of the amendments is permitted, including adoption in an interim period.

The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.

In the fourth quarter of 2022, Ouster adopted the amendments and recognized contract assets acquired and contract liabilities assumed in the mergers in accordance with ASC 606.

Ouster has elected to apply the practical expedient under paragraph ASC 805-20-30-29(b) of the adopted amendments and allocated the transaction price based on the standalone selling price of each performance obligation in the contract with a customer for all contracts acquired in the mergers.

As of December 31, 2022, the adoption of this new standard had no impact on the Company’s consolidated financial statements and related footnote disclosures.

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 consolidated financial statements.

Business Combination and Related Transactions

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Transaction costs incurred by the Company in connection with the acquisition, including professional fees, were $ 1.5 million.

The following table summarizes the preliminary fair value of identifiable assets acquired and liabilities assumed (in thousands):

Measurement period adjustments recognized during 2022 related primarily to updated estimated fair values for assumed employer withholding tax liabilities, royalty liability and a net working capital adjustment.

A reconciliation of preliminary total consideration as of December 31, 2021, and total final consideration as of December 31, 2022, are presented below (in thousands):

As Reported Measurement Period Adjustment As Adjusted Value

Fair value of common stock issued at closing $ 60,024 $ ( 358 ) $ 59,666

Fully vested replacement equity awards 1,081 — 1,081

Cash paid at closing to settle Sense pre-existing debt and transaction costs incurred by Sense 11,703 — 11,703

Total consideration $ 72,808 $ ( 358 ) $ 72,450

As Reported Measurement Period Adjustment As Adjusted Value

Assets acquired:

Cash $ 689 $ — $ 689

Restricted cash 69 — 69

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Property and equipment, net 626 — 626

Intangible assets:

Developed technology - estimated useful life of 8 years

Vendor relationship - estimated useful life of 3 years

Customer relationships - estimated useful life of 3 years

Developed technology 15,900 — 15,900

Vendor relationship 6,600 — 6,600

Customer relationships 900 — 900

Goodwill 51,076 76 51,152

Total assets acquired $ 77,091 $ 76 $ 77,167

Liabilities assumed:

Accounts payable $ ( 266 ) $ — $ ( 266 )

Accrued and other current liabilities ( 1,540 ) ( 234 ) ( 1,774 )

Other non-current liabilities — ( 200 ) ( 200 )

Deferred tax liability ( 2,477 ) — ( 2,477 )

Total purchase consideration $ 72,808

Total liabilities assumed $ ( 4,283 ) $ ( 434 ) $ ( 4,717 )

Net Assets acquired $ 72,808 $ ( 358 ) $ 72,450

The fair value assigned to developed technology was determined as of the acquisition date under the relief-from-royalty rate method using Level 3 inputs.

Management applied significant judgement in estimating the fair value of the developed technology, which involved significant assumptions related to the revenue growth rates, the relief-from-royalty rate, the discount rate, and the economic life.

The fair values assigned to the vendor relationship and customer relationships were determined using Level 3 inputs under the with-and-without method.

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Goodwill is not deductible for tax purposes.

The operating results of Sense are included in our consolidated statements of income from the respective dates of acquisition.

Sense’s revenue and pretax loss for the period from the acquisition date of October 22, 2021 to December 31, 2021 was not material.

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Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 121,100 $ — $ — $ 121,100

$ 177,513 $ — $ — $ 177,513

Total financial assets $ 121,100 $ — $ — $ 121,100

$ 177,513 $ — $ — $ 177,513

Warrant liabilities $ — $ — $ 180 $ 180

$ — $ — $ 7,626 $ 7,626

Total financial liabilities $ — $ — $ 180 $ 180

$ — $ — $ 7,626 $ 7,626

December 31, 2021

Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 177,513 $ — $ — $ 177,513

$ 10,493 $ — $ — $ 10,493

Total financial assets $ 177,513 $ — $ — $ 177,513

$ 10,493 $ — $ — $ 10,493

Warrant liabilities $ — $ — $ 7,626 $ 7,626

$ — $ — $ 49,293 $ 49,293

Total financial liabilities $ — $ — $ 7,626 $ 7,626

$ — $ — $ 49,293 $ 49,293

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

The fair value of the redeemable convertible preferred stock warrant, redeemable convertible preferred stock tranche and Private Placement warrant liabilities is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

The fair value of the Private Placement warrant liabilities 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 8).

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Preferred Stock

Warrant Liability

Preferred Stock

Tranche Liability Private Placement Warrant Liability Derivative

Warrant Liability Redeemable Convertible Preferred Stock Tranche Liability Private Placement Warrant Liability Derivative liability

Fair value as of January 1, 2020 $ ( 162 ) $ — $ — $ —

Recognition of preferred stock warrant liability upon subsequent issuance of warrants ( 53 ) — — —

Change in the fair value included in other income (expense), net 6 — — —

Fair value as of December 31, 2019

$ ( 162 ) $ — $ — $ —

Initial recognition of preferred stock warrant liability upon subsequent issuance of warrants ( 691 ) ( 1,610 ) — —

( 691 ) ( 1,610 ) — —

Change in the fair value included in other income (expense), net ( 48,440 ) — — ( 5,308 )

( 48,440 ) — — ( 5,308 )

Extinguishment of derivative liability upon conversion of convertible notes — — — 5,308

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Fair value as of December 31, 2020 ( 49,293 ) — — —

( 49,293 ) — — —

Private placement warrant liability acquired as part of the Merger

— — ( 19,377 ) —

Private placement warrant liability acquired as part of the Colonnade Merger — — ( 19,377 ) —

Change in the fair value included in other income (expense), net ( 8,804 ) — 11,751

( 8,804 ) — 11,751 —

Issuance of preferred stock upon exercise of warrants 58,097 — — —

Fair value as of December 31, 2021 — — ( 7,626 ) —

$ — $ — $ ( 7,626 ) $ —

Change in the fair value included in other income (expense), net — — 7,446 —

Fair value as of December 31, 2022 $ — $ — $ ( 180 ) $ —

Non-Recurring Fair Value Measurements

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$ 122,932 $ 182,644

(1) The Company maintains a cash sweep account which is included in money market funds as of December 31, 2021.

Cash is invested in the short-term money market funds, which is a cash sweep for not invested cash that earns interest.

(1) The Company maintains a cash sweep account, which is included in money market funds as of December 31, 2022 and 2021, respectively.

Cash is invested in short-term money market funds that earn interest.

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

2022 2021 2020

Cash and cash equivalents

$ 122,932 $ 182,644 $ 11,362

Restricted cash, current

Restricted cash, non-current

1,089 1,035 1,004

Total cash, cash equivalents and restricted cash

$ 124,278 $ 184,656 $ 12,642

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

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Total inventory $ 19,533 $ 7,448

$ 7,448 $ 4,817

During the years ended December 31, 2022, 2021 and 2020, $ 1.3 million, $ 0.8 million and $ 0.8 million of inventory write downs were charged to cost of revenue.

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Receivable from contract manufacturer 2,526 1,344

Grant receivable 779 —

Security deposit 118 20

Other current assets 2,073 897

Total prepaid and other current assets $ 8,543 $ 5,566

$ 5,566 $ 2,441

Property and Equipment, net

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Depreciation expense associated with property and equipment was $ 5.0 million, $ 4.7 million and $ 3.7 million in the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2021, the Company had tangible assets of $ 1.8 million held in Thailand and the remainder were in the U.S.

As of December 31, 2020, the Company had tangible assets of $ 1.3 million held in Thailand and the remainder were in the U.S.

