# Ouster, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Ouster, Inc.](/companies/oust.md) (CIK 1816581)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 16:11 ET
- Period: 2023-09-30
- Accession: 0001628280-23-038609
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1816581/000162828023038609/oust-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1816581/000162828023038609/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $22.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $58.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $19.1m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $55.9m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $3.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $2.9m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $16.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $75.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$35.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$335.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $1.8m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $5.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $17.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $349.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$35.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$335.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.89 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$9.39 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.89 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$9.39 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 39,228,118 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 35,670,408 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$113.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $75.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $252.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $321.8m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $61.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $127.8m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $40.4m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $194.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,386 characters.

*The following discussion of the results of operations and financial condition of Ouster, Inc. (“we,” “us,” “our,” the “Company,” “Ouster”) should be read in conjunction with the information set forth in our condensed consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q, as well as our audited consolidated financial statements and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Ouster’s Annual Report on Form 10-K (the “2022 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 24, 2023. This discussion contains forward-looking statements which are based upon current plans, expectations and beliefs. Such forward-looking statements involve risks and uncertainties. Ouster’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” in the 2022 Form 10-K, as updated in Part II, Item 1A “Risk Factors” herein, and as may be further updated from time to time in the Company’s other filings with the SEC.*

*On April 20, 2023, Ouster filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to effect a one-for-10 reverse stock split of Ouster’s common stock and a corresponding reduction in Ouster’s authorized shares of common stock (the “Reverse Stock Split”). The historical share and per share information included herein have been adjusted to reflect the Reverse Stock Split.*

*Unless the context otherwise requires, references in this subsection to “we”, “our”, “Ouster” and “the Company” refer to the business and operations of Ouster, Inc.*

### Overview

We founded Ouster in 2015 with the invention of our high-performance digital lidar. To continue to grow our business in the coming years, we have expanded and plan to continue to expand our sales and marketing efforts and our software development capabilities, and to accelerate sensor development efforts. We are headquartered in San Francisco, CA.

We are a leading global provider of high-resolution digital lidar sensors that offer advanced 3D vision to machinery, vehicles, robots, and fixed infrastructure assets, which allows each to understand and visualize the surrounding world and ultimately enables safe operation and autonomy. We design and manufacture digital lidar sensors that we believe are the highest-performing, lowest-cost lidar solutions available today across each of our four target markets: industrial automation; smart infrastructure; robotics; and automotive.

Our digital lidar sensors leverage a simplified architecture based on two semiconductor chips and are backed by a suite of patent-protected technology. We have invested heavily in patents since our inception, pursuing comprehensive coverage of invention families and use cases, with broad international coverage. We believe that our extensive patent coverage creates material barriers to entry for anyone aiming to compete in the digital lidar space.

Our product offering today includes four models of sensors in our OS product line: the hemispherical view OSDome, the ultra-wide field of view OS0, the mid-range OS1, and the long-range OS2. Within our OS sensor models, we offer numerous customization options, all enabled by embedded software. For each of our three models in the OS product line, we offer resolution options of 128 lines vertically (“channels”), 64 channels, or 32 channels, as well as many beam spacing options. We are currently developing our solid-state DF product line, which is a suite of short, mid, and long-range solid-state digital lidar sensors that provide uniform precision imaging without motion blur across an entire field of view. In October 2022, we announced the launch of our newest OS series scanning sensors, REV7, powered by our next-generation L3 chip. REV7 features the all-new OSDome sensor, as well as upgraded OS0, OS1, and OS2 sensors that deliver double the range, enhanced object detection, increased precision and accuracy, and greater reliability. The new REV7 sensors offer performance upgrades that we believe will enhance Ouster’s market opportunity, driven by new opportunities for longer-range and mapping applications.

In recognition of growing demand for lidar-powered software solutions, in January 2023, we announced Ouster Gemini, a software platform for our sensors that provides privacy-safe object detection and tracking capabilities. The Ouster Gemini platform is designed primarily for the smart infrastructure vertical, providing alerts and analytics on the movement of people and vehicles for the intelligent transportation systems (ITS), security, and retail analytics industries.

Following the Velodyne Merger, we added three additional sensor products and a software solution to our portfolio. The VLP-16, VLP32, and VLS-128 lidar sensors expand the price and performance range of our offering, and have a sizeable existing install base. We intend to continue to sell these products when they present a fit for key customer requirements. Blue City is a software-based solution that includes lidar sensors, computing hardware and tailored software for the ITS market. The solution complements our Gemini platform and adds additional software capabilities, such as signal control and traffic analytics for our ITS customers.

The Company outsources certain product lines to its manufacturing partners, Benchmark Electronics, Inc. and Fabrinet. Both partners manufacture products at their facilities in Thailand, which management expects will reduce the Company’s product costs and allow the Company to rapidly scale production to meet its anticipated product demand.

### Merger with Velodyne Lidar, Inc.

On February 10, 2023, we completed our merger of equals with Velodyne Lidar, Inc. pursuant to the terms of the Agreement and Plan of Merger with Velodyne, Merger Sub I and Merger Sub II (the “Velodyne Merger”). The Velodyne Merger was accounted for as a business combination with Ouster being an accounting acquirer. Since February 11, 2023, our results of operations have included Velodyne.

For additional information regarding the terms of the Velodyne Merger, see Note 3, to our unaudited condensed consolidated financial statements included in this Quarterly Report.

