UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from ___________________to ___________________

Commission file number: 001-38703

VELODYNE LIDAR, INC.

(Exact name of registrant as specified in its charter)

Delaware	83-1138508
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

5521 Hellyer Avenue
San Jose, CA	95138
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (669) 275-2251

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	VLDR	The Nasdaq Stock Market LLC
Warrants, each exercisable for three-quarters of one share of common stock	VLDRW	The Nasdaq Stock Market LLC

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

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

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

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

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

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

As of July 30, 2021, the registrant had 195,558,910 shares of common stock, $0.0001 par value per share, outstanding.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Table of Contents

		Page
	PART I. Financial Information
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45
	PART II. Other Information
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Default Upon Senior Securities	72
Item 4.	Mine Safety Disclosures	72
Item 5.	Other Information	72
Item 6.	Exhibits	72
	Signatures	74

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws and particularly in Item 2: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. These statements are based on the expectations and beliefs of management of Velodyne Lidar, Inc. (Velodyne) in light of historical results and trends, current conditions and potential future developments, and are subject to a number of factors and uncertainties that could cause actual results to differ materially from forward-looking statements. These forward-looking statements include statements about the future performance and opportunities of Velodyne; statements of the plans, strategies and objectives of management for future operations of Velodyne; and statements regarding future market opportunities, economic conditions or performance. Forward-looking statements may contain words such as “will be,” “will,” “expect,” “anticipate,” “continue,” “project,” “believe,” “plan,” “could,” “estimate,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “pursue,” “should,” “target,” “likely” or similar expressions, and include the assumptions that underlie such statements.

The following factors, among others, could cause actual results to differ materially from forward-looking statements:

•Velodyne’s future performance, including Velodyne’s revenue, costs of revenue, gross profit or gross margin, and operating expenses;

•the sufficiency of Velodyne’s cash and cash equivalents to meet its operating requirements;

•Velodyne’s ability to sell its products to new customers;

•the success of Velodyne’s customers in developing and commercializing products using Velodyne’s solutions, and the market acceptance of those products;

•the amount and timing of future sales;

•Velodyne’s future market share;

•competition from existing or future businesses and technologies;

•the impact of the COVID-19 pandemic on Velodyne’s business and the business of its customers;

•the market for and adoption of lidar and related technology;

•Velodyne’s ability to effectively manage its growth and future expenses;

•Velodyne’s ability to compete in a market that is rapidly evolving and subject to technological developments;

•Velodyne’s ability to maintain, protect, and enhance its intellectual property;

•Velodyne’s ability to comply with modified or new laws and regulations applying to its business;

•the attraction and retention of qualified employees and key personnel;

•Velodyne’s ability to introduce new products that meet its customers’ requirements and to continue successfully transitioning the manufacturing of its products to third-party manufacturers;

•Velodyne’s anticipated investments in and results from sales and marketing and research and development; and

•the increased expenses associated with Velodyne being a public company.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other risk factors herein discussed under Item 1A: “Risk Factors.” Forward-looking statements reflect current views about Velodyne’s plans, strategies and prospects, which are based on information available as of the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable law, Velodyne undertakes no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not place undue reliance on those statements, which speak only as of the date of this Quarterly Report on Form 10-Q.

.

2

PART I. Financial Information

Item 1. Consolidated Financial Statements

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30,		December 31,
	2021		2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	76,084	$	204,648
Short-term investments	277,546		145,636
Accounts receivable, net	9,473		13,979
Inventories, net	16,675		18,132
Prepaid and other current assets	10,231		22,319
Total current assets	390,009		404,714
Property, plant and equipment, net	14,652		16,805
Goodwill	1,189		1,189
Intangible assets, net	434		627
Contract assets	10,378		8,440
Other assets	19,935		937
Total assets	$	436,597	$	432,712
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,940	$	7,721
Accrued expense and other current liabilities	25,280		50,349
Contract liabilities	8,736		7,323
Total current liabilities	39,956		65,393
Long-term tax liabilities	570		569
Other long-term liabilities	30,378		25,927
Total liabilities	70,904		91,889
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock	—		—
Common stock	20		18
Additional paid-in capital	800,040		656,717
Accumulated other comprehensive loss	(216)		(230)
Accumulated deficit	(434,151)		(315,682)
Total stockholders’ equity	365,693		340,823
Total liabilities and stockholders’ equity	$	436,597	$	432,712

See accompanying notes to unaudited condensed consolidated financial statements.