The following table summarizes the Company's property and equipment, net by geography (in thousands):

United States $ 5,295 $ 8,254

Thailand 2,481 1,800

France 1,750 —

Total $ 9,695 $ 10,054

Goodwill and Acquired Intangible Assets, Net

In the fourth quarter of 2021, the Company completed the acquisition of Sense Photonics Inc.

(“Sense”), a privately held lidar technology company for autonomous vehicles.

The transaction has been accounted for as a business combination.

The Company purchased all of the outstanding shares of the capital stock of Sense and settled all Sense debt for total consideration of $ 72.8 million.

Goodwill represents the excess of the purchase price over the preliminary estimated fair values of the identifiable assets and assumed liabilities acquired and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition.

Goodwill is not deductible for tax purposes.

The following table presents goodwill activity (in thousands):

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December 31, 2021 51,076

Acquired intangible assets, net consisted of the following (in thousands):

Measurement period adjustment 76

December 31, 2022 $ 51,152

Goodwill and purchased intangible assets are reviewed for impairment annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment.

The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends and lower projections of profitability that may impact future operating results.

The Company with the assistance of third-party valuation specialist performed an interim and annual impairment test of its goodwill, as of September 30, 2022 and October 1, 2022, respectively, as a result of the decline in market conditions and updated outlook as a result of the impact of market uncertainties that prolonged sales cycle.

The Company’s reporting unit fair value was determined based on a discounted future cash flow model (income approach) and a market approach.

The Company’s estimate of fair value included significant judgments and assumptions relating to an implied control premium and comparable company market transactions.

The estimated fair value of the reporting unit exceeded its carrying value by approximately 4 %.

Accordingly, the Company determined that goodwill was not impaired as of September 30, 2022 and October 1, 2022.

The Company with the assistance of third-party valuation specialist performed an interim impairment test of its goodwill in the fourth quarter of 2022 as a result of the continuing market volatility resulting in a decline in the Company’s stock price.

The Company’s reporting unit fair value was determined based on a discounted future cash flow model (income approach) and a market approach.

The Company’s estimate of fair value included significant judgments and assumptions relating to an implied control premium and comparable company market transactions.

The estimated fair value of the reporting unit exceeded its carrying value by approximately 5 % as of December 31, 2022.

Accordingly, the Company determined that goodwill was not impaired as of December 31, 2022.

Given this level headroom, in the event the financial performance of the Company does not meet management’s current expectations in the future or the Company experiences prolonged market downturns or persistent declines in the Company’s stock price, or there are other negative revisions to key assumptions, the Company may be required to perform additional impairment analyses and could be required to recognize a non-cash goodwill impairment charge.

The following tables present acquired intangible assets, net as of December 31, 2022 and 2021 (in thousands):

December 31, 2022

Estimated Useful Life

(in years) December 31, 2021

Value Accumulated

Amortization Net Book

(in years) Gross Carrying amount Accumulated Amortization Net Book Value

Developed technology 8 $ 15,900 $ ( 2,318 ) $ 13,582

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Intangible assets, net $ 23,400 $ ( 5,235 ) $ 18,165

$ 23,400 $ ( 748 ) $ 22,652

Amortization expense associated with acquired intangible assets, net was $ 0.7 million in the year ended December 31, 2021.

The Company did no t have any intangible assets and amortization expense associated as of December 31, 2020 and in the year ended December 31, 2019.

December 31, 2021

Estimated Useful Life

(in years) Gross Carrying amount Accumulated Amortization Net Book Value

Developed technology 8 $ 15,900 $ ( 331 ) $ 15,569

Vendor relationship 3 6,600 ( 367 ) 6,233

Customer relationships 3 900 ( 50 ) 850

Intangible assets, net $ 23,400 $ ( 748 ) $ 22,652

Amortization expense was $ 4.5 million and $ 0.7 million in the years ended December 31, 2022 and 2021, respectively.

The Company did no t have any intangible assets and amortization expense associated as of December 31, 2020.

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

Thereafter 3,644

Total $ 18,165

Accrued and Other Current Liabilities

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Total accrued and other current liabilities $ 17,473 $ 14,173

$ 14,173 $ 4,121

Convertible Notes Payable

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The 2019 Convertible Notes were to be payable anytime on or after September 18, 2021 upon demand by consent of the 2019 Investors holding at least 60 % of the outstanding principal of the 2019 Convertible Notes or at the Company’s option with 10 days’ notice to the 2020 Investors, and carried interest at 5 % per annum which in addition to the notes was payable at maturity.

The 2019 Convertible Notes and all accrued but unpaid interest were automatically convertible into shares of the Company’s common stock in the event of qualified financing and convertible in the event of non-qualified financing (defined with respect to the 2019 Convertible Notes as a sale by the Company of shares of its capital stock for aggregate gross proceeds of less than $ 20 million) or change of control at the option of the majority of 2020 investors at a conversion price determined as the lesser of (i) a ratio of $ 300 million and the number of shares of the Company’s common stock outstanding immediately prior to the respective events, assuming conversion or exercise of all securities convertible into common stock and (ii) 85 % of the price per share of its capital stock paid in the applicable transaction (qualified financing, non-qualified financing, or change of control).

Convertible Notes and all accrued but unpaid interest were automatically convertible into shares of the Company’s common stock in the event of qualified financing and convertible in the event of non-qualified financing (defined with respect to the 2019 Convertible Notes as a sale by the Company of shares of its capital stock for aggregate gross proceeds of less than $ 20 million) or change of control at the option of the majority of 2020 investors at a conversion price determined as the lesser of (i) a ratio of $ 300 million and the number of shares of the Company’s common stock outstanding immediately prior to the respective events, assuming conversion or exercise of all securities convertible into common stock and (ii) 85 % of the price per share of its capital stock paid in the applicable transaction (qualified financing, non-qualified financing, or change of control).

2019 Convertible Notes contain embedded features that provide the lenders with multiple settlement alternatives.

Certain of these settlement features provided the lenders a right to a fixed number of the Company’s shares upon conversion of the notes (the “conversion option”).

Other settlement features provided the lenders the right or the obligation to receive cash or

a variable number of shares upon the completion of a capital raising transaction, change of control or default of the Company (the “redemption features”).

Other settlement features provided the lenders the right or the obligation to receive cash or a variable number of shares upon the completion of a capital raising transaction, change of control or default of the Company (the “redemption features”).

The conversion options of the convertible notes did not meet the requirements to be separately accounted for as a derivative liability.

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For the year ended December 31, 2020, the Company recognized interest expense of $ 0.4 million and amortization of debt discount issuance costs, included in interest expense of $ 0.1 million in relation with the 2019 Convertible Notes.

Long-term Debt

Runway Growth Loan Agreement

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The Runway Loan and Security Agreement provided for loans in an aggregate principal amount up to $ 10.0 million with a loan maturity date of November 15, 2021.

The loan carried an interest rate equal to LIBOR plus 8.5 %, unless LIBOR becomes no longer attainable or ceases to fairly reflect the costs of the lender, in which case the applicable interest rate shall be Prime Rate plus 6.0 %.

In an event of default, annual interest is increased by 5.0 % above the otherwise applicable rate.

The loan’s annual effective interest rate was approximately 16.4 % for each of the years ended December 31, 2021 and 2020.

In conjunction with the Runway Loan and Security Agreement, the Company issued a warrant to purchase 35,348 shares of Series A redeemable convertible preferred stock (the “Series A Preferred Stock”) of OTI ( 4.0 % of original principal amount of $ 10.0 million, divided by the exercise price), with an exercise price of $ 11.3518 per share.