### Amazon Warrant

Amazon.com NV Investment Holdings LLC, a wholly-owned subsidiary of Amazon.com, Inc. (“Amazon”), holds a warrant (“Amazon Warrant”) to acquire shares of our common stock. We assumed the Amazon Warrant as part of the Velodyne Merger. As a result of the issuance and sale by us of an additional 802,832 shares of common stock in the three months ended September 30, 2023 pursuant to the At-Market-Issuance Sales Agreement at prices below the exercise price of the Amazon Warrant, an antidilution adjustment to the terms of the Amazon Warrant occurred, resulting in the increase in the number of shares issuable under the Amazon Warrant by 120 shares of common stock and a reduction to the original strike price of the Amazon Warrant to $50.70 per share. As of September 30, 2023, there were 3,264,018 shares of common stock issuable under the Amazon Warrant. The exercise price and the warrant shares issuable upon exercise of the Amazon Warrant are subject to further antidilution adjustments, including in the event we make certain sales of common stock (or securities exercisable or convertible into or exchangeable for shares of our common stock) at a price less than the exercise price of the Amazon Warrant. The Amazon Warrant is subject to vesting; 50% of the unvested Amazon Warrant as of the date of the Velodyne Merger vested as a result of the Velodyne Merger and the remainder will vest over time based on payments by Amazon or its affiliates to us in connection with Amazon’s purchase of goods and services from us.

### Factors Affecting Our Performance

*Commercialization of Lidar Applications.* We believe that lidar is approaching its inflection point of adoption across our target end market applications, and that we are well-positioned to capitalize on this market adoption. However, as our customers continue research and development projects to commercialize semi-autonomous solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market and customer adoption. As a result, we expect that our results of operations, including revenue and gross margins, will continue to fluctuate on a quarterly and annual basis for the foreseeable future. As the market for lidar solutions matures and more customers reach a commercialization phase with solutions that rely on our technology, the fluctuations in our operating results may become less pronounced. In May 2023, the Company announced that it had been awarded a serial production agreement with Motional, a global leader in driverless technology, to be Motional’s exclusive supplier of long-range lidar using the VLS-128 lidar sensor through 2026, and we intend to seek to establish similar relationships with other customers. Nonetheless, our revenue may not grow as we expect unless and until more customers commercialize their products and lidar technology becomes more prevalent across our target end markets.

*Number of Customers in Production.* For certain strategic customers and markets, our products must be integrated into a broader platform, which then must be tested, validated, and achieve system-level performance and reliability thresholds that enable commercial production and sales. The time necessary for these customers to reach commercial production varies from six months to seven years based on the market and application. For example, the production cycle in the automotive market tends to be substantially longer than in our other target markets, including industrial automation, smart infrastructure and robotics. It is critical to our future success in each of our target end markets that our customers reach commercial production and sales and that they select our products in their commercial production applications. Because the timelines to reach production vary significantly and the revenue generated by each customer in connection with commercial production and sales is unpredictable, it is difficult for us to reliably predict our financial performance.

*Customers’ Sales Volumes.* Our customer base is diversified and we aim to continue to penetrate into diverse end markets to increase our sales volumes. Ultimately widespread adoption of our customers’ products that incorporate our lidar solutions will depend on many factors, including the size of our customers’ end markets, end market penetration of our customer’s products that incorporate our digital lidar solutions, our end customers’ ability to sell their products, and the financial stability and reputation of the customers. We believe our sales volume by customer depends on the end market demand for our customers’ products that incorporate our digital lidar solutions.

*Average Selling Prices (“ASPs”), Product Costs and Margins.* Our product costs and gross margins depend largely on the volumes of sensors sold and the number and variety of solutions we provide to our customers. We anticipate that our selling prices will vary by target end market and application due to market-specific supply and demand dynamics. We expect to continue to experience some downward pressure on margins from the impact of the Velodyne Merger and related integration activities including the transition of manufacturing of our products to Thailand and excess and obsolete charges. We believe that these customer-specific selling price fluctuations combined with our volume-driven product costs may drive fluctuations in revenue and gross margins on a quarterly basis. However, notwithstanding any short-term price surcharges on our products, we expect that over time our volume-driven product costs will decrease.

*Competition.* Lidar is an emerging market, and there are many competitors for the growing market. This has created downward pressure on our ASPs, particularly in the Asia-Pacific region. We expect this pressure to continue to push our ASPs lower in the coming years. However, we believe that because of our complementary metal-oxide-semiconductor (“CMOS”) digital lidar technology, we are well-positioned to scale more rapidly than our competitors and leverage our scale to deliver positive gross margins.

*Continued Investment and Innovation.* We believe that we are a leading digital lidar and solutions provider. Our financial performance is significantly dependent on our ability to maintain this leading position, which is further dependent on the investments we make in research and development. We believe it is essential that we continue to identify and respond to rapidly evolving customer requirements, including successfully realizing our product roadmap. If we fail to continue our innovation, our market position and revenue may be adversely affected, and our investments in that area will not be recovered.

*Market Trends and Uncertainties.* We anticipate increasing demand for our digital lidar solution. We estimate a multibillion-dollar total addressable market (“TAM”) for our solutions in the near future. We define our TAM as automation applications in the industrial, smart infrastructure, robotics and automotive end markets where we actively engage and maintain customer relationships. Each of our target markets is potentially a significant global opportunity, and these markets have historically been underserved by limited or inferior technology or not served at all. We believe we are well-positioned in our market as a leading provider of high-resolution digital lidar sensors and associated software solutions.

