What changed in this filing

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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-24 · 83 added, 51 removed, 241 unchanged (36% of the section changed)

Controls and Procedures

Limitations on Effectiveness of Disclosure Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

Disclosure controls and procedures include controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934, as amended, (“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

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Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022.

Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2022 due to the material weaknesses in our internal control over financial reporting described below.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023 due to the material weaknesses in our internal control over financial reporting described below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Our management, including our principal executive officer and principal financial officer, conducted an assessment as of December 31, 2022 of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment as of December 31, 2023 of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was not effective due to the material weaknesses described below.

We identified material weaknesses in our internal control over financial reporting.

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

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We did not design and maintain effective controls over the period-end financial reporting process to achieve complete, accurate and timely financial accounting, reporting and disclosures, including segregation of duties and adequate controls related to journal entries and certain other business processes, and verifying transactions are properly classified in the financial statements.

This material weakness resulted in adjustments to several account balances and disclosures in the consolidated financial statements for the years ended December 31, 2019 and 2018, and adjustments to the equity and warrant liabilities accounts and related disclosures in the condensed consolidated financial statements for the three months ended March 31, 2021.

• We did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our consolidated financial statements.

Specifically, we did not design and maintain (i) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately and (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to our financial applications, programs and data to appropriate personnel.

This material weakness did not result in a material misstatement to the consolidated financial statements, however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected.

These material weaknesses resulted in adjustments to several account balances and disclosures in the consolidated financial statements for the years ended December 31, 2019 and 2018, and adjustments to the equity and warrant liabilities accounts and related disclosures in the condensed consolidated financial statements for the three months ended March 31, 2021.

Additionally, each of these material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Measures Taken

We have taken several measures to design and implement controls to improve our internal control over financial reporting and continue to make progress towards establishing an effective internal control framework to remediate the foregoing material weaknesses.

Our efforts included the following:

• Recruiting additional personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third party consultants and specialists.

• Enhancing entity level controls (ELCs) including increasing Board and Audit Committee oversight, expanding senior management review of financial and business performance, creating an internal audit function and charter, and providing code of conduct and compliance training to company employees.

• Strengthening IT governance and designing IT general controls including restricted user access to our internal systems for financial reporting, and IT change management

• Designing and implementing additional controls for financial close and reporting including review of accounting policies, journal entry review controls, review of significant or non-routine transactions, period end close procedures, financial statement preparation, review, and reporting, and controls within various business processes as they relate to financial reporting.

This included design and implementation of controls around classification of balances in our financial statements and strengthening processes for management oversight over financial reporting and disclosure controls.

• Conducting internal control trainings for personnel responsible for implementing internal controls for the Company.

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting.

We have excluded Velodyne Lidar, Inc.

from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2023 because it was acquired in a merger during 2023.

The total assets and total revenues of Velodyne Lidar, Inc., a wholly-owned subsidiary, represents 8% and 35%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Remediation Measures of Unremediated Material Weaknesses

As it relates to the above material weaknesses that continued to exist as of December 31, 2023, our management is committed and continues to make progress to improve our internal control over financial reporting.

We continued implementation of a plan to remediate the control deficiencies that led to the above material weaknesses.

These remediation measures are ongoing and include the following:

• Continuing to recruit personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third-party consultants and specialists.

Our management also reallocated roles and responsibilities within the accounting team based on skills and experience of various personnel.

• Continuing to operate entity level controls (ELCs) including Board and Audit Committee oversight, senior management review of financial and business performance and internal controls, and expansion of the internal audit team.

We have designed and implemented these controls in the previous financial years.

• Continuing to provide internal control training for personnel responsible for implementing internal controls for the Company.

• Continue to operate internal controls for financial close and reporting including review of accounting policies, journal entry review controls including segregation of duties, period end close procedures, financial statement preparation, review, and reporting, and controls within various business processes as they relate to financial reporting, including controls to ensure segregation of duties.

This included controls around classification of balances in our financial statements and strengthening processes for management oversight over financial reporting and disclosure controls.

We have designed and implemented these controls in the previous financial years.

These investments in resources have improved the stability of our accounting organization.

While significant progress has been made in response to the material weaknesses, time is needed to demonstrate sustainability as it relates to our internal control over financial reporting and improvements made to our complement of resources, including demonstrating sustained operating effectiveness of our internal controls.

We are committed to continuous improvement and will continue to diligently review our internal control over financial reporting.

Remediation of Previously Reported Material Weaknesses

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, our management concluded that we did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our consolidated financial statements.

Our management completed the following actions and measures designed to remediate the control deficiencies that led to the material weakness:

• Continuing to operate entity level controls (ELCs) including increasing Board and Audit committee oversight over operation of internal control for financial reporting including IT General controls.

We had designed and implemented these controls in the previous financial years and continued to operate these in 2023.

• Enhanced senior management oversight over operation of IT general controls related to change management and user access management.

• Strengthened and enhanced the IT governance and policies to enable consistent operation of IT processes in the area of change management and user access management.

