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: 001-39463

_______________________

Ouster, Inc.

(Exact name of registrant as specified in its charter)

_______________________

Delaware	86-2528989
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

350 Treat Avenue

San Francisco, California 94110

(Address of principal executive offices) (Zip Code)

(415) 949-0108

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

_______________________

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	OUST	New York Stock Exchange
Warrants to purchase common stock	OUST WS	New York Stock Exchange

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 August 6, 2021, the registrant had 161,343,284 shares of common stock, $0.0001 par value per share, outstanding.

1

TABLE OF CONTENTS

		Page
	Part I - Financial Information
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	6
	Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
	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	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits.	48
Signature		49

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, potential acquisitions, market growth and trends, strategic customer agreements and total addressable markets, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including Ouster’s limited operating history and history of losses; the negotiating power and product standards of its customers; fluctuations in its operating results; cancellation or postponement of contracts or unsuccessful implementations; the adoption of its products and the growth of the lidar market generally; its ability to grow its sales and marketing organization; substantial research and development costs needed to develop and commercialize new products; the competitive environment in which it operates; selection of our products for inclusion in target markets; its future capital needs; its ability to use tax attributes; its dependence on key third party suppliers, in particular Benchmark Electronics, Inc., and manufacturers; ability to maintain inventory and the risk of inventory write-downs; inaccurate forecasts of market growth; its ability to manage growth; the creditworthiness of our customers; risks related to acquisitions; risks related to international operations; risks of product delivery problems or defects; costs associated with product warranties; its ability to maintain competitive average selling prices or high sales volumes or reduce product costs; conditions in its