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, 2022

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

Securities Registered Pursuant to Section 12(g) of the Act: None

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 29, 2022, the registrant had 219,717,302 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.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	43
	PART II. Other Information
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Default Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	71
	Signatures	72

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”. These statements are based on the expectations and beliefs of management of Velodyne Lidar, Inc. (“Velodyne”, “Velodyne Lidar” or the “Company”) 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;

•the impact of adverse or changing economic conditions;

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

•supply chain constraints in the semiconductor industry;

•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 ability to meet technical and quality specifications;

•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 list 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.

2

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.

PART I. Financial Information

Item 1. Financial Statements

3

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	77,024	$	24,064
Short-term investments	152,185		270,357
Accounts receivable, net	7,085		8,881
Inventories, net	13,467		9,299
Prepaid and other current assets	9,545		14,822
Total current assets	259,306		327,423
Property, plant and equipment, net	13,603		14,710
Operating lease right-of-use (“ROU”) assets	16,557		16,891
Goodwill	1,189		1,189
Intangible assets, net	448		724
Contract assets	9,182		12,962
Other assets	1,557		1,522
Total assets	$	301,842	$	375,421
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,445	$	5,105
Accrued expense and other current liabilities	28,133		33,028
Operating lease liabilities, current	2,896		2,623
Contract liabilities, current	5,347		6,348
Total current liabilities	44,821		47,104
Operating lease liabilities, non-current	14,646		15,210
Contract liabilities, non-current	10,740		12,740
Long-term tax liabilities	449		443
Other long-term liabilities	988		661
Total liabilities	71,644		76,158
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock	—		—
Common stock	22		20
Additional paid-in capital	851,132		825,988
Accumulated other comprehensive loss	(1,203)		(412)
Accumulated deficit	(619,753)		(526,333)
Total stockholders’ equity	230,198		299,263
Total liabilities and stockholders’ equity	$	301,842	$	375,421

See accompanying notes to condensed consolidated financial statements.

4

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,
	2022		2021		2022		2021
Revenue:
Product	$	9,652	$	11,970	$	14,014	$	22,563
License and services	1,855		1,626		3,673		8,759
Total revenue	11,507		13,596		17,687		31,322
Cost of revenue:
Product	18,347		19,210		33,543		34,839
License and services	257		170		524		349
Total cost of revenue	18,604		19,380		34,067		35,188
Gross loss	(7,097)		(5,784)		(16,380)		(3,866)
Operating expenses:
Research and development	18,757		17,009		40,054		35,387
Sales and marketing	5,340		47,176		11,345		54,251
General and administrative	13,430		19,133		25,747		36,169
Total operating expenses	37,527		83,318		77,146		125,807
Operating loss	(44,624)		(89,102)		(93,526)		(129,673)
Interest income	294		109		521		212
Interest expense	—		(41)		(3)		(77)
Other income (expense), net	(110)		10,136		(106)		10,119
Loss before income taxes	(44,440)		(78,898)		(93,114)		(119,419)
Provision for (benefit from) income taxes	(141)		339		306		635
Net loss	$	(44,299)	$	(79,237)	$	(93,420)	$	(120,054)
Net loss per share:
Basic and diluted	$	(0.22)	$	(0.41)	$	(0.47)	$	(0.63)
Weighted-average shares used in computing net loss per share:
Basic and diluted	198,947,058		193,002,807		198,414,502		191,123,251

See accompanying notes to condensed consolidated financial statements.

5

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net loss	$	(44,299)	$	(79,237)	$	(93,420)	$	(120,054)
Other comprehensive loss, net of tax:
Changes in unrealized loss on available for sale securities	13		22		(699)		11
Foreign currency translation adjustments	(75)		14		(92)		3
Total other comprehensive loss, net of tax	(62)		36		(791)		14
Comprehensive loss	$	(44,361)	$	(79,201)	$	(94,211)	$	(120,040)

See accompanying notes to condensed consolidated financial statements.