3

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue:
Product	$	11,970	$	11,427	$	22,563	$	27,849
License and services	1,626		16,959		8,759		17,568
Total revenue	13,596		28,386		31,322		45,417
Cost of revenue:
Product	19,210		14,419		34,839		29,545
License and services	170		81		349		384
Total cost of revenue	19,380		14,500		35,188		29,929
Gross profit (loss)	(5,784)		13,886		(3,866)		15,488
Operating expenses:
Research and development	17,009		14,591		35,387		29,118
Sales and marketing	47,176		3,373		54,251		8,672
General and administrative	19,133		5,630		36,169		16,363
Restructuring	—		(3)		—		1,043
Total operating expenses	83,318		23,591		125,807		55,196
Operating loss	(89,102)		(9,705)		(129,673)		(39,708)
Interest income	109		5		212		117
Interest expense	(41)		(32)		(77)		(38)
Other income (expense), net	10,136		22		10,119		(143)
Loss before income taxes	(78,898)		(9,710)		(119,419)		(39,772)
Provision for (benefit from) income taxes	339		17		635		(6,660)
Net loss	$	(79,237)	$	(9,727)	$	(120,054)	$	(33,112)
Net loss per share:
Basic and diluted	$	(0.41)	$	(0.07)	$	(0.63)	$	(0.24)
Weighted-average shares used in computing net loss per share:
Basic and diluted	193,002,807		139,863,194		191,123,251		138,887,585

See accompanying notes to unaudited condensed consolidated financial statements.

4

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss	$	(79,237)	$	(9,727)	$	(120,054)	$	(33,112)
Other comprehensive income (loss), net of tax:
Changes in unrealized gain on available for sale securities	22		—		11		—
Foreign currency translation adjustments	14		(32)		3		(34)
Total other comprehensive income (loss), net of tax	36		(32)		14		(34)
Comprehensive loss	$	(79,201)	$	(9,759)	$	(120,040)	$	(33,146)

See accompanying notes to unaudited condensed consolidated financial statements.

5

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share data)

(Unaudited)

	Series A Convertible Preferred Stock (Pre-Combination)			Series B Convertible Preferred Stock (Pre-Combination)			Series B-1 Convertible Preferred Stock (Pre-Combination)			Common Stock (Pre-Combination)			Common Stock (Post-Combination)			Additional Paid in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2020	—	$	—	—	$	—	—	$	—	—	$	—	175,912,194	$	18	$	656,717	$	(230)	$	(315,682)	$	340,823
Issuance of common stock under warrant exercises	—	—		—	—		—	—		—	—		6,973,882	1		80,199		—		—		80,200
Issuance of common stock under employee stock award plans, net of taxes	—	—		—	—		—	—		—	—		6,798,504	—		(37)		—		—		(37)
Share-based compensation	—	—		—	—		—	—		—	—		—	—		11,530		—		—		11,530
Other comprehensive loss, net of tax	—	—		—	—		—	—		—	—		—	—		—		(22)		—		(22)
Adjustment for previously issued warrants (Note 9)	—	—		—	—		—	—		—	—		—	—		(1,585)		—		1,585		—
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(40,817)		(40,817)
Balance at March 31, 2021	—	—		—	—		—	—		—	—		189,684,580	19		746,824		(252)		(354,914)		391,677
Issuance of common stock under warrant exercises	—	—		—	—		—	—		—	—		1,929	—		22		—		—		22
Issuance of common stock under employee stock award plans, net of taxes	—	—		—	—		—	—		—	—		5,541,305	1		(1)		—		—		—
Share-based compensation	—	—		—	—		—	—		—	—		—	—		53,195		—		—		53,195
Other comprehensive loss, net of tax	—	—		—	—		—	—		—	—		—	—		—		36		—		36
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(79,237)		(79,237)
Balance at June 30, 2021	—	$	—	—	$	—	—	$	—	—	$	—	195,227,814	$	20	$	800,040	$	(216)	$	(434,151)	$	365,693