Although increasing adoption of semi-autonomous solutions that rely on lidar technology may generate higher demand, we may not be able to take advantage of demand if we are unable to anticipate regulatory changes and adapt quickly enough to meet such new regulatory standards or requirements applicable to us or to our customers’ products in which our digital lidar sensors are used. Market acceptance of semi-autonomous solutions and active safety technology depend upon many factors, including cost, performance, safety performance, regulatory requirements and international taxes or tariffs related to such technologies. These factors may impact the ultimate market acceptance of our lidar technology.

*International Expansion.* We view international expansion as an important element of our strategy to increase revenue and achieve profitability. We continue to position ourselves in geographic markets that we expect to serve as important sources of future growth. We have an existing presence in three regions: Americas; Asia-Pacific; and Europe, Middle East and Africa. We intend to expand our presence in these regions over time including through distribution partnerships. Expanded global reach will require continued investment and may expose us to additional foreign currency risk, international taxes and tariffs, legal obligations and additional operational costs, risks and challenges that may impact our ability to meet our projected sales volumes, revenue and gross margins.

### Components of Results of Operations

### Revenue

The majority of our revenue comes from the sale of our lidar sensors and accessories both directly to end users and through distributors both domestically and internationally. We recognize revenue from product sales when the performance obligation of transferring control of the product to the customer has been met, generally when the product is shipped. We also recognize revenue by performing services related to product development, validation, maintenance under our extended warranty contracts and shipping; however, we do not expect product development and validation and license and services to be material components of revenue, cost of revenue or gross margin in the foreseeable future. Performance obligations related to services are generally recognized over time, based on cost-to-cost input basis or straight-line over time. Amounts billed to customers related to shipping and handling are classified as revenue, and we have elected to recognize the cost of shipping activities that occur after control has transferred to the customer as a fulfillment cost rather than a separate performance obligation. All related costs are accrued and recognized within cost of revenue when the related revenue is recognized.

Most of our customers are innovators and early technology adopters incorporating our products into their solutions. Currently, our product revenue consists of both customers ordering small volumes of our products that are in an evaluation phase and customers that order larger volumes of our products and have more predictable long-term production schedules. However, we believe we are still at the very beginning of the lidar adoption curve, and some customers are still learning their growth and demand rates which can impact the timing of purchase orders quarter to quarter. As we grow our business, we expect to continue to improve our own understanding of our customers’ needs and timelines, and expect the timing of orders will have a less notable impact on our quarterly results.

### Cost of Revenue

Cost of revenue consists of the manufacturing cost of our digital lidar sensors, which primarily consists of sensor components, personnel-related expenses, including salaries, benefits, and stock-based compensation directly associated with our manufacturing organization, and amounts paid to our third-party contract manufacturer and vendors. Our cost of revenue also includes depreciation of manufacturing equipment, amortization of intangible assets, an allocated portion of overhead, facility and IT costs, warranty expenses, excess and obsolete inventory and shipping costs.

### Gross Profit and Gross Margin

Our gross profit equals total revenues less our total cost of revenues, and our gross margin is our gross profit expressed as a percentage of total revenue. Subject to quarterly fluctuations and volatility, we expect unit costs to decline as we manufacture higher unit volumes of sensors and a greater portion of our sensors are produced by our contract manufacturers in Thailand.

### Operating Expenses

#### Research and Development Expenses

Research and development (“R&D”) activities are primarily conducted at our San Francisco based headquarters and our additional R&D facilities in Scotland, Canada and San Jose and consist of the following activities:

- Design, prototyping, and testing of proprietary electrical, optical, and mechanical subsystems for our digital lidar products;
- Robust testing for industrial and autonomous vehicle safety certifications;
- Development of new products and enhancements to existing products in response to customer requirements including firmware development and software development of lidar integration products;
- Custom system-on-a-chip (“SoC”) design for Ouster’s digital lidar products; and
- Development of custom manufacturing equipment.

R&D expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, for all personnel directly involved in R&D activities, third-party engineering and contractor costs, prototype expenses, amortization of intangible assets, and an allocation of shared overhead costs including facilities, utilities and IT-related costs that support R&D activities.

R&D costs are expensed as they are incurred. Our investment in R&D will continue to grow as we invest in new lidar technology and related software. Our absolute amount of R&D expenses is expected to grow over time; however, we expect R&D as a percentage of revenue to decrease over time as our business grows.

#### Sales and Marketing Expenses

Our business development, customer support and marketing teams are located in offices worldwide. 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 expenses also include amortization expense of intangible assets related to customer relationships associated with the acquisitions. We have experienced additional sales and marketing expenses as a result of our global expansion, and expect sales and marketing spend as a percentage of revenue to decrease over time as our business grows.

#### General and Administrative Expenses

General and administrative expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, of our executives and members of the board of directors, finance, human resources, an allocation of shared overhead costs including facilities, utilities and IT-related costs that support general and administrative activities, as well as amortization of intangible assets, fees related to legal fees, patent prosecution, accounting, finance and professional services, as well as insurance and bank fees. Our absolute amount of general and administrative expenses will grow over time; however, we expect the general and administrative spend as a percentage of revenue to decrease over time as our business grows. We have experienced and may in the near-term experience additional increases in general and administrative expenses related to legal, accounting, finance and professional services costs associated with the Velodyne Merger, litigation activities, hiring more personnel and consultants to support our growing international expansion and compliance with the applicable provisions of the Sarbanes-Oxley Act (“SOX”) and other SEC rules and regulations as a result of being a public company.