6

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2021	197,346,675	$	20	$	825,988	$	(412)	$	(526,333)	$	299,263
Common stock warrants issued to customer	—	—		5,303		—		—		5,303
Issuance of common stock under employee stock award plans	916,819	—		—		—		—		—
Stock-based compensation	—	—		4,938		—		—		4,938
Other comprehensive loss, net of tax	—	—		—		(729)		—		(729)
Net loss	—	—		—		—		(49,121)		(49,121)
Balance at March 31, 2022	198,263,494	20		836,229		(1,141)		(575,454)		259,654
Issuance of common stock under at the market (“ATM”) offering, net of issuance costs of $741	6,471,048	1		6,845		—		—		6,846
Common stock warrants issued to customer	—	—		942		—		—		942
Issuance of common stock under employee stock award plans	11,428,168	1		809		—		—		810
Stock-based compensation	—	—		6,307		—		—		6,307
Other comprehensive loss, net of tax	—	—		—		(62)		—		(62)
Net loss	—	—		—		—		(44,299)		(44,299)
Balance at June 30, 2022	216,162,710	$	22	$	851,132	$	(1,203)	$	(619,753)	$	230,198
	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2020	175,912,194	$	18	$	656,717	$	(230)	$	(315,682)	$	340,823
Issuance of common stock under public warrant exercises	6,973,882	1		80,199		—		—		80,200
Issuance of common stock under employee stock award plans	6,798,504	—		(37)		—		—		(37)
Stock-based compensation	—	—		11,530		—		—		11,530
Other comprehensive loss, net of tax	—	—		—		(22)		—		(22)
Prior year adjustment on warrant liability (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 public warrant exercises	1,929	—		22		—		—		22
Issuance of common stock under employee stock award plans	5,541,305	1		(1)		—		—		—
Stock-based compensation	—	—		53,195		—		—		53,195
Other comprehensive income, 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

See accompanying notes to condensed consolidated financial statements.

7

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(93,420)	$	(120,054)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	4,362		4,114
Reduction of operating lease ROU assets	1,392		1,533
Stock-based compensation	11,245		64,725
Reduction of revenue related to stock warrant issued to customer	6,245		—
Provision for doubtful accounts	—		2,425
Gain from forgiveness of PPP loan	—		(10,124)
Amortization of investment premium or discount, net	671		—
Other	—		550
Changes in operating assets and liabilities:
Accounts receivable, net	1,795		2,082
Inventories, net	(4,168)		1,457
Prepaid and other current assets	5,794		3,512
Contract assets	3,262		(2,438)
Other assets	(35)		6
Accounts payable	3,508		(1,680)
Accrued expenses and other liabilities	(5,611)		(7,611)
Operating lease liabilities	(1,348)		(1,550)
Contract liabilities	(3,001)		264
Net cash used in operating activities	(69,309)		(62,789)
Cash flows from investing activities:
Purchase of property, plant and equipment and intangibles	(2,580)		(1,779)
Proceeds from sales of short-term investments	14,500		2,000
Proceeds from maturities of short-term investments	137,661		55,943
Purchase of short-term investments	(35,358)		(190,376)
Investment in notes receivable	—		(750)
Net cash provided by (used in) investing activities	114,223		(134,962)
Cash flows from financing activities:
Proceeds from issuance of ATM shares, net of transaction costs	7,395		—
Payment of issuance costs related to ATM shares	(51)		—
Payment of transaction costs related to Business Combination	—		(20,005)
Proceeds from warrant exercises, net of issuance costs	—		89,244
Proceeds from common stock issuance under equity incentive plans	811		—
Tax withholding payment for vested equity awards	—		(37)
Net cash provided by financing activities	8,155		69,202
Effect of exchange rate fluctuations on cash and cash equivalents	(109)		(15)
Net increase (decrease) in cash and cash equivalents	52,960		(128,564)
Beginning cash and cash equivalents	24,064		204,648
Ending cash and cash equivalents	$	77,024	$	76,084
Supplemental disclosures of cash flow information:
Cash paid for interest	$	3	$	77
Cash paid for income taxes, net	334		682
Cash paid for operating leases	1,835		2,256
Supplemental disclosure of noncash investing and financing activities:
Changes in accrued purchases of property, plant and equipment, and intangibles	$	842	$	5

8

	Six Months Ended June 30,
	2022	2021
Issuance costs related to ATM offering included in accrued liabilities	500	—
ROU assets obtained in exchange for operating lease liabilities	1,074	340

See accompanying notes to condensed consolidated financial statements.

9

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.

The Company’s predecessor, Graf Industrial Corp. (“Graf”), 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. Refer to Note 2. Business Combination for further discussion of the Business Combination.

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.

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

Basis of Presentation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. Specifically, operating lease ROU assets, current and non-current lease liabilities and non-current contract liabilities are now presented as separate line items on the consolidated balance sheets and were previously included within other assets, current liabilities and other long-term liabilities, respectively. In addition, operating lease liabilities are now presented as separate line items on the consolidated statements of cash flows and were previously included within accrued and other liabilities.

Liquidity

The Company has funded its operations primarily through proceeds realized from the Business Combination, issuances of stock, and sales to customers. As of June 30, 2022, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $229.2 million, continuing sale of its stocks under the ATM offering, available borrowing capacity of $4.2 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, 2022 were available for issuance.