6

	Series A Convertible Preferred Stock (Pre-Combination)			Series B Convertible Preferred Stock (Pre-Combination)			Series B-1 Convertible Preferred Stock (Pre-Combination)			Common Stock (Pre-Combination)			Common Stock (Post-Combination)			Additional Paid in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2019, as previously reported	8,772,852	$	1	1,375,440	$	—	1,375,440	$	—	34,252,578	$	3	—	$	—	$	240,474	$	(216)	$	(164,016)	$	76,246
Retroactive application of the recapitalization	(8,772,852)	(1)		(1,375,440)	—		(1,375,440)	—		(34,252,578)	(3)		137,911,975	14		(10)		—		—		—
Balance at December 31, 2019, as adjusted	—	—		—	—		—	—		—	—		137,911,975	14		240,464		(216)		(164,016)		76,246
Share-based compensation	—	—		—	—		—	—		—	—		—	—		21		—		—		21
Other comprehensive loss, net of tax	—	—		—	—		—	—		—	—		—	—		—		(2)		—		(2)
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(23,385)		(23,385)
Balance at March 31, 2020	—	—		—	—		—	—		—	—		137,911,975	14		240,485		(218)		(187,401)		52,880
Issuance of Series B-1 convertible preferred stock at $10.25 per share on April 1, 2020, net of issuance cost of $81	—	—		—	—		—	—		—	—		1,951,219	—		19,919		—		—		19,919
Share-based compensation	—	—		—	—		—	—		—	—		—	—		135		—		—		135
Other comprehensive loss, net of tax	—	—		—	—		—	—		—	—		—	—		—		(32)		—		(32)
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(9,727)		(9,727)
Balance at June 30, 2020	—	$	—	—	$	—	—	$	—	—	$	—	139,863,194	$	14	260,539		$	(250)	$	(197,128)	$	63,175

See accompanying notes to unaudited condensed consolidated financial statements.

7

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(120,054)	$	(33,112)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	4,114		4,251
Reduction in carrying amount of ROU assets	1,533		—
Stock-based compensation	64,725		156
Provision for doubtful accounts	2,425		509
Gain from forgiveness of notes payable	(10,124)		—
Other	550		70
Changes in operating assets and liabilities:
Accounts receivable, net	2,082		(23,914)
Inventories, net	1,457		2,195
Prepaid and other current assets	3,512		2,939
Contract assets	(2,438)		(8,439)
Other assets	6		264
Accounts payable	(1,680)		645
Accrued expenses and other liabilities	(9,161)		(9,506)
Contract liabilities	264		11,397
Net cash used in operating activities	(62,789)		(52,545)
Cash flows from investing activities:
Purchase of property, plant and equipment	(1,779)		(1,723)
Proceeds from sales of short-term investments	2,000		—
Proceeds from maturities of short-term investments	55,943		2,200
Purchase of short-term investments	(190,376)		—
Investment in notes receivable	(750)		—
Net cash provided by (used in) investing activities	(134,962)		477
Cash flows from financing activities:
Proceeds from issuance of preferred stock, net of issuance costs	—		19,919
Payment of transaction costs related to Business Combination	(20,005)		—
Proceeds from warrant exercises	89,244		—
Tax withholding payment for vested equity awards	(37)		—
Cash paid for IPO costs	—		(1,196)
Proceeds from notes payable	—		10,000
Net cash provided by financing activities	69,202		28,723
Effect of exchange rate fluctuations on cash and cash equivalents	(15)		(30)
Net decrease in cash and cash equivalents	(128,564)		(23,375)
Beginning cash and cash equivalents	204,648		60,004
Ending cash and cash equivalents	$	76,084	$	36,629
Supplemental disclosures of cash flow information:
Cash paid for interest	$	77	$	38
Cash paid for (received from) income taxes, net	682		(7,811)
Cash paid for operating leases	2,256		—
Supplemental disclosure of noncash investing and financing activities:
Changes in accrued purchases of property, plant and equipment	$	5	$	97
Assets held for sale reclassification	—		4,746
ROU assets obtained in exchange for new operating lease liabilities	340		—
Transaction costs included in accrued liabilities	5,000		1,186

See accompanying notes to unaudited condensed consolidated financial statements.