• Recruited additional personnel with appropriate knowledge and experience for Internal controls and IT General controls area, in addition to engaging and utilizing third-party consultants and specialists.

• Continuing to operate IT general controls including restricted user access to our internal systems for financial reporting, and IT change management.

We had designed and implemented these controls in the previous financial years and continued to operate these in 2023.

• Conducted internal control training for personnel responsible for IT general controls related to IT change management and IT user access management.

Our management completed its documentation, testing and evaluation of the enhanced control activities and determined that, as of December 31, 2023, these control activities have been appropriately designed and implemented, and have operated effectively for a sufficient period of time to conclude that these previously identified material weaknesses related to restricted user access, and IT change management have been remediated.

Attestation Report of Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2022 was not required to be audited by our auditors under Section 404(b) of the Sarbanes Oxley Act, 2022 due to Ouster being deemed a Non-accelerated filer and smaller reporting company (SRC) within the definition of Rule 12b-2 as the company’s public float was below the specified thresholds as of June 30, 2022.

The effectiveness of our internal control over financial reporting as of December 31, 2023 was not required to be audited by our auditors under Section 404(b) of the Sarbanes Oxley Act of 2002 due to Ouster being non-accelerated filer within the definition of Rule 12b-2.

Accordingly, this Annual Report on Form 10-K does not include an attestation report of our independent registered accounting firm.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

On December 15, 2023, Mark Weinswig , the Company’s Chief Financial Officer , adopted a “Rule 10b5-1 trading arrangement” as defined in Item 408(a) of Regulation S-K.

The plan provides for the periodic sale of up to 19,990 shares of common stock between April 13, 2024 and May 14, 2024.

Other than as described above, during the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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We did not grant any waivers to the Code of Conduct in fiscal 2023.

The remaining information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K will be included under the headings “Election of Directors,” “Executive Officers” “Corporate Governance,” and “Delinquent Section 16(a) Reports” (if applicable) in our definitive proxy statement for our 2023 Annual Meeting of Stockholders, and such required information is incorporated herein by reference.

The remaining information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K will be included under the headings “Election of Directors,” “Executive Officers” “Corporate Governance,” and “Delinquent Section 16(a) Reports” (if applicable) in our definitive proxy statement for our 2024 annual meeting of stockholders (the “2024 Annual Meeting of Stockholders”), to be filed within 120 days after the end of the 2023 fiscal year and is incorporated herein by reference.

Information About Our Executive Officers & Directors

The following table provides information regarding our executive officers and members of our board of directors (ages are calculated of the date of this Annual Report on Form 10-K):

The following table provides information regarding our executive officers and members of our board of directors (ages are calculated as of March 15, 2024):

Age Position at Ouster Principal Employment

Director, Co-Founder and Chief Executive Officer Same

Mark Frichtl 34 Co-Founder and Chief Technology Officer Same

Mark Frichtl 35

Co-Founder and Chief Technology Officer Same

Mark Weinswig

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General Counsel and Secretary Same

Nathan Dickerman

46 President of Field Operations Same

Tewksbury, Ph.D.

66 Executive Chairman of the Board Former Chief Executive Officer of Velodyne Lidar, Inc.

Virginia Boulet 69 Director Former Managing Director of Legacy Capital, LLC

Susan Heystee 61 Director Former Senior Vice President of Global Automotive Business at Verizon Connect

Ernest Maddock 64 Director Former Chief Financial Officer of Micron Technology, Inc.

Karin Rådström 44 Director Chief Executive Officer of Mercedes-Benz Trucks

Kristin Slanina 53 Director Chief Innovation Officer at ParkMyFleet

Riaz Valani 46 Director General Partner and Founder of Global Asset Capital

Executive Chairman of the Board of Directors

Former Chief Executive Officer of Velodyne Lidar, Inc.

Virginia Boulet 70

Director Former Managing Director of Legacy Capital, LLC, an investment company

Susan Heystee 62

Director Former Senior Vice President of Global Automotive Business at Verizon Connect, a telecommunications company

Ernest Maddock 65

Director Former Chief Financial Officer of Micron Technology, Inc., a semiconductor manufacturing company

Karin Rådström 45

Director Chief Executive Officer of Mercedes-Benz Trucks, a commercial vehicle manufacturer

Kristin Slanina 54

Director Chief Innovation Officer at ParkMyFleet, a provider of parking locations and technology solutions for fleet operations

Riaz Valani 47

Director General Partner and Founder of Global Asset Capital, a private equity investment firm

Executive Compensation

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4,996,772 (2)

$ 1.01 15,051,217

Restricted Stock Units 3,074,939 (3)

Restricted Stock Awards 50,184 (7)

Options to Purchase Common Stock 1,871,649 (4)

Employee Stock Purchase Plan (6)

$ — 6,627,990

Equity compensation plans not approved by security holders — $ — —

(1) Consists of the Ouster, Inc.

2021 Incentive Award Plan (“2021 Plan”), Ouster Inc.

2021 Incentive Award Plan (“2021 Plan”), Velodyne 2020 Equity Incentive plan (the “Velodyne Plan”), Ouster Inc.

Amended and Restated 2015 Stock Plan (“2015 Plan”) and Sense Photonics, Inc.