#### Goodwill Impairment Charges

In the nine months ended September 30, 2023, we recorded goodwill impairment charges of $166.7 million. These charges were primarily driven by the decrease in the Company’s market capitalization during the period. Our goodwill impairment analysis includes a comparison of the aggregate estimated fair value of our reporting unit to our total market capitalization. There were no goodwill impairment charges during the three months ended September 30, 2023. As of September 30, 2023, our remaining goodwill balance was nil. No goodwill impairment charges were recognized during the year ended December 31, 2022.

### Interest Income, Interest Expense, and Other Income (Expense), Net

Interest income consists primarily of income earned on our cash and cash equivalents. These amounts will vary based on our cash and cash equivalents balances in interest bearing deposit accounts and market rates. Interest expense consists primarily of interest on our debt and amortization of debt issuance costs and discounts. Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, realized gains and losses related to sales of our available-for-sale investments, the change in fair value of the private placement warrant liability.

### Income Taxes

Our income tax provision consists of federal, state and foreign current and deferred income taxes. Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in the quarter. Our effective tax rate differs from the U.S. statutory tax rate primarily due to valuation allowances on deferred tax assets as it is more likely than not that some, or all, of our deferred tax assets will not be realized. We continue to maintain a full valuation allowance, excluding specific balances due to the Velodyne Merger, against our net deferred tax assets. Income tax provision for the three and nine months ended September 30, 2023 and 2022, respectively, was not material to the Company’s condensed consolidated financial statements.

### Results of Operations:

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Quarterly Report. The following table sets forth our condensed consolidated results of operations data for the periods presented:

*(dollars in thousands)*

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $22,209 | $11,204 | $58,835 | $30,091 |
| Cost of revenue(1) | 19,116 | 7,488 | 55,932 | 21,002 |
| Gross profit (loss) | 3,093 | 3,716 | 2,903 | 9,089 |
| Operating expenses(1): |  |  |  |  |
| Research and development | 16,678 | 17,212 | 75,584 | 49,011 |
| Sales and marketing | 7,887 | 8,541 | 33,086 | 23,194 |
| General and administrative | 14,270 | 14,008 | 63,437 | 40,306 |
| Goodwill impairment charges | — | — | 166,675 | — |
| Total operating expenses | 38,835 | 39,761 | 338,782 | 112,511 |
| Loss from operations | (35,742) | (36,045) | (335,879) | (103,422) |
| Other income (expense): |  |  |  |  |
| Interest income | 2,495 | 733 | 6,459 | 1,231 |
| Interest expense | (1,825) | (699) | (5,222) | (1,143) |
| Other (expense) income, net | (13) | 61 | (124) | 7,071 |
| Total other income, net | 657 | 95 | 1,113 | 7,159 |
| Loss before income taxes | (35,085) | (35,950) | (334,766) | (96,263) |
| (Benefit from) provision for income tax expense | 17 | 37 | 349 | 121 |
| Net loss | $(35,102) | $(35,987) | $(335,115) | $(96,384) |

41

The following table sets forth the components of our condensed consolidated statements of operations and comprehensive loss data as a percentage of revenue for the periods presented:

|  | Three Months Ended September 30, 2023 (% of total revenue) | 2022 | Nine Months Ended September 30, 2023 (% of total revenue) | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenue | 100% | 100% | 100% | 100% |
| Cost of revenue(1) | 86 | 67 | 95 | 70 |
| Gross profit (loss) | 14 | 33 | 5 | 30 |
| Operating expenses (1): |  |  |  |  |
| Research and development | 75 | 154 | 128 | 163 |
| Sales and marketing | 36 | 76 | 56 | 77 |
| General and administrative | 64 | 125 | 108 | 134 |
| Goodwill impairment charges | 0 | — | 283 | — |
| Total operating expenses | 175 | 355 | 575 | 374 |
| Loss from operations | (161) | (322) | (570) | (344) |
| Other income (expense): |  |  |  |  |
| Interest income | 11 | 7 | 11 | 4 |
| Interest expense | (8) | (6) | (9) | (4) |
| Other income (expense), net | — | 1 | — | 23 |
| Total other income, net | 3 | 2 | 2 | 23 |
| Loss before income taxes | (158) | (320) | (568) | (321) |
| Benefit from income tax expense | — | — | — | — |
| Net loss | (158)% | (320)% | (568)% | (321)% |

(1) Includes stock-based compensation expense as follows:

*(dollars in thousands)*

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue | $570 | $207 | $1,998 | $570 |
| Research and development | 4,056 | 3,681 | 19,765 | 11,248 |
| Sales and marketing | 1,345 | 1,913 | 7,726 | 5,276 |
| General and administrative | 2,401 | 2,654 | 17,129 | 8,230 |
| Total stock-based compensation | $8,372 | $8,455 | $46,618 | $25,324 |

42

### Comparison of the Three Months Ended September 30, 2023 and 2022

### Revenue

*(dollars in thousands)*

| Revenue by geographic location: | Three Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Americas | $13,317 | $4,182 | $9,135 | 218% |
| Asia-Pacific | 2,325 | 2,072 | 253 | 12 |
| Europe, Middle East and Africa | 6,567 | 4,950 | 1,617 | 33 |
| Total | $22,209 | $11,204 | $11,005 | 98% |

#### Revenue

Revenue increased by $11.0 million, or 98%, to $22.2 million for the three months ended September 30, 2023 from $11.2 million for the comparable period in the prior year. The increase in revenue was driven by higher volume that was primarily due to the Velodyne Merger. In addition, the Company launched the REV7 sensors and realized higher OS sensor revenues in 2023.