8

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business, Background and Nature of Operations

Velodyne Lidar, Inc. (the Company, Velodyne or Velodyne Lidar) provides smart vision solutions that are advancing the development of safe automated systems throughout the world. The Company’s technology, which is used in various automotive and non- automotive applications, is empowering the autonomous revolution by allowing machines to see their surroundings in real-time and in 3D.

Graf Industrial Corp. (Graf), the Company’s predecessor, was originally incorporated in Delaware as a special purpose acquisition company (SPAC). On September 29, 2020 (the Closing Date), Graf consummated a business combination (the Business Combination) with Velodyne Lidar, Inc. (the pre-combination Velodyne). Immediately upon the consummation of the Business Combination, Graf merged into the pre-combination Velodyne, with the pre-combination Velodyne surviving as a wholly-owned subsidiary of the Company. Graf changed its name to Velodyne Lidar, Inc. and the pre-combination Velodyne changed its name to Velodyne Lidar USA, Inc.

On September 30, 2020, Velodyne Lidar’s common stock and warrants began trading on the Nasdaq Global Select Market under the symbol “VLDR” and “VLDRW,” respectively. Unless the context otherwise requires, “we,” “us,” “our,” “Velodyne,” “Velodyne Lidar” and the “Company” refers to Velodyne Lidar Inc., the combined company and its subsidiaries following the Business Combination. Refer to Note 2 for further discussion of the Business Combination.

The Company has evaluated how it is organized and managed and has identified only one operating segment.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States ( GAAP) for interim financial information. All intercompany transactions and balances have been eliminated in consolidation. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for the fair presentation of the company’s financial position, results of operations, comprehensive loss, cash flows and stockholders’ equity for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for any future annual or interim period. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained in its amended Annual Report on Form 10-K for the year ended December 31, 2020.

The Business Combination is accounted for as a reverse recapitalization as the pre-combination Velodyne was determined to be the accounting acquirer under Financial Accounting Standards Board (FASB)’s Accounting Standards Codification Topic 805, Business Combinations (ASC 805). In connection with the Business Combination, outstanding capital stock of the pre-combination Velodyne was converted into common stock of the Company, par value $0.0001 per share, representing a recapitalization, and the net assets of the Company were acquired at historical cost, with no goodwill or intangible assets recorded. The pre-combination Velodyne was deemed to be the predecessor of the Company, and the consolidated assets and liabilities and results of operations prior to the Closing Date are those of the pre-combination Velodyne. The shares and corresponding capital amounts and net loss per share available to common stockholders, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement. The number of shares of preferred stock was also retroactively restated in shares reflecting the exchange ratio, and the carrying amounts of preferred stock are based on the fair value of its redemption amount on each reporting date. All preferred stock was converted into shares of the Company’s common stock on the Closing Date. Refer to Note 9, Stockholders’ Equity, and Note 11, Net Loss Per Share, for further discussion of the recapitalization and share adjustments.

Liquidity

9

The Company has funded its operations primarily through the Business Combination, PIPE offering, private placements of the pre-combination Velodyne convertible preferred stock and sales to customers. As of June 30, 2021, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $353.6 million and available borrowing capacity of $25.0 million under a revolving credit facility. The Company has incurred losses and negative cash flows from operations. If the Company incurs additional losses in the future, it may need to raise additional capital through issuances of equity and debt. There can be no assurance that the Company would be able to raise such capital. However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least twelve months from the date the unaudited condensed consolidated financial statements for the quarter ended June 30, 2021 were available for issuance.

Emerging Growth Company

As of December 31, 2020, the Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the Securities Act), as modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has opted to take advantage of such extended transition period available to emerging growth companies which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Based on the Company’s aggregate worldwide market value of voting and non-voting common equity held by non-affiliates as of June 30, 2021, the Company will become a “large accelerated filer” and lose its emerging growth company status upon the filing of its Annual Report on Form 10-K for the year ending December 31, 2021.