The loan carried an interest rate equal to LIBOR plus 8.5 %, unless LIBOR was no longer attainable or ceased to fairly reflect the costs of the lender, in which case the applicable interest rate would have been Prime Rate plus 6.0 %.

In an event of default, annual interest would have been increased by 5.0 % above the otherwise applicable rate.

In conjunction with the Runway Loan and Security Agreement, OTI issued a warrant to purchase 35,348 shares of Series A redeemable convertible preferred stock (the “Series A Preferred Stock”) of OTI ( 4.0 % of original principal amount of $ 10.0 million, divided by the exercise price), with an exercise price of $ 11.3518 per share.

The fair value of this warrant was estimated to be $ 0.1 million and accounted for as a debt discount.

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The aggregate value of the warrants increased by $ 0.1 million after the warrant modification.

The warrants were exercised on March 11, 2021 and the warrant liability was remeasured to fair value with the increase recognized as a loss of $ 0.6 million and $ 13.8 million for the years ended December 31, 2021 and 2020, respectively, within other income (expense), net in the consolidated statements of operations and comprehensive loss.

The warrants were exercised on March 11, 2021 and the warrant liability was remeasured to fair value with the increase recognized as a loss of $ 0.6 million for the three months ended March 31, 2021 within other income (expense), net in the consolidated statements of operations and comprehensive loss.

The warrant liability was remeasured to fair value as of March 31, 2021 and the reduction was recognized as a gain of $ 0.2 million.

On March 26, 2021, the Company terminated the Runway Loan and Security Agreement and repaid the $ 7.0 million principal amount outstanding as well as interest and fees amounting to $ 0.4 million.

The Company incurred no prepayment fees in connection with the termination and all liens and security interests securing the loan made pursuant to the Runway Loan and Security Agreement were released upon termination.

As of December 31, 2021 and 2020, the outstanding principal balance of the loan was nil and $ 7.0 million, respectively.

As of December 31, 2022 and 2021, the outstanding principal balance of the loan was nil , respectively.

Promissory notes

The Company issued a $ 5.0 million promissory note in January 2021 to certain current investors of the Company (or their respective affiliates) to help continue to fund the Company’s ongoing operations through the consummation of the Merger.

The note accrued interest at a rate equal to LIBOR plus 8.5 % per annum and was repaid on March 11, 2021 in accordance with its terms in connection with the consummation of the Merger.

Series A and B Redeemable Convertible Preferred Stock Warrants and Tranche Liabilities

The note accrued interest at a rate equal to LIBOR plus 8.5 % per annum and was repaid on March 11, 2021 in accordance with its terms in connection with the consummation of the Colonnade Merger.

Loan and Security Agreement

On April 29, 2022 (the “Closing Date”), the Company entered into the Loan Agreement with Hercules.

The Loan Agreement provides the Company with a term loan facility of up to $ 50.0 million, subject to certain terms and conditions (the “Term Loan Facility”).

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 December 31, 2022, we did not achieve certain conditions relating to the achievement of trailing twelve month revenue and profit milestones under the Loan Agreement therefore an additional $ 10.0 million is no longer available to the Company.

Advances under the Loan Agreement bear 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 includes covenants, limitations, and events of default customary for similar facilities.

The Loan Agreement matures on May 1, 2026 (the “Maturity Date”).

Interest on amounts borrowed under the Loan Agreement is payable on a monthly basis until June 1, 2025 (the “Amortization Date”).

On and as of the Amortization Date, payments consist of equal monthly installments of principal and interest payable until the secured obligations are repaid in full.

However, if the Company achieves certain equity proceeds, revenue or profit targets for the twelve-month period ending December 31, 2023, then the Amortization Date will be extended to the Maturity Date.

The entire principal balance and all accrued but unpaid interest shall 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 are paid and the date on which such obligations become due and payable, the Company is 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.

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 is 17.90 % after giving effect to the debt discount, debt issuance costs and the end of term charge.

The Company may 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 is prepaid in any of the first 12 months following the Closing Date, 1.50 %, if such advance is prepaid after 12 months but prior to 24 months following the Closing Date, and 1.0 %, if such advance is prepaid anytime thereafter.

If the Company failed to maintain an unrestricted cash balance of $ 60.0 million, it would then be subject to a financial covenant that requires the Company to achieve certain trailing twelve-month revenue targets tested quarterly as set forth in the Loan Agreement and commencing with the quarter ending on June 30, 2023.

In contemplation of entry into the Velodyne Merger Agreement, on November 1, 2022, the Company entered into the Second Amendment.

Pursuant to the terms of the Second Amendment, the financial covenant requiring the Company to achieve certain trailing twelve month revenue thresholds commencing with the quarter ending June 30, 2023 will be eliminated and replaced, contingent upon and effective as of the closing of the transaction under the Velodyne Merger Agreements, with a minimum liquidity financial covenant whereby the Company must 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 Third Amendment, which amends 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.

As of December 31, 2022, we were in compliance with all financial covenants.

All obligations under the Loan Agreement are unconditionally guaranteed by certain of the Company’s subsidiaries, including Sense Photonics, Inc., a Delaware corporation.

The Term Loan Facility is secured by substantially all of the Company’s and the guarantors’ existing and after-acquired assets, including all intellectual property, all securities in existing and future domestic subsidiaries and 65.0 % of the securities in foreign subsidiaries, subject to certain exceptions and exclusions.

The Loan Agreement contains customary covenants for transactions of this type and other covenants agreed to by the parties, including, among others, (i) the provision of annual, quarterly and monthly financial statements, management rights and insurance policies and (ii) restrictions on incurring debt, granting liens, making acquisitions, making loans, paying dividends, dissolving, and entering into leases and asset sales.

The Loan Agreement also provides for customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control, judgment and material adverse effect defaults.

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

Long-term debt $ 40,000

End of term fee 337

unamortized debt discount ( 496 )

debt issuance costs ( 267 )

Total debt $ 39,574

The unamortized debt discount and debt issuance costs are amortized to interest expense over the life of the instrument using the effective interest rate method.

Amortization expense included in the interest expense related to debt discount and debt issuance costs of the Loan Agreement was not material for the year ended December 31, 2022.

Warrants and Tranche Liabilities

On November 27, 2018, in connection with the execution of the Runway Loan and Security Agreement, the Company issued a warrant to purchase 35,348 shares of Series A Preferred Stock of the Company at an exercise price of $ 11.3518 per share (the “Runway warrant”).

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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 6,000,000 Private Placement warrants at a price of $ 1.00 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.

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 Colonnade Merger, or earlier upon redemption or liquidation.

Each Private Placement warrant is exercisable for one Class A ordinary share at a price of $ 11.50 per share.

On March 11, 2021, each outstanding Private Placement warrant automatically converted into a warrant to purchase one share of Ouster common stock pursuant to the Warrant Agreement.

The Private Placement warrants were initially recognized as a liability at a fair value of $ 19.4 million and the Private Placement warrant liability was remeasured to fair value as of December 31, 2021, resulting in a gain of $ 11.8 million in the year ended December 31, 2021, classified within other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

The Private Placement warrants were initially recognized as a liability at a fair value of $ 19.4 million and the Private Placement warrant liability was remeasured to fair value as of December 31, 2022 and 2021, resulting in a gain of $ 7.4 million and $ 11.8 million in the years ended December 31, 2022 and 2021, respectively, classified within other income (expense), 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:

2021 December 31,

Stock price $ 12.00 $ 5.20 $ 0.86

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Risk-free interest rate 0.78 % 1.14 % 4.39 %

Public Warrants

CLA, in its IPO in August 2020, issued 20,000,000 units that each consisted of one Class A ordinary share and one-half warrant to purchase a Class A ordinary share, which the Company refers to as CLA warrants before the Colonnade Merger and Public warrants after the Colonnade Merger.