#### Geographic Locations

Revenue increased across the geographic regions of Americas; Asia-Pacific; and Europe, Middle East and Africa as compared to the comparable period in the prior year. The revenue increases in those geographic regions were primarily attributable to the Velodyne Merger, our focus and investment in our global sales team and higher demand for our sensors during the three months ended September 30, 2023.

### Cost of Revenue

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue | $19,116 | $7,488 | $11,628 | 155% |

Cost of revenue increased by $11.6 million, or 155%, to $19.1 million for the three months ended September 30, 2023 from $7.5 million for the comparable period in the prior year. The increase in cost of revenue was primarily attributable to the Velodyne Merger, which increased revenues and costs, and higher costs related to cancelling certain Velodyne products and transitioning to the REV7 sensors.

### Operating Expenses

*(dollars in thousands)*

| Operating expenses: | Three Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $16,678 | $17,212 | $(534) | (3)% |
| Sales and marketing | 7,887 | 8,541 | (654) | (8) |
| General and administrative | 14,270 | 14,008 | 262 | 2 |
| Total operating expenses: | $38,835 | $39,761 | $(926) | (2)% |

#### Research and Development

Research and development expenses decreased by $0.5 million, or 3%, to $16.7 million for the three months ended September 30, 2023 from $17.2 million for the comparable period in the prior year. The decrease was primarily attributable to lower spending related to product development materials and contract engineering, partially offset by impacts from the Velodyne Merger, which increased headcount-related expenses and other associated costs.

#### Sales and Marketing

Sales and marketing expenses decreased by $0.7 million, or 8%, to $7.9 million for the three months ended September 30, 2023 from $8.5 million for the comparable period in the prior year. The decrease was primarily attributable to the decrease in headcount-related expenses and other costs, associated with our June 2023 restructuring activities.

#### General and Administrative

General and administrative expenses increased by $0.3 million, or 2%, to $14.3 million for the three months ended September 30, 2023 from $14.0 million for the comparable period in the prior year. The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses and other costs.

#### Goodwill Impairment Charges

There were no goodwill impairment charges for the three months ended September 30, 2023 and 2022.

### Interest Income, Interest Expense and Other Income (Expense), Net

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $2,495 | $733 | $1,762 | 240% |
| Interest expense | $(1,825) | $(699) | $(1,126) | 161 |
| Other (expense) income, net | $(13) | $61 | $(74) | (121) |

The increase in interest income was primarily attributable to a higher average cash and cash equivalent balances driven by additions from the Velodyne Merger transaction.

Interest expense was $1.8 million and $0.7 million for the three months ended September 30, 2023 and 2022, respectively, related to higher interest on term loan borrowings and amortization of debt issuance costs and discount under the former our Loan Agreement (as defined below).

Other (expense) income, net was not material for either of the periods presented.

### Income Taxes

We were subject to income taxes in the United States and miscellaneous foreign jurisdictions for the three months ended September 30, 2023 and 2022. Our income tax expense for three months ended September 30, 2023 and 2022 was not material to our condensed consolidated financial statements.

### Comparison of the Nine Months Ended September 30, 2023 and 2022

### Revenue

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $58,835 | $30,091 | $28,744 | 96% |
| Revenue by geographic location: |  |  |  |  |
| Americas | $35,204 | $10,685 | $24,519 | 229% |
| Asia-Pacific | 5,994 | 7,004 | (1,010) | (14) |
| Europe, Middle East and Africa | 17,637 | 12,402 | 5,235 | 42 |
| Total | $58,835 | $30,091 | $28,744 | 96% |

44

#### Revenue

Revenue increased by $28.7 million, or 96%, to $58.8 million for the nine months ended September 30, 2023 from $30.1 million for the comparable period in the prior year. The increase in revenue was primarily driven by higher volume that was largely due to the Velodyne Merger. In addition, the Company launched the REV7 sensors and realized higher OS sensor revenues in 2023.

#### Geographic Locations

Revenue increased across the geographic regions of Americas and Europe, Middle East and Africa as compared to the comparable period in the prior year. The revenue increases in those geographic regions were primarily attributable to the Velodyne Merger, our focus and investment in our global sales team and increased demand for our sensors during the nine months ended September 30, 2023. Revenue in the Asia-Pacific geographic region was relatively flat.

### Cost of Revenue

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue | $55,932 | $21,002 | $34,930 | 166% |

Cost of revenue increased by $34.9 million, or 166%, to $55.9 million for the nine months ended September 30, 2023 from $21.0 million for the comparable period in the prior year. The increase in cost of revenue was primarily attributable to the Velodyne Merger, which increased costs primarily associated with higher costs and excess and obsolete charges related to canceling certain Velodyne products and transitioning to the REV7 sensors.