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

10

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,
	2022		2021
Customers accounted for 10% or more of accounts receivable:
Customer A	22	%	*
Customer B	11	%	*
Customer C	11	%	16	%
Customer D	*		14	%
Customer E	*		11	%
Vendors accounted for 10% or more of accounts payable:
Vendor A	45	%	28	%
Vendor B	11	%	*
* Less than 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, common stock warrant valuation, useful lives of property, plant, and equipment and intangible assets, assessment of the recoverability of long-lived assets, goodwill impairment, 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 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, 2021.

Amazon Warrant

The Amazon Warrant (as defined in Note 9) is accounted for as an equity instrument and measured in accordance with Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation. To determine the fair value of the Amazon Warrant, the Company used the Black-Scholes option pricing model, which is based in part on assumptions that require management to use judgment.

For awards granted to a customer, which are not in exchange for distinct goods or services, the fair value of the awards earned based on service or performance conditions is recorded as a reduction of the transaction price in accordance with ASC 606, Revenue from Contracts with Customers. Accordingly, when Amazon makes payments and vesting conditions become

11

probable of being achieved, the Company will record a non-cash stock-based reduction to revenue associated with the Amazon Warrant, which is calculated based on the grant date fair value of the Amazon Warrant shares.

Recently Accounting Pronouncements

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, which has subsequently been amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-11, ASU 2020-02 and ASU 2020-03 to provide additional guidance on the credit losses standard. The objective of the guidance in ASU 2016-13 is to allow entities to recognize estimated credit losses in the period that the change in valuation occurs. ASU 2016-13 requires an entity to present financial assets measured on an amortized cost basis on the balance sheet, net of an allowance for credit losses. Available for sale and held to maturity debt securities are also required to be held net of an allowance for credit losses. For smaller reporting companies, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company will adopt the new standard in the first quarter of 2023 and is currently evaluating the impact this standard will have on its consolidated financial statements and related footnote disclosures.

Recently Adopted Accounting Pronouncements

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. ASU 2020-10 is effective for public companies, other than smaller reporting companies, for fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-10 is effective for fiscal years beginning after December 15, 2021, and interim periods beginning after December 15, 2022. The Company adopted ASU 2020-10 on January 1, 2022. The adoption of this new standard did not have a significant impact on the Company’s consolidated financial statements and related footnote disclosures.

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 loss per share for periods prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the merger agreement.

The aggregate consideration for the Business Combination and related transactions 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 approximately $1.5 billion. The Company used approximately $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, 2022, the Company had $5.0 million of accrued transaction costs, consisting primarily of investment banking fees, in accrued expenses on the condensed consolidated balance sheet.

Note 3. Revenue

Disaggregation of Revenues

12

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, percentage may not foot due to rounding difference):

	Three Months Ended
	June, 30, 2022				June, 30, 2021
	Revenue		% of Revenue		Revenue		% of Revenue
Revenue by geography:
North America(1)	$	4,292	37	%	$	5,271	38	%
Asia Pacific(2)	3,645		32	%	5,255		39	%
Europe, Middle East and Africa	3,570		31	%	3,070		23	%
Total	$	11,507	100	%	$	13,596	100	%
Revenue by products and services:
Products(1)	$	9,652	84	%	$	11,970	88	%
License and services(2)	1,855		16	%	1,626		12	%
Total	$	11,507	100	%	$	13,596	100	%
Revenue by timing of recognition:
Goods transferred at a point in time(1)	$	10,075	88	%	$	12,272	90	%
Goods and services transferred over time(2)	1,432		12	%	1,324		10	%
Total	$	11,507	100	%	$	13,596	100	%
	Six Months Ended
	June, 30, 2022				June, 30, 2021
	Revenue		% of Revenue		Revenue		% of Revenue
Revenue by geography:
North America(1)	$	2,988	17	%	$	10,315	33	%
Asia Pacific(2)	8,551		48	%	14,761		47	%
Europe, Middle East and Africa	6,148		35	%	6,246		20	%
Total	$	17,687	100	%	$	31,322	100	%
Revenue by products and services:
Products(1)	$	14,014	79	%	$	22,563	72	%
License and services(2)	3,673		21	%	8,759		28	%
Total	$	17,687	100	%	$	31,322	100	%
Revenue by timing of recognition:
Goods transferred at a point in time(1)	$	14,833	84	%	$	28,942	92	%
Goods and services transferred over time(2)	2,854		16	%	2,380		8	%
Total	$	17,687	100	%	$	31,322	100	%

(1) Includes a non-cash stock-based reduction of revenue of $0.9 million and $6.2 million, respectively, for the three and six months ended June 30 2022 associated with the Amazon Warrant agreement entered into in February 2022. See Note 9 for more information.