These warrants may only be exercised for a whole number of shares, and no fractional warrants were issued or issuable upon separation of the units and only whole warrants will trade.

The warrants became exercisable 12 months following the closing of the Company’s IPO, and will expire five years from the completion of the Colonnade Merger, or earlier upon redemption or liquidation.

Each Public warrant is exercisable at a price of $ 11.50 per share.

On March 11, 2021, upon the closing of the Colonnade Merger pursuant to the Colonnade Merger Agreement (Note 1), each of the 9,999,996 outstanding warrants, as adjusted for any fractional warrants that were not issued upon separation, was converted automatically into a redeemable Public warrant to purchase one share of the Company’s common stock.

The Public warrants were recognized as equity upon the Colonnade Merger in the amount of $ 17.9 million.

Prior to their expiration, the Company may redeem the Public warrants at a price of $ 0.01 per warrant, provided that the closing price of the Company’s common stock equals or exceeds $ 18.00 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.

350 Treat Building Lease

In September 2017, the Company entered into a lease agreement (the “350 Treat Building Lease”) to lease approximately 26,125 square feet of office and warehouse space located in San Francisco, California for its corporate headquarters.

Subsequently, in June 2018, the Company took possession of the 350 Treat Building Lease.

This lease includes a free rent period and escalating rent payments and has a remaining lease term of 3.1 years that expires on January 31, 2023.

The Company’s obligation to pay rent commenced in February 2018.

The Company is obligated to make lease payments totaling approximately $ 7.4 million over the lease term, offset by $ 2.4 million of tenant improvement allowance.

The lease further provides that the Company is obligated to pay to the landlord certain costs, including taxes and operating expenses.

In November 2021, the Company entered into an amendment to the 350 Treat Building Lease agreement, whereby the parties agreed to extend the term of the lease for an additional four years and seven months and provide for an additional tenant improvement allowance.

The total base lease payments for the extended period of 4.6 years equals $ 7.6 million.

The Company recorded an adjustment of $ 5.5 million to the right-of-use asset and right-of-use operating lease liability associated with the 350 Treat Building Lease agreement upon the amendment.

The amendment resulted in an adjustment of $ 5.5 million to the right-of-use asset and right-of-use operating lease liability which was recorded in November 2021.

As of December 31, 2022 the remaining lease term is 4.7 years that expires on August 31, 2027.

In addition to minimum lease payments, the lease requires the Company to pay associated taxes and operating costs.

The 350 Treat Building Lease is considered to be an operating lease as it does not meet the criteria of a finance lease.

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In September 2017 the Company entered into a lease agreement (the “2741 16 th Street Lease”) to lease approximately 20,032 square feet of office space and 25,000 of parking space located in San Francisco, California.

Subsequently, in June 2019, the Company took possession of the 2741 16 th Street Lease.

This lease includes a free rent period and escalating rent payments and has a remaining lease term of 3.1 years that expires on August 31, 2023.

The Company’s obligation to pay rent commenced in September 2018.

The Company is obligated to make lease payments totaling approximately $ 8.2 million over the lease term, offset by $ 4.6 million of tenant improvement allowance.

The lease further provides that the Company is obligated to pay to the landlord certain costs related to 2741 16 th Street, including taxes and operating expenses.

In May 2020, the Company entered into an amendment to the 2741 16 th Street Lease agreement, whereby the parties agreed to extend the term of the lease for an additional four years, restructure the monthly rent payable under the lease and provide for an additional tenant improvement allowance.

The total base lease payments for the extended period of 4.0 years equals $ 8.5 million and the increase in total base lease payments for the lease term provided for by the original agreement is $ 0.7 million.

The Company recorded an adjustment of $ 6.2 million to the right-of-use asset and right-of-use operating lease liability associated with the 2741 16 th Street Lease agreement upon the amendment.

The amendment resulted in an adjustment of $ 6.2 million to the right-of-use asset and right-of-use operating lease liability which was recorded in May 2020.

As of December 31, 2022 the remaining lease term is 4.7 years that expires on August 31, 2027.

In addition to minimum lease payments, the lease requires the Company to pay associated taxes and operating costs.

The 2741 16 th Street Lease is considered to be an operating lease as it does not meet the criteria of a finance lease.

As of December 31, 2021, the operating lease right-of-use asset and lease liability were $ 7.7 million (2020:

$ 8.7 million) and $ 10.1 million (2020:

$ 11.5 million), respectively.

As of December 31, 2022, the operating lease right-of-use asset and lease liability were $ 6.5 million and $ 8.7 million, respectively.

As of December 31, 2021, the operating lease right-of-use asset and operating lease liability were $ 7.7 million and $ 10.1 million, respectively.

The discount rate used to determine the operating lease liability was 5.25 %.

Other operating real estate leases

In 2020 and 2021, the Company entered into three lease agreements for office spaces located outside of the US.

The Company has executed or assumed as lessee other five operating leases for rental of office space.

The terms of those leases range from 1 to 3 years.

The Company is obligated to make lease payments totaling approximately $ 1.0 for those leases over the respective lease terms.

The Company is obligated to make lease payments totaling approximately $ 0.9 million for those leases over the respective lease terms.

Total operating lease cost for the years ended December 31, 2022, 2021 and 2020 was $ 3.9 million, $ 3.6 million and $ 2.9 million, which consisted of $ 3.8 million, $ 3.0 million and $ 2.6 million of fixed lease expense and $ 0.1 million, $ 0.6 million and $ 0.3 million of variable lease expense, respectively.

1 unchanged sentence

The following table presents the weighted average remaining lease term and discount rate for leases:

2021 December 31,

Weighted-average remaining lease term 4.52 5.53

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Letters of credit

In connection with the 350 Treat Building Lease and 2741 16 th Street Lease, the Company obtained letters of credit from certain banks as required by the lease agreements.

If the Company defaults under the terms of the lease, the lessor will be entitled to draw upon the letters of credit in the amount necessary to cure the default.

In connection with certain office leasehold interests in real property located in San Francisco (350 Treat Ave and, 2741 16th Street) and in Paris (5, rue Coq Héron), the Company obtained letters of credit from certain banks as required by the lease agreements.

If the Company defaults under the terms of the applicable lease, the lessor will be entitled to draw upon the letters of credit in the amount necessary to cure the default.

The amounts covered by the letters of credit are collateralized by certificates of deposit, which are included in restricted cash on the consolidated balance sheets as of December 31, 2022 and 2021.

The outstanding amount of the letters of credit are $ 2.0 million and $ 1.3 million as of December 31, 2021 and 2020, respectively.

The outstanding amount of the letters of credit was $ 1.3 million and $ 2.0 million as of December 31, 2022 and 2021, respectively.

Non-cancelable purchase commitments

As of December 31, 2022, the Company had non-cancelable purchase commitments to a third-party contract manufacturer for approximately $ 22.3 million and other vendors for approximately $ 6.3 million.

Legal proceedings

The Company is involved in various legal proceedings arising in the ordinary course of business.

The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated.

When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made.

Legal fees are expensed as incurred.

On June 10, 2021, we received a letter from the SEC notifying us of an investigation and document subpoena.

The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate any loss is expected to be immaterial.

This assessment is based on our current understanding of relevant facts and circumstances.