### Operating Expenses

*(dollars in thousands)*

| Operating expenses: | Nine Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $75,584 | $49,011 | $26,573 | 54% |
| Sales and marketing | 33,086 | 23,194 | 9,892 | 43 |
| General and administrative | 63,437 | 40,306 | 23,131 | 57 |
| Goodwill impairment charges | 166,675 | — | 166,675 | \* |
| Total operating expenses: | $338,782 | $112,511 | $226,271 | 201% |

\*Not meaningful.

#### Research and Development

Research and development expenses increased by $26.6 million, or 54%, to $75.6 million for the nine months ended September 30, 2023 from $49.0 million for the comparable period in the prior year. The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses and other costs.

#### Sales and Marketing

Sales and marketing expenses increased by $9.9 million, or 43%, to $33.1 million for the nine months ended September 30, 2023 from $23.2 million for the comparable period in the prior year. The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses and other costs.

#### General and Administrative

General and administrative expenses increased by $23.1 million, or 57%, to $63.4 million for the nine months ended September 30, 2023 from $40.3 million for the comparable period in the prior year. The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses and other costs.

#### Goodwill Impairment Charges

Goodwill impairment charges were $166.7 million for the nine months ended September 30, 2023 for the reasons described above under “Goodwill impairment charges.” There were no goodwill impairment charges during the nine months ended September 30, 2022.

### Interest Income, Interest Expense and Other Income (Expense), Net

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $6,459 | $1,231 | $5,228 | 425% |
| Interest expense | $(5,222) | $(1,143) | $(4,079) | 357 |
| Other (expense) income, net | $(124) | $7,071 | $(7,195) | (102) |

The increase in interest income was primarily attributable to a higher average cash and cash equivalent balances driven by additions from the Velodyne Merger transaction.

Interest expense was $5.2 million for the nine months ended September 30, 2023 and was related to term loan borrowings and amortization of debt issuance costs and discount under our former Loan Agreement (as defined below). Interest expense recorded for the nine months ended September 30, 2022 was $1.4 million and consisted of interest and amortization of debt issuance cost under our former Loan Agreement with Hercules Capital, Inc., which commenced on April 29, 2022.

Other (expense) income, net was $0.1 million for the nine months ended September 30, 2023 compared to $7.1 million for the comparable period in the prior year. During the nine months ended September 30, 2023, we recorded a loss of $0.1 million for the fair value change of private placement warrant liability. During the nine months ended September 30, 2022, we recorded a gain of $7.4 million for the fair value change of private placement warrant liability.

### Income Taxes

We were subject to income taxes in the United States and miscellaneous foreign jurisdictions for the nine months ended September 30, 2023 and 2022. Our income tax expense for the nine months ended September 30, 2023 and 2022 was not material to our condensed consolidated financial statements.

### Liquidity and Capital Resources

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

On April 29, 2022, we entered into an open market sale agreement with B. Riley Securities, Inc., Cantor Fitzgerald & Co. and Oppenheimer & Co. Inc. (the “ATM Agreement”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $150.0 million under an “at-the-market” equity offering program. Subject to the terms and conditions of the agreement, we may sell the shares in amounts and at times to be determined by us but we are under no obligation to sell any of the shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock, capital needs and determinations by us of the appropriate sources of funding.

During the three months ended September 30, 2023, the Company sold 802,832 shares under the ATM Agreement at a weighted-average sales price of $5.06 per share, resulting in cumulative gross proceeds to the Company totaling approximately $4.1 million before deducting offering costs, sales commissions and fees. Cumulative net proceeds to the Company totaled approximately $3.6 million after deducting offering costs, sales commissions and fees. The remaining availability under the ATM Agreement as of September 30, 2023 is approximately $129.1 million. The Company intends to use the net proceeds from the sale of shares pursuant to the ATM Agreement for working capital and general corporate purposes.

On October 25, 2023, we entered into a Credit Line Account Application and Agreement for Organizations and Businesses (the “Credit Agreement”) and the Addendum to Credit Line Account Application and Agreement (the “Addendum”; and the Credit Agreement as amended, modified, and/or supplemented by the Addendum, the “UBS Agreement”) with UBS Bank USA (the “Bank”) and UBS Financial Services Inc. The UBS Agreement provides us with a revolving credit line of up to $45.0 million, subject to certain terms and conditions. We borrowed $44.0 million on October 25, 2023, and all of the proceeds were used to prepay and terminate our Loan Agreement with Hercules Capital, Inc., dated April 29, 20223 (as amended, the “Loan Agreement”) on October 25, 2023. Pursuant to the terms of the UBS Agreement, we have agreed to maintain minimum liquidity, comprised of unencumbered cash and cash equivalents, U.S. treasuries and other assets acceptable to the Bank, of $52.0 million in an account maintained with the Bank or its affiliates at all times. This amount is expected to appear as restricted cash on our balance sheet in future periods. For a description of the other material terms of the UBS Agreement, see Note 16, Subsequent Event to our unaudited condensed consolidated financial statements included in this Quarterly Report.

For a description of our former Loan Agreement with Hercules Capital, Inc., see Note 6, Debt to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, public company costs and general corporate needs. We expect these needs to continue as we develop and grow our business.

### Material Cash Requirements

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the condensed consolidated balance sheet as of September 30, 2023, while others are considered future commitments. Our contractual obligations primarily consist of non-cancelable purchase commitments with various parties to purchase goods or services, primarily inventory, entered into in the normal course of business and operating leases. For information regarding our other contractual obligations, refer to Note 8 , Commitments and Contingencies to our unaudited condensed consolidated financial statements included in this Quarterly Report and Part II, Item 7 of our Annual Report on Form 10-K as filed with the SEC on March 24, 2023.