Concentration of Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. The Company maintains its cash and cash equivalents, and short-term investments with high-quality financial institutes with investment-grade ratings. A majority of the cash balances are with U.S. banks and are insured to the extent defined by the Federal Deposit Insurance Corporation.

The Company’s accounts receivable are derived from customers located both inside and outside the U.S. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions and requires customer advance payments in certain circumstances. The Company does not require collateral.

The Company’s concentration of risk related to accounts receivable and accounts payable was as follows:

	June 30,	December 31,
	2021	2020
Number of customers accounted for 10% or more of accounts receivable	1	3
Number of vendors accounted for 10% or more of accounts payable	1	3

One customer accounted for 29% of the Company’s accounts receivable as of June 30, 2021. Two customers accounted for a total of 47%, of the Company’s accounts receivable as of December 31, 2020. One vendor accounted for 45% and 34%, respectively, of accounts payable as of June 30, 2021 and December 31, 2020.

10

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include standalone selling price (SSP) for each distinct performance obligation in its customer contracts, total estimated future patents and their corresponding estimated development costs, total estimated costs and related progress towards complete satisfaction of performance obligation in certain services arrangements, allowances for doubtful accounts, inventory reserves, warranty reserves, valuation allowance for deferred tax assets, stock-based compensation, useful lives of property, plant, and equipment and intangible assets, income tax uncertainties, and other loss contingencies. The Company bases its estimates on historical experience and also on assumptions that it believes are reasonable. Actual results could differ from those estimates, and such differences could be material to the Company’s consolidated financial condition and results of operations.

Significant Accounting Policies

Except for the change in certain policies upon adoption of the accounting standards described below, there have been no material changes to the Company's significant accounting policies, compared to the accounting policies described in Note 1, Description of Business and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2020.

Allowance for Doubtful Accounts

The Company’s allowance for doubtful accounts includes estimated losses that result from uncollectible accounts receivable. The Company determines the allowance by considering a number of factors, including the length of time trade accounts receivable are past due, its customer’s current financial condition and payment history, the condition of the general economy and the industry as a whole, and other relevant facts and circumstances. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon the aforementioned factors and any specific customer collection issues that have been identified. Significant changes in one or more of these considerations may require adjustments affecting the net income (loss) and net carrying value of the account receivable. Provisions for the estimated allowance for doubtful accounts are recorded in general and administrative expense at the end of each reporting period.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), which supersedes FASB Accounting Standards Codification Topic 840, Leases (Topic 840), and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. Among its provisions, this standard requires lessees to recognize right-of-use (ROU) assets and lease liabilities on the balance sheets for operating leases, and also requires additional qualitative and quantitative disclosures about lease arrangements. The Company adopted the new standard in the first quarter of 2021 using the modified retrospective method, under which the Company applies Topic 842 to existing and new leases as of January 1, 2021, but prior periods are not restated and continue to be reported under Topic 840 guidance in effect during those periods. Upon adoption, the Company recorded net ROU assets of $19.4 million and lease liabilities of $20.4 million and there were no cumulative effect adjustments as of January 1, 2021. The standard did not have a material effect on the Company’s condensed consolidated statements of operations and the condensed consolidated statement of cash flows. See Note 6. “Leases” for further information.

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In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by, among other things, eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted the new standard on January 1, 2021. The adoption of this new standard did not have a significant effect on our consolidated financial statements.

Leases

The Company determines if an arrangement is a lease at inception. The Company evaluates classification of leases at

commencement and, as necessary, at modification. As of June 30, 2021, all leases are classified as operating leases except for certain immaterial equipment finance leases. Operating leases, consisting primarily office leases, are included in operating lease ROU assets, other current liabilities, and operating lease liabilities on the Company's Condensed Consolidated Balance Sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made prior to lease commencement and excludes lease incentives. Variable lease payments not dependent on an index or a rate, are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. The Company's lease terms are the noncancelable period, including any rent-free periods provided by the lessor, and include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised. As the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments over the lease term. The incremental borrowing rate is a hypothetical rate based on the Company's understanding of what its credit rating would be for a secured borrowing where the lease was executed. Lease costs are recognized on a straight-line basis over the lease term.