As such, our view of these matters is subject to inherent uncertainties and may change in the future.

Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable.

Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates.

The Company has made no accruals with respect to the following:

On December 1, 2022, December 20, 2022, December 29, 2022, and January 9, 2023, purported stockholders of Velodyne filed the following lawsuits against Velodyne and certain of its directors and officers in the Southern District of New York for violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and U.S.

Securities and Exchange Commission (“SEC”) Rule 14a-9:

Velodyne, et.

al., Carlisle v.

Velodyne, et.

al., Wheeler v.

al., and Cristino v.

Velodyne, et.

The complaints allege that Velodyne’s disclosures in connection with the Merger with Ouster were materially incomplete and misleading.

The plaintiff in O’Dell v.

voluntarily dismissed his complaint on January 17, 2023.

Velodyne also received eleven demand letters from stockholders making similar allegations regarding Velodyne’s disclosures relating to the Merger.

The Company does not believe the allegations in the complaints and demand letters are meritorious, and intends to defend against them vigorously.

On June 14, 2022, Velodyne filed a lawsuit against the Company relating to two patents and requested an International Trade Commission proceeding with respect to the same two patents.

On July 8, 2022, the Company filed a complaint against Velodyne, alleging multiple claims including intellectual property misappropriation and false advertising.

In connection with the Velodyne Merger, the matters were dismissed.

On June 10, 2021, the Company received a letter from the SEC notifying us of an investigation and document subpoena.

The subpoena seeks documents regarding projected financial information in CLA’s Form S-4 registration statement filed on December 22, 2020.

We are complying with the SEC’s requests to date.

We are awaiting information from the SEC on whether there will be next steps, if any beyond current requests to date.

Although we believe we are responding in an appropriate manner, there can be no assurance whether this SEC investigation shall conclude, whether the SEC may request production for additional documents and communications, or whether we may be involved in subsequent litigation.

At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter.

The Company has complied with the SEC’s requests to date;

however, the SEC may request additional documents or information.

Indemnification

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Redeemable Convertible Preferred and Common Stock

The Company’s common stock and warrants trade on the New York Stock Exchange under the symbol “OUST” and “OUSTWS”, respectively.

Pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Co mpany is authorized and has available for issuance the following shares and classes of capital stock, each with a par value of $ 0.0001 per share:

(i) 1,000,000,000 shares of common stock; (ii) 100,000,000 shares of preferred stock.

Immediately following the Merger, there were 161,449,205 shares of common stock with a par value of $ 0.0001 , and 15,999,996 warrants outstanding.

The Company’s common stock trades on the New York Stock Exchange under the symbol “OUST” and the Company’s warrants trade on the New York Stock Exchange and NYSE American under the symbols “OUST WS” and “OUST WTA,” respectively.

Pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company

is authorized to issue the following shares and classes of capital stock, each with a par value of $ 0.0001 per share:

(i) 1,000,000,000 shares of common stock;

(ii) 100,000,000 shares of preferred stock.

Immediately following the Colonnade Merger, there were 161,449,205 shares of common stock with a par value of $ 0.0001 , and 15,999,996 warrants outstanding.

The holder of each share of common stock is entitled to one vote.

The Company has retroactively adjusted the shares issued and outstanding prior to March 11, 2021 to give effect to the exchange ratio established in the Merger Agreement to determine the number of shares of common stock into which they were converted.

The Company has retroactively adjusted the shares issued and outstanding prior to March 11, 2021 to give effect to the exchange ratio established in the Colonnade Merger Agreement to determine the number of shares of common stock into which they were converted.

Immediately prior to the Colonnade Merger, OTI’s certificate of incorporation, as amended, authorized it to issue 342,367,887 shares of $ 0.00001 par value, with 210,956,516 shares designated as common stock and 131,411,372 shares of redeemable convertible preferred stock.

On March 11, 2021, upon the closing of the Colonnade Merger Agreement (Note 1), all of OTI’s outstanding redeemable convertible preferred stock was converted to the Company’s common stock pursuant to the conversion rate effective immediately prior to the Colonnade Merger and the remaining amount was reclassified to additional paid-in capital.

As of December 31, 2022 and 2021, the Company does not have any redeemable convertible preferred stock outstanding.

ATM Agreement

On April 29, 2022, the Company entered into the ATM Agreement pursuant to which the Company may, subject to the terms and conditions set forth in the agreement offer and sell, from time to time, through or to the agents, acting as agent or principal, shares of the Company’s common stock, par value $ 0.0001 per share, having an aggregate offering price of up to $ 150.0 million.

Cumulative net proceeds to the Company totaled approximately $ 15.8 million after deducting offering costs, sales commissions and fees.

The Company plans to use the net proceeds from this offering for working capital and general corporate purposes.

In September 2022, the Company suspended sales of common stock through its ATM Agreement.

The remaining availability under the ATM Agreement as of December 31, 2022 is approximately $ 133.2 million.

Series Seed Financing and conversion

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In August 2020, the Company issued 25,286,587 shares of Series B redeemable convertible preferred stock at $ 0.3323 per share for gross proceeds of $ 8.4 million, less $ 0.1 million of stock issuance costs.

On March 11, 2021, upon the closing of the Transaction pursuant to the Merger Agreement (Note 1), all of the outstanding redeemable convertible preferred stock was converted to the Company’s common stock pursuant to the conversion rate effective immediately prior to the Transaction and the remaining amount was reclassified to additional paid-in capital.

As of December 31, 2021, the Company does not have any redeemable convertible preferred stock outstanding.

On March 11, 2021, upon the closing of the Transaction pursuant to the Colonnade Merger Agreement (Note 1), all of the outstanding redeemable convertible preferred stock was converted to the Company’s common stock pursuant to the conversion rate effective immediately prior to the Transaction and the remaining amount was reclassified to additional paid-in capital.

Redeemable convertible preferred stock as of December 31, 2020, consisted of the following (in thousands, except share and per share data):

7 unchanged sentences

The Series Seed, Series A and Series B preferred stockholders were entitled to receive dividends prior and in preference to any dividends on the common stock, at a rate of $ 0.0612 , $ 0.6789 and $ 0.019938 per share, respectively, per annum on a non-cumulative basis, when and if declared by the board of directors, subject to the prior rights of the preferred stockholders.

After payment of such dividend, any additional dividends were to be distributed among the holders of the

preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all shares of preferred stock into common stock).

After payment of such dividend, any additional dividends were to be distributed among the holders of the preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all shares of preferred stock into common stock).

Liquidation preference

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The holders of Series Seed, Series A and Series B redeemable convertible preferred stock had a right to convert their stock into not assessable shares of common stock at a conversion rate equal to their respective liquidation preferences divided by a conversion price of $ 1.02 , $ 11.3518 and $ 0.3323 , respectively, which would be adjusted for any stock splits, stock dividends, combination, subdivisions, recapitalization or similar transactions.

Shares of Series B redeemable convertible preferred stock were automatically be converted into shares of common stock upon the earlier of (a) the closing of the sale of shares of common stock to the public at a minimum price of $ 1.41 per share, subject to appropriate adjustment in the event of any stock splits, stock dividends, combinations, subdivisions, recapitalization or similar transactions with respect to common stock, in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $ 75.0 million of gross cash proceeds to the Company or (b)(i) upon vote or written consent of a majority of the then outstanding shares of the Series Seed redeemable convertible preferred stock, voting as a separate series on an as-converted basis or (ii) upon vote or written consent of the majority of the then outstanding shares of the Series B redeemable convertible preferred stock, voting as a separate series on an as-converted basis, respectively.