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No additional awards will be granted under the 2015 Plan or the Sense Plan and, as a result, no shares remain available for issuance for new awards under the 2015 Plan or the Sense Plan.

(3) Consists of 15,065,926 outstanding restricted stock units under the 2021 Plan and 1,444,267 outstanding restricted stock units under the Sense Plan.

(4) Consists of 20,111,908 outstanding options to purchase stock under the 2015 Plan, 645,797 outstanding options to purchase stock under the 2021 Plan and 259,457 outstanding options to purchase stock under the Sense Plan.

(5) As of December 31, 2022, the weighted-average exercise price of outstanding options under the 2015 Plan was $0.66, the weighted-average exercise price of outstanding options under the 2021 Plan was $10.26 and the weighted-average exercise price of outstanding options under the Sense Plan was $5.24.

(6) Represents Ouster, Inc.

2022 Employee Stock Purchase Plan and total number of shares remaining available under the plan.

The number of shares authorized under our Velodyne 2020 Plan will increase on the first day of each calendar year beginning on January 1, 2021 and ending on (and including) January 1, 2030, equal to the lesser of (A) 820,400 shares of common stock and (B) such lesser number of shares as determined by our board of directors.

(3) Consists of 2,062,787 outstanding restricted stock units under the 2021 Plan, 949,128 outstanding restricted stock units under the Velodyne Plan, and 63,024 outstanding restricted stock units under the Sense Plan.

(4) Consists of 1,856,434 outstanding options to purchase stock under the 2015 Plan and 15,215 outstanding options to purchase stock under the Sense Plan.

(5) As of December 31, 2023, the weighted-average exercise price of outstanding options under the 2015 Plan was $6.99 and the weighted-average exercise price of outstanding options under the Sense Plan was $52.40.

Outstanding restricted stock units and restricted stock awards subject to time-based vesting do not have an exercise price and therefore are not included in the calculation of the weighted-average exercise price.

(6) Consists of 102,338 shares remaining available for issuance under the 2021 Plan, 1,077,184 shares available for issuance under the Velodyne Plan and 405,311 available for purchase by our employees under the Ouster, Inc 2022 Employee Stock Purchase Plan.

(7) Consists of 50,184 outstanding restricted stock awards under the Velodyne Plan.

The remaining information required by Item 403 of Regulation S-K will be included under the heading “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2024 Annual Meeting of Stockholders, and such required information is incorporated herein by reference.

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S-4 POS 333-251611 3.1 3/10/2021

Bylaws of Ouster, Inc.

S-4 POS 333-251611 3.2 3/10/2021

Certificate of Amendment to Certificate of Incorporat ion of Ouster, Inc.

3.1 4/20/2023

A mended and Restated Bylaws of Ouster, Inc.

3.3 11/08/2023

Warrant Agreement, dated August 20, 2020, between Colonnade Acquisition Corp.

and Continental Stock Transfer & Trust Company, as warrant ag ent

and Continental Stock Transfer & Trust Company, as warrant agent

8-K 001-39463 4.1 8/25/2020

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S-1 333-240378

Description of Our Securities

4.2 8/04/2020

Description of Securities

Warrant to Purchase Common Stock of Velodyne Lidar, Inc., by and between Velodyne Lidar, Inc.

54 unchanged sentences

Second Amended and Restated Non-Employee Director Compensation Program

10.7 3/24/2023

Agreement and Plan of Merger and Plan of Reorganization, dated as of October 5, 2021, by and among Ouster, Inc., Sparrow Acquisition Sub., Inc., Sense Photonics, Inc., and Fortis Advisors LLC, solely in its capacity as Holders’ Agent

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Third Amendment to Loan and Security Agreement, dated February 10, 2023, by and among Ouster, Inc., Hercules Capital, Inc., and the lenders and guarantors party thereto.

Form of Voting and Support Agreement, dated November 4, 2022, by and among Ouster, Inc.

and each Velodyne stockholder party thereto

8-K 001-39463 10.2 11/7/2022

Form of Severance and Change in Control Agreement of Velodyne Lidar, Inc.

3 unchanged sentences

10-Q 001-39463 10.2 11/8/2022

Employment Agreement, by and between Ouster, Inc.

and Nathan Dickerman, dated March 1, 2021

10-Q 001-39463 10.4 11/8/2022

Executive Employment Agreement by and between Velodyne Lidar, Inc.

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8-K 001-38703 10.1 2/7/2022

Joinder Agreement by and between Velodyne Lidar USA, Inc.

and Hercules Capital , Inc., dated May 9, 2023.

10.1 8/14/2023

C red it Line Ag reement for Organizations and Business and Addendum , date d October 25, 2023, by and between the Company, UBS Bank USA, and UBS Financial Services Inc.

10.1 10/31/2023

List of Subsidiaries

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

P olicy for Recovery of Erroneously Award ed Compensation

101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.

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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 9A. Controls and Procedures