The Company does not recognize ROU assets and lease liabilities for short-term leases, which have a lease term of twelve months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

Note 2. Business Combination and Related Transactions

On September 29, 2020, the Company consummated a business combination with the pre-combination Velodyne. Pursuant to ASC 805, for financial accounting and reporting purposes, the pre-combination Velodyne was deemed the accounting acquirer and the Company was treated as the accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. Accordingly, the Business Combination was treated as the equivalent of the pre-combination Velodyne issuing stock for the net assets of Graf, accompanied by a recapitalization. Under this method of accounting, the consolidated financial statements of the Company are the historical financial statements of the pre-combination Velodyne. The net assets of Graf were stated at historical costs, with no goodwill or other intangible assets recorded, and are consolidated with the pre-combination Velodyne's financial statements on the Closing date. The shares and net income (loss) per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement.

In connection with the Business Combination, Graf entered into subscription agreements with certain investors (the PIPE Investors), whereby it issued 15,000,000 shares of common stock at $10.00 per share (the Private Placement Shares) for an aggregate purchase price of $150.0 million (the Private Placement), which closed simultaneously with the consummation of the Business Combination. Upon the closing of the Business Combination, the Private Placement Shares were automatically converted into shares of the Company's common stock on a one-for-one basis.

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The aggregate consideration for the Business Combination and proceeds from the Private Placement was approximately $1.8 billion, consisting of (i) $222.1 million in cash at the closing of the Business Combination, net of transaction expenses, and (ii) 150,277,532 shares of common stock valued at $10.25 per share, totaling $1,540.3 million. The common stock consideration consists of up to (1) 143,575,763 shares of Company common stock, including shares issuable in respect of vested equity awards of the pre-combination Velodyne, plus (2) 2,000,000 shares of Company common stock earned due to the satisfaction of the Earnout Condition on July 30, 2020, including 187,861 Earnout RSUs, which are subject to a six-month service condition and are not legally issued and outstanding shares of Company common stock at Closing, plus (3) 4,702,304 shares of Company common stock that were issued to Velodyne equity holders that did not opt to have their respective shares repurchased by the pre-combination Velodyne for cash in a pre-closing tender offer conducted by the pre-combination Velodyne (the Pre-Closing Tender Offer). The Company used $1.8 million of the proceeds to repurchase and retire 175,744 shares of Company common stock from certain stockholders in the Pre-Closing Tender Offer.

In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $29.1 million related to the equity issuance, consisting primarily of investment banking, legal, accounting and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds. As of June 30, 2021, the Company has $5.0 million of accrued transaction costs, consisting primarily of investment banking fees, in accrued expenses on the consolidated balance sheet.

Note 3. Revenue

Disaggregation of Revenues

The Company disaggregates its revenue from contracts with customers by geographic region based on the shipping location of the customer, type of good or service and timing of transfer of goods or services to customers (point-in-time or over time), as it believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

Total revenue based on the disaggregation criteria described above is as follows (dollar in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2021				2020				2021				2020
			% of Revenue				% of Revenue				% of Revenue				% of Revenue
	Revenue				Revenue				Revenue				Revenue
Revenue by geography:
North America	$	5,271	38	%	$	4,650	16	%	$	10,315	33	%	$	13,903	30	%
Asia Pacific	5,255		39	%	20,150		71	%	14,761		47	%	25,774		57	%
Europe, Middle East and Africa	3,070		23	%	3,586		13	%	6,246		20	%	5,740		13	%
Total	$	13,596	100	%	$	28,386	100	%	$	31,322	100	%	$	45,417	100	%
Revenue by products and services:
Products	$	11,970	88	%	$	11,427	40	%	$	22,563	72	%	$	27,849	61	%
License and services	1,626		12	%	16,959		60	%	8,759		28	%	17,568		39	%
Total	$	13,596	100	%	$	28,386	100	%	$	31,322	100	%	$	45,417	100	%
Revenue by timing of recognition:
Goods transferred at a point in time	$	12,272	90	%	$	28,198	99	%	$	28,942	92	%	$	44,922	99	%
Goods and services transferred over time	1,324		10	%	188		1	%	2,380		8	%	495		1	%
Total	$	13,596	100	%	$