$ 75.0 million of gross cash proceeds to the Company or (b)(i) upon vote or written consent of a majority of the then outstanding shares of the Series Seed redeemable convertible preferred stock, voting as a separate series on an as-converted basis or (ii) upon vote or written consent of the majority of the then outstanding shares of the Series B redeemable convertible preferred stock, voting as a separate series on an as-converted basis, respectively.

Redemption rights

3 unchanged sentences

Stock-based compensation

As of December 31, 2021, the Company has three equity incentive plans, the 2015 Stock Plan (the “2015 Plan”), the 2021 Incentive Award Plan (the “2021 Plan”) and the Sense 2017 Equity Incentive Plan (the “Sense Plan” and together the “Plans”).

The Plans provide for the grant of stock options, stock appreciation rights, restricted stock awards restricted stock units, performance stock unit awards and other forms of equity compensation (collectively, “equity awards”).

As of December 31, 2022, the Company has four equity incentive plans, the 2015 Stock Plan (the “2015 Plan”), the Sense 2017 Equity Incentive Plan (the “Sense Plan”), the 2021 Incentive Award Plan (the “2021 Plan”) and 2022 Employee Stock Purchase Plan (the “2022 ESPP” and, collectively with the 2015 Plan, the Sense Plan and the 2021 Plan, together the “Plans”).

The Plans provide for the grant of stock options, stock appreciation rights, restricted stock awards (“RSA”), restricted stock units (“RSUs”), performance stock unit awards and other forms of equity compensation (collectively, “equity awards”).

In addition, the 2021 Plan provides for the grant of performance bonus awards.

All awards within the Plans may be granted to employees, including officers, as well as directors and consultants, within the limits defined in the Plans.

All awards under the Plans may be granted to employees, including officers, and awards under the 2015 Plan, Sense Plan and 2021 Plan also may be granted to directors and consultants, in each case, within the limits defined in the Plans.

Options under the Plans will be exercisable at such times and as specified in the Award Agreement (as defined in the Plans) provided that the term of an option or stock appreciation will not exceed ten years .

6 unchanged sentences

All participants holding shares of restricted stock will be entitled to all the rights of a stockholder with respect to such shares and have voting power and other rights with respect to such shares, provided, however, that such shares are held in escrow and subject to forfeiture until the shares vested.

The exercise price of stock options granted before the Merger were determined based on the fair value of stock at the date of grant obtained by the Company on a contemporaneous basis from an independent valuation firm.

The exercise price of stock options granted before the Colonnade Merger were determined based on the fair value of stock at the date of grant obtained by the Company on a contemporaneous basis from an independent valuation firm.

The valuation firm used a PWERM to estimate the aggregate enterprise value of the Company at each valuation date.

17 unchanged sentences

In 2015, the Company established its 2015 Stock Plan.

As of March 11, 2021, the effective time of the Merger, the Company no longer grants equity awards pursuant to the 2015 Plan, but it continues to govern the terms of outstanding stock options that were granted prior to that date.

As of March 11, 2021, the effective time of the Colonnade Merger, the Company no longer grants equity awards pursuant to the 2015 Plan, but it continues to govern the terms of outstanding stock options that were granted prior to that date.

2022 Employee Stock Purchase Plan

The Company’s 2022 ESPP has been offered to all eligible employees since August 2022 and generally permits certain employees to purchase shares of our common stock through payroll deductions of up to 15 % of their compensation of each offering period, subject to certain limitations.

The 2022 ESPP has overlapping offering periods, with each offering period lasting 24 months.

Under the 2022 ESPP, the purchase price of a share under the ESPP equals 85 % of the lesser of the fair market value of a share of common stock on either the first or last day of each offering period, but no less than the par value per share of common stock.

As of December 31, 2022, 6.6 million shares of our common stock were available for issuance under the 2022 ESPP.

The maximum amount that an employee can contribute during a purchase right period is $ 7,500 .

The stock-based compensation expense is calculated as of the beginning of the offering period as the fair value of the 2022 ESPP shares utilizing the Black-Scholes option valuation model and is recognized over the offering period.

The first offering period under the 2022 ESPP commenced on September 6, 2022.

During fiscal 2022 employees purchased approximately 0.3 million shares of common stock under the 2022 ESPP at a purchase price of $ 1.1730 , with proceeds of $ 0.4 million.

Stock Options Assumed from Acquisition

7 unchanged sentences

At issuance, the promissory notes were used to settle certain executives’ and employees’ obligations for 2,883,672 vested and 4,603,833 unvested ISOs that were exercised and no cash was exchanged.

In March 2021, in connection with the close of the Merger, the Company forgave half of the respective obligations under the promissory notes for certain executives and required such noteholders to repay the remaining balance of $ 0.5 million under each of their respective notes.

In March 2021, in connection with the close of the Colonnade Merger, the Company forgave half of the respective obligations under the promissory notes for certain executives and required such noteholders to repay the remaining balance of $ 0.5 million under each of their respective notes.

Additional compensation expense of $ 0.5 million was recognized in general and administrative expenses in the year ended December 31, 2021.

Early Exercises

For those shares issued in connection with early cash exercises, there were 1,501,976 and 6,212,254 unvested shares outstanding as of December 31, 2021 and 2020, respectively, and approximately $ 0.3 million and $ 0.6 million of related liabilities at respective dates.

The number of options early exercised for the years ended December 31, 2021 and 2020 were nil and 9,507,478 , respectively.

The Company recognized stock-based compensation for all stock options in the statements of operations and comprehensive loss as follows (in thousands):

Year Ended December 31,

2022 2021 2020

4 unchanged sentences

Total stock-based compensation $ 33,321 $ 25,363 $ 12,057

The following table summarizes stock-based compensation expense by award type (in thousands):

Year Ended December 31,

2022 2021 2020

RSUs $ 24,236 $ 13,306 $ —

Stock Options 8,851 12,035 11,064

Employee stock purchase plan 220 — —

RSAs 14 22 993

Total stock-based compensation $ 33,321 $ 25,363 $ 12,057

Stock option activity for the years ended December 31, 2022, 2021 and 2020 is as follows:

Options Weighted-

Ave rage Exercise

Price per Share

Weighted-Average

Average Exercise

Price per Share Weighted-

Term (in years) Aggregate

4 unchanged sentences

Outstanding—December 31, 2020 25,732,503 $ 0.56 9.5 $ 245,746

Options assumed through acquisition 823,114 5.05 8.3 125

Options granted 645,796 10.26 9.3 —

37,663,242 0.45 9.4 363,941

Options exercised ( 2,155,348 ) 0.22 10,742

( 12,221,364 ) 0.20 9.5 121,106

Options cancelled ( 916,969 ) 0.30 4,492

( 1,309,020 ) 1.58 —

Outstanding—December 31, 2021 24,129,096 $ 1.01 8.6 $ 100,992

25,732,503 $ 0.56 9.5 $ 245,746

Options assumed through acquisition 823,114 5.05 8.3 125

Options granted

645,796 10.26 9.3 —

Options exercised ( 2,133,181 ) 0.20 4,639

( 2,155,348 ) 0.22 10,742

Options cancelled ( 978,753 ) 2.86 1,015

( 916,969 ) 0.30 4,492

Outstanding—December 31, 2022 21,017,162 $ 1.01 7.7 $ 8,285

2 unchanged sentences

The following table summarizes information about stock options outstanding and exercisable at December 31, 2022.