(2) Includes license revenue of $0.9 million and $1.9 million, respectively, related to patent cross-license agreements for the three and six months ended June 30, 2022, and $0.9 million and $7.3 million, respectively, for the three and six months ended June 30, 2021. In June 2020, the Company entered into a patent cross-license agreement related to its litigation settlement with a customer in Asia Pacific. Under the terms of the arrangement, the customer agreed to make a one-time license payment upon settlement, will make annual fixed royalty payments through 2024, and thereafter, will make product sales royalty payments through February 2030. In

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September 2020, Velodyne entered into another patent cross-license agreement related to its litigation with a different customer in Asia Pacific. As of June 30, 2022 and December 31, 2021, the Company had $3.8 million and $3.8 million, respectively, of current deferred revenue, and $10.1 million and $11.9 million, respectively, of long-term deferred revenue associated with the rights granted as part of these patent cross-license agreements to receive future patents as they represent stand ready obligations. As of June 30, 2022 and December 31, 2021, the Company also had $13.0 million and $16.3 million, respectively, of contract assets related to these patent cross-license agreements.

Contract Assets and Contract Liabilities

Contract assets primarily relate to unbilled accounts receivable. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when revenue is recognized on guaranteed minimums at the inception of the contract when there is not yet a right to invoice in accordance with contract terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and reclassified to accounts receivable when billed in accordance with the terms of the contract.

Contract liabilities consist of deferred revenue, customer advanced payments and customer deposits. Deferred revenue includes billings in excess of revenue recognized related to product sales, licenses, extended warranty and other services revenue, and is recognized as revenue when the Company performs under the contract. The long-term portion of deferred revenue, mostly related to obligations under license arrangements and extended warranty, is classified as non-current contract liabilities and is included in other long-term liabilities in the Company’s consolidated balance sheets. Customer advanced payments represent required customer payments in advance of product shipments according to customer’s payment term. Customer advance payments are recognized as revenue when control of the performance obligation is transferred to the customer. Customer deposits represent consideration received from a customer which can be applied to future product or service purchases, or refunded.

Contract assets and contract liabilities consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

	June 30,		December 31,
	2022		2021
Contract assets, current
Unbilled accounts receivable	$	3,830	$	3,313
Contract assets, long-term
Unbilled accounts receivable	9,182		12,962
Total contract assets	$	13,012	$	16,275
Contract liabilities, current
Deferred revenue, current	$	5,278	$	6,209
Customer advance payment	69		139
Total	5,347		6,348
Contract liabilities, long-term
Deferred revenue, long-term	10,740		12,740
Total contract liabilities	$	16,087	$	19,088

The following table shows the significant changes in contract assets and contract liabilities balances (in thousands):

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	Six Months Ended June 30,
	2022		2021
Contract assets:
Beginning balance	$	16,275	$	11,253
Transferred to receivables from contract assets recognized at the beginning of the period	(3,313)		(2,813)
Increase due to unbilled and recognized as revenue in excess of billings during the period, net of amounts transferred to receivables	50		5,251
Ending balance	$	13,012	$	13,691
Contract liabilities:
Beginning balance	$	19,088	$	22,055
Revenue recognized that was included in the contract liabilities beginning balance	(4,120)		(5,972)
Increase due to cash received and not recognized as revenue and billings in excess of revenue recognized during the period	1,119		6,236
Ending balance	$	16,087	$	22,319

Note 4. Fair Value Measurement

The Company categorizes assets and liabilities recorded at fair value on the consolidated balance sheet based on the level of judgment associated with inputs used to measure their fair value. For assets and liabilities measured at fair value, fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and the Company considers assumptions that market participants would use when pricing the asset or liability.

The three levels of inputs that may be used to measure fair value are:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities in active markets or quoted prices in less active market. All significant inputs used in the valuations are observable or can be directly or indirectly through market corroboration, for substantially the full term of the assets or liabilities.

•Level 3 — Unobservable inputs are based on assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation. The Company monitors and review the inputs to ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes.

The following table summarize the Company’s assets measured at fair value on a recurring basis, by level, within the fair value hierarchy (in thousands):

	June 30, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	60,008	$	—	$	—	$	60,008
Total cash equivalents	60,008		—		—		60,008
Short-term investments:
Money market fund	7		—		—		7
Commercial paper	—		74,300		—		74,300
Corporate debt securities	—		77,878		—		77,878
Total short-term investments	7		152,178		—		152,185
Total assets measured at fair value	$	60,015	$	152,178	$	—	$	212,193

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	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	391	$	—	$	—	$	391
Total cash equivalents	391		—		—		391
Short-term investments:
Money market fund	7		—		—		7
Commercial paper	—		130,983		—		130,983
Corporate debt securities	—		139,367		—		139,367
Total short-term investments	7		270,350		—		270,357