As of September 30, 2023, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $200.5 million. The Company has incurred losses and negative cash flows from operations for several years. If the Company continues to incur losses in the future, it may need to improve liquidity and raise additional capital through the issuance of equity, including under the ATM Agreement, and/or debt financing. This is subject, to a certain extent, to general economic, financial, competitive, regulatory, and other factors that are beyond our control and there can be no assurance that the Company would be able to raise such capital. Nevertheless, management believes that the Company’s existing sources of liquidity will be adequate to fund its operations for at least twelve months from the date the unaudited condensed consolidated financial statements in this Quarterly Report were available for issuance.

### Cash Flow Summary

The following table summarizes our cash flows from continuing operations for the periods presented:

*(dollars in thousands)*

| Net cash provided by (used in): | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(113,703) | $(83,290) |
| Investing activities | $63,524 | $(2,078) |
| Financing activities | $3,385 | $35,414 |

47

### Operating Activities

During the nine months ended September 30, 2023, operating activities used $113.7 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $335.1 million, impacted by our non-cash charges of $238.7 million, primarily consisting of goodwill impairment charges of $166.7 million, depreciation and amortization of $14.3 million, loss on write-off of construction in progress and right-of-use asset impairment of $1.4 million, gain on lease termination of $0.8 million, stock-based compensation of $46.6 million, a change in right-of-use asset of $3.3 million and inventory write down of $8.2 million. The changes in our operating assets and liabilities of $17.3 million were primarily due to an increase in accounts receivable of $4.5 million, increase in inventory of $4.5 million, a decrease in accounts payable of $4.1 million and an increase in accrued and other liabilities of $10.2 million.

During the nine months ended September 30, 2022, operating activities used $83.3 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $96.4 million, impacted by our non-cash charges of $28.3 million primarily consisting of stock-based compensation of $25.3 million, a $7.4 million change in fair value of warrant liabilities, depreciation and amortization of $7.1 million, change in right-of-use asset of $2.1 million, interest expense and amortization of debt issuance costs and debt discount of $0.4 million. The changes in our operating assets and liabilities of $15.2 million were primarily due to a decrease in operating lease liability of $2.4 million, an increase in accounts payable of $3.2 million, an increase in accounts receivable of $0.1 million and an increase in accrued and other liabilities of $0.2 million.

### Investing Activities

During the nine months ended September 30, 2023, cash provided by investing activities was $63.5 million, which was attributed primarily to the Velodyne Merger and proceeds from sales of short-term investments.

During the nine months ended September 30, 2022, cash used in investing activities was $2.1 million, which was related to purchases of property, plant and equipment, partially offset by sales of property and equipment.

### Financing Activities

During the nine months ended September 30, 2023, cash provided by financing activities was $3.4 million, consisting primarily of $2.9 million of proceeds from the issuance of common stock under the ATM Agreement, net of commissions and fees.

During the nine months ended September 30, 2022, cash provided by financing activities was $35.4 million, consisting primarily of $19.1 million of proceeds from borrowings, net of debt discount and issuance costs, $16.3 million of proceeds from the issuance of common stock under the ATM Agreement, net of commissions and fees, and proceeds from the exercise of stock options of $0.4 million.

### Critical Accounting Estimates

Our critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to our critical accounting policies and estimates since the filing of our Annual Report on Form 10-K for the year ended December 31, 2022 except for the revision in our revenue policies and addition of investments as a significant accounting policy, both in connection with Velodyne Merger, which is described in Note 2 - Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements included in this Quarterly Report.

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions. Certain of these policies require the application of subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates and assumptions are based on historical experience, changes in the business environment and other factors that we believe to be reasonable under the circumstances. Different estimates that could have been applied in the current period or changes in the accounting estimates that are reasonably likely can result in a material impact on our financial condition and operating results in the current and future periods.

## Market risk

As filed, 5,638 characters.

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates, foreign currency exchange rates and to a lesser extent, inflation risk. The following analysis provides quantitative information regarding these risks.

### Inflation Risk

General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades. General inflation, including rising prices for inputs and rising wages, as well as rising interest rates negatively impact our business by increasing our operating costs. General inflation also negatively impacts our business by decreasing the capital for our customers to deploy to purchase our products. Inflation may cause our customers to reduce or delay orders for our products thereby causing a decrease in sales. Increased instability relating to this higher inflation as well as rising interest rates may enhance volatility in currency exchange rates, limit our suppliers’ and customers’ access to credit and limit our ability to access debt and equity financing. These uncertainties may make it difficult for us and our suppliers and customers to accurately plan future business activities and materially adversely impact our operating results and financial condition. While we adjust our prices to try to offset rising operating costs, we may not be able to fully offset such higher costs or demand may decline. Our inability to offset costs or consequential decline in demand could harm our business, results of operations or financial condition.

### Interest Rate Risk

As of September 30, 2023, we had cash and cash equivalents and short-term investments of approximately $200.5 million, of which $46.0 million consisted of institutional money market funds, $73.2 million commercial paper, and $51.8 million corporate debt and U.S. government agency securities, all of which carries a degree of interest rate risk. The primary goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. These investments are subject to interest rate risk, as sharp increases in market interest rates could have an adverse impact on their fair value. Although the fair values of these instruments can fluctuate, we believe that the short-term, highly liquid nature of these investments, and our ability to hold these instruments to maturity, reduces our risk for potential material losses. A hypothetical 100 basis point change in interest rates would not have a material impact on our financial condition or results of operations due to the short-term nature of our investment portfolio.