Options Outstanding Options Exercisable

Outstanding Weighted

Life (Years) Weighted

Options Outstanding

Price Options

Exercisable Weighted

5,548,717 8.4 $ 0.18 3,492,915 8.4 $ 0.18

Outstanding Weighted

Life (Years) Options

$ 0.18 3,773,175 7.5 2,933,506

4 unchanged sentences

21,017,162 12,398,966

No options were granted during the year ended December 31, 2022.

The weighted average grant date fair value of options granted during the years ended December 31, 2021 and 2020 was $ 5.90 and $ 1.10 , respectively.

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Year Ended December 31,

2021 2020 2019

Expected term (in years) 6.0 5.0 - 6.1

Risk-free interest rate 1.0 % 0.3 % - 1.5 %

1.5 % - 2.4 %

Expected volatility 63.2 % 57.4 % - 63.3 %

55.3 % - 58.0 %

Expected dividend rate 0 % 0 %

5 unchanged sentences

Expected dividend rate 0 %

Restricted Stock Awards (“RSA”)

A summary of RSAs activity under the Plan is as follows:

Restricted Stock Units (“RSU”)

A summary of RSUs activity under the Plan is as follows:

Shares Weighted Average

2 unchanged sentences

Unvested—January 1, 2021 — $ —

Granted during the year

1,617,264 0.46

Canceled during the year

( 105,921 ) 0.35

Vested during the year

( 1,505,454 ) 0.52

Unvested - December 31, 2020

40,754 $ 0.67

Assumed through acquisition 4,490,980 6.55

Granted during the year 5,899,954 9.39

1 unchanged sentence

Vested during the year ( 512,290 ) 10.30

( 23,288 ) 0.67

Unvested—December 31, 2021 9,326,572 $ 7.82

17,466 $ 0.67

The total fair value of RSAs vested during the years ended December 31, 2021, 2020 and 2019 was less than $ 0.1 million, $ 1.1 million and $ 0.1 million, respectively.

Restricted Stock Units (“RSU”)

A summary of RSUs activity under the Plan is as follows:

Shares Weighted Average

Grant Date Fair

Value (per share)

Unvested - January 1, 2021 — $ —

Assumed through acquisition 4,490,980 6.55

Granted during the year 15,710,791 $ 2.74

5,224,504 9.39

Canceled during the year ( 4,071,027 ) $ 5.60

( 552,072 ) 8.89

Vested during the year ( 4,456,143 ) $ 6.16

( 509,786 ) 10.30

Unvested—December 31, 2022 16,510,193 $ 3.98

8,653,626 $ 7.90

As of December 31, 2022, total compensation expense related to unvested RSUs granted to employees, but not yet recognized, was $ 61.9 million, with a weighted-average remaining vesting period of 2.7 years.

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The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

Year Ended December 31,

2022 2021 2020

1 unchanged sentence

Options to purchase common stock 21,017,162 22,675,729 25,732,503

Unvested RSA 17,466 146,675 34,865

Public and private common stock warrants 15,999,900 15,999,900 4,443,862

Restricted Stock Units 16,510,193 10,106,993 —

Unvested early exercised common stock options 750,276 2,043,288 6,212,254

ESPP shares pending issuance 2,511,432 — —

Unvested RSAs — 17,466 146,675

Vested and early exercised options subject to nonrecourse notes — — 2,151,100

— 2,151,100 —

Preferred stock warrants 15,999,900 4,443,862 37,285

50,843,376 127,121,148 6,177,127

Total 56,788,963 50,843,376 127,121,148

Income (loss) before income taxes for the years ended December 31, 2022, 2021 and 2020 are as follows (in thousands):

3 unchanged sentences

Foreign 1,040 181 103

$ ( 96,775 ) $ ( 106,405 ) $ ( 51,660 )

Total $ ( 138,255 ) $ ( 96,775 ) $ ( 106,405 )

The components of income tax expense are as follows (in thousands):

3 unchanged sentences

Foreign 243 36 23

Total current (benefit) expense

Total current expense 305 37 24

Federal — ( 2,185 ) —

State — ( 646 ) 351

Valuation allowance — — —

Foreign — — —

Total deferred (benefit) expense — ( 2,831 ) 351

Total income tax (benefit) expense

$ ( 2,794 ) $ 375 $ 1

Income tax benefit in current years relates to the release of valuation allowance as a result of the recording of a deferred tax liability from an acquisition during the year.

A reconciliation between the statutory rate U.S.

Total income tax expense (benefit) $ 305 $ ( 2,794 ) $ 375

A reconciliation between the statutory U.S.

federal rate and the Company’s effective tax rate is as follows:

1 unchanged sentence

2022 2021 2020

Federal statutory rate $ ( 20,323 ) $ ( 22,344 ) $ ( 10,849 )

Tax at federal statutory rate $ ( 29,034 ) $ ( 20,323 ) $ ( 22,344 )

State income taxes, net of federal benefit 57 ( 644 ) 1,330

3 unchanged sentences

Fair value changes - warrants ( 1,564 ) ( 619 ) 11,192

Convertible debt cancellation of indebtedness income — 15,079 —

Valuation allowance 25,666 20,058 ( 6,812 )

Non-deductible expenses 78 ( 2,031 ) ( 485 )

Convertible debt cancellation of indebtedness income — — 15,079

Other 29 35 168

Total tax (benefit) provision

$ ( 2,794 ) $ 375 $ 1

Total tax provision (benefit) $ 305 $ ( 2,794 ) $ 375

Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):

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Operating lease liability 3,631 4,360

Capitalized research and development expenditures

Gross deferred tax assets

5 unchanged sentences

Intangible property

Fixed assets — ( 230 )

( 4,077 ) ( 5,287 )

Operating lease, right of use assets

8 unchanged sentences

Accordingly, the Company has recorded a full valuation allowance on its deferred tax assets.

The valuation allowance on the Company’s net deferred taxes increased b y $ 28.0 million and decreased by $ 6.8 million during the years ended December 31, 2021 and 2020, respectively.

The increase in valuation allowance is primarily attributed to the generation of net operating losses and credit in 2021.

The valuation allowance on the Company’s net deferred taxes increased by $ 22.2 million and $ 28.1 million during the years ended December 31, 2022 and 2021, respectively.

The increase in valuation allowance is primarily attributable to the generation of net operating losses and capitalization of research and development expenditures, which became enacted for tax year beginning after December 31, 2021, during 2022.

As of December 31, 2022, the Company had federal net operating loss carryforwards and state net operating loss carryforwards of approximately $ 246.2 million and $ 124.9 million, respectively.

As of December 31, 2020, the federal net operating loss carryforward begins expiring in 2035 through 2040, and the state net operating loss carryforward begins expiring in 2035 through 2040.

As of December 31, 2022, federal net operating loss carryforwards generated after December 31, 2017 will be carried forward indefinitely and the state net operating loss carryforward begins expiring in 2031 through 2042.

As of December 31, 2022, the amount of federal net operating loss that does not expire is $ 237.7 million.

As of December 31, 2021, the Company had federal net operating loss carryforwards and state net operating loss carryforwards of approximately $ 224.4 million and $ 146.8 million, respectively.

As of December 31, 2021, federal net operating loss carryforwards generated after December 31, 2017 will be carried forward indefinitely and the state net operating loss carryforward begins expiring in 2035 through 2040.

As of December 31, 2021, the amount of federal net operating loss that does not expire is $ 215.9 million.

As of December 31, 2022, the Company had federal and state research and development credit carryforwards of approximately $ 4.7 million and $ 2.9 million, respectively.

As of December 31, 2020, the Company had federal and state research and development credit carryforwards of approximately $ 2.1 million and less than $ 0.1 million, respectively.