In addition, our operating results are subject to risk from interest rate fluctuations on borrowings under our debt financing arrangements, which carry variable interest rates. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Because our borrowings under our financing arrangements bear interest at variable rates, we are exposed to market risks relating to changes in interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. As of September 30, 2023, we had $40.0 million of variable rate debt outstanding under our former Loan Agreement, which was refinanced on October 25, 2023. Based upon a sensitivity analysis of our debt levels on September 30, 2023, an increase or decrease of 1% point in the effective interest rate under our former Loan Agreement would cause an increase or decrease in interest expense of approximately $0.4 million over the next 12 months.

We anticipate that interest payable on borrowings under the UBS Agreement will be substantially less than the interest payable on the term loan facility with Hercules Capital, Inc, and that the new Agreement will provide more operational flexibility.

We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future.

### Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the U.S. and to a lesser extent in Asia and Europe. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. No strategy can completely insulate us from risks associated with such fluctuations and our currency exchange rate risk management activities could expose us to substantial losses if such rates move materially differently from our expectations.

## Controls and procedures

As filed, 7,730 characters.

### Limitations on Effectiveness of Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. 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. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### 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 September 30, 2023. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2023 due to the material weaknesses in our internal control over financial reporting described below.

### Material weaknesses and remediation measures

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).

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.

We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with our accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:

- 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.

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 continued to make progress during the quarter ended September 30, 2023 towards establishing an effective internal control framework to remediate the foregoing material weaknesses. Our efforts have 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 training 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 review our internal control over financial reporting diligently.

### Changes in Internal Control over Financial Reporting

Other than the remediation measures described above, there were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 6,017 characters.

Investing in our securities involves a high degree of risk. You should carefully consider the risks described under the heading “Risk Factors” in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”), the other information in this Quarterly Report, including our unaudited condensed consolidated financial statements and the related notes, as well as our other public filings with the SEC, before deciding to invest in our securities. There have been no material changes to the Company’s risk factors previously disclosed in our 2022 Form 10-K, other than the below. The occurrence of any of the events described therein could harm our business, financial condition, results of operations, liquidity or prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business.

***Our indebtedness could adversely affect our financial health and competitive position.***

On October 25, 2023, we entered into a Credit Line Account Application and Agreement for Organizations and Businesses (the “Credit Agreement”) and the Addendum to Credit Line Account Application and Agreement (the “Addendum”; and the Credit Agreement as amended, modified, and/or supplemented by the Addendum, the “UBS Agreement”) with UBS Bank USA (the “Bank”), and UBS Financial Services Inc. We may incur additional indebtedness in the future.

Pursuant to the terms of the UBS Agreement, we have agreed to maintain minimum liquidity, comprised of unencumbered cash and cash equivalents, U.S. treasuries and other assets acceptable to the Bank, of $52.0 million in an account maintained with the Bank or its affiliates at all times. This amount is expected to appear as restricted cash on our balance sheet in future periods. As collateral for the facility, we have agreed to maintain securities accounts with the Bank or its affiliates with deposits in an amount sufficient to meet the collateral value as determined by the Bank pursuant to the UBS Agreement. The facility under the UBS Agreement is secured by our assets in securities accounts and any other accounts maintained with the Bank or its affiliates, and any supporting obligations, general intangibles and other rights ancillary or attributable to such assets, subject to customary exceptions.

The UBS Agreement also contains affirmative and negative covenants customary for a credit line of this type, including requirements for maintenance of the collateral accounts and certain limitations on withdrawal of cash from such collateral accounts. The UBS Agreement also provides for customary events of default, including, among others, non-payment, failure to maintain an amount equal to the greater of (x) the outstanding loans and (y) the collateral value as determined by the Bank, in the securities accounts maintained with the Bank, bankruptcy, or breach of a covenant, representation and warranty.

Our leverage could have important consequences to us, including:

- exposing us to the risk of increased interest rates as our borrowings under the UBS Agreement are at variable rates;
- making it more difficult for us to make payments on our debt;
- limiting our ability to pay future dividends;
- increasing our vulnerability to downturns in our business, lidar industry or the general economy and limiting our flexibility in planning for, or reacting to, changes in our business;
- requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, and future business opportunities;
- restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
- requiring us to comply with financial and operational covenants, restricting us, among other things, from placing liens on our assets, making investments, incurring debt, making payments to our equity or debt holders and engaging in transactions with affiliates;
- limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes;
- preventing us from taking advantage of business opportunities as they arise or successfully carrying out our plans to expand our store base and product offerings; and
- placing us at a competitive disadvantage compared to our competitors who may be less leveraged.

Consequences of this indebtedness may require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use our cash flow to fund operations, capital expenditures, and future business opportunities. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all. A failure by us or our subsidiaries to comply with the agreements governing our indebtedness could result in an event of default under such indebtedness, which could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of default under any of the agreements governing our indebtedness, the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements. If any of our indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have a material adverse effect on our ability to continue to operate as a going concern.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-038609. Last ingested by Listed: Oct 30, 2026, 12:37 ET. No prices; not investment advice.