As of December 31, 2021 and 2020 the federal credits will expire starting in 2035 and 2038, respectively, if not utilized and state credits carryforward indefinitely.

As of December 31, 2021, the Company had federal and state research and development credit carryforwards of approximately $ 4.0 million and $ 2.3 million, respectively.

As of December 31, 2022 the federal credits will expire starting in 2035, if not utilized and state credits carryforward indefinitely.

The Tax Reform Act of 1986 and similar state legislation impose substantial restrictions on the utilization of the net operating losses and tax credit carryforwards in the event there is a change in ownership as provided by Section 382 and Section 383 of the Internal Revenue Code and similar state provisions.

Such ownership change could result in the limitation and /or expiration of the net operating loss and tax credit carryforwards before utilization, which could result in

increased future tax liabilities.

Such ownership change could result in the limitation and /or expiration of the net operating loss and tax credit carryforwards before utilization, which could result in increased future tax liabilities.

While the Company has experienced ownership shifts, there has been no limitation or loss of tax attributes as of December 31, 2022.

Beginning January 1, 2022, the Tax Cuts and Jobs Act (the "Tax Act”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenditures pursuant to Internal Revenue Code (“IRC”) Section 174.

The capitalized research and development expenditures are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.

As a result of this provision of the Tax Act, deferred tax assets related to capitalized research expenditures increased by $ 15.9 million.

ASC 740, Income Taxes (“ASC 740”), requires that the tax benefit of net operating losses, temporary differences, and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period.

As of December 31, 2022 and 2021 the Company has reviewed the positive and negative evidence relating to the realizability of the deferred tax assets and has concluded that the deferred tax assets are more likely than not to not be realized.

The CARES Act includes provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss carry back periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

This new legislation did not impact the current year provision.

The Company will continue to monitor the possible impacts in the future periods.

On June 29, 2020, Governor Gavin Newsom signed California Assembly Bill 85 (AB 85) into law.

The legislation suspends the California net operating loss deductions for 2021, 2022, and 2023 for certain taxpayers and imposes a limitation of certain California Tax Credits for 2021, 2022, and 2023.

The legislation disallows the use of California net operating loss deductions if the taxpayer recognizes business income and its adjusted gross income is greater than $1.0 million.

The carryover periods for net operating loss deductions disallowed by this provision will be extended.

Additionally, any business credit will only offset a maximum of $5.0 million of California tax.

As a result of the legislation, the available California net operating losses were unable to be utilized to offset taxable income in 2021.

The Company utilized California R&D credits to reduce its taxable income to minimum tax.

The Company will continue to monitor the possible California net operating loss and credit limitations in future periods.

The balance of gross unrecognized tax benefits as of December 31, 2022, and 2021 was $ 18.8 million and $ 18.5 million, respectively.

Out of the total unrecognized tax benefits, $ 0.1 million at December 31, 2021, if recognized, would reduce our effective tax rate in the period of recognition.

Out of the total unrecognized tax benefits, $ 0.1 million at December 31, 2022, if recognized, would impact our effective tax rate in the period of recognition.

The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

1 unchanged sentence

As of December 31, 2022 and 2021, the Company has not accrued interest and penalties related to uncertain tax positions.

The following table sets forth the change in the uncertain tax positions for the years ended December 31, 2021 and 2020:

The following table sets forth the change in the uncertain tax positions for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Year Ended December 31,

2022 2021 2020

9 unchanged sentences

The Company has not been audited by the Internal Revenue Service or any state income or franchise tax agency.

As of December 31, 2021, its federal returns for the years ended December 31, 2016 through the current period and the state returns for the years ended December 31, 2016 through the current period are still open to examination.

As of December 31, 2022, its federal returns for the years ended December 31, 2016 through the current period and the state

returns for the years ended December 31, 2016 through the current period are still open to examination.

In addition, all of the net operating losses and research and development credit carry-forwards that may be used in future years are still subject to inquiry given that the statute of limitation for these items would begin in the year of the utilization.

Related Party Transactions

See Note 7 , Long-term Debt for details of promissory notes issued by the Company to certain investors of the Company (or an affiliate thereof).

See Note 12 , Stock-based compensation for details of partial recourse promissory notes issued by the Company to certain executives and employees.

Debt for details of promissory notes issued by the Company to certain investors of the Company (or an affiliate thereof).

Stock-based compensation for details of partial recourse promissory notes issued by the Company to certain executives and employees.

Revenue from the sale of lidar sensor kits, which is recognized at a point in time, was $ 41.0 million, $ 33.6 million and $ 16.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Service revenue from non-recurring engineering work in relation to the Company’s new product release in early 2020 for the year ended December 31, 2020 was $ 2.0 million.

The following table presents total revenues by geographic area based on the location products were shipped to and services provided (in thousands):

Year Ended December 31,

2022 2021 2020

Americas $ 15,977 $ 15,656 $ 8,764

Asia and Pacific 9,510 7,334 4,270

Europe, Middle East and Africa 15,542 10,588 5,870

Total $ 41,029 $ 33,578 $ 18,904

Subsequent Events

The Company has evaluated subsequent events through February 28, 2022, the date these consolidated financial statements were available to be issued and has determined that no subsequent events require disclosure in the consolidated financial statements.

As noted above, on February 10, 2023, the Company completed the Velodyne Merger with Velodyne pursuant to the terms of the Velodyne Agreement with Velodyne, Velodyne Merger Sub I and Velodyne Merger Sub II.

In connection with the closing of the Velodyne Merger, the Company and Velodyne now operate as a single combined company.

Velodyne shares ceased trading on the Nasdaq after market close on February 10, 2023, and each Velodyne share was exchanged for 0.8204 shares of Ouster common stock.

The combined company will keep the name Ouster and continue to trade on New York Stock Exchange under the ticker “OUST.”

In connection with the closing of the Velodyne Merger the Company undertook actions to reduce operating expenses by initiating a reduction in force that is expected to impact approximately 180 - 200 employees and consolidating some of its facilities, including Velodyne’s facility in India (collectively, the “Restructuring Initiatives”).

The Restructuring Initiatives are expected to result in a range of approximately $ 27.0 million - $ 30.0 million of aggregate charges, which we anticipate to include $ 12.0 million - $ 13.0 million of one-time cash termination benefits, $ 0.5 million of termination costs related to the facility in India, and approximately $ 14.5 million - $ 16.5 million of non-cash stock-based compensation charge related to the vesting of share-based awards for employees who are terminated.

These actions are consistent with the Company’s previously stated intention to derive operational synergies from the combined enterprise resulting from the Mergers.

Through these initiatives, the Company seeks to streamline the organization and re-balance resources to better align with the Company’s priorities following the Mergers.

The Company anticipates that most of these charges will be recognized in the Company’s first fiscal quarter of 2023.

On January 20, 2023, Oban Merger Sub, Inc.

(“Merger Sub”) and Oban Merger Sub II LLC (“Merger Sub II”, together with Merger Sub, collectively, the “Subsidiary Guarantors”) entered into the Joinder Agreement by and between the Subsidiary Guarantors and Hercules, pursuant to which the Subsidiary Guarantors became guarantors under the Loan Agreement.

On February 10, 2023, the Company entered into the Third Amendment to Loan and Security Agreement (the “Third Amendment”), which amends certain provisions of 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.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

The information required by this Item 9 was previously reported in the Company’s Current Report on Form 8-K/A that was filed with the Securities and Exchange Commission on March 15, 2021.

The information required by this Item 9 was previously reported in the Company’s Current Report on Form 8-K/A that was filed with the SEC March 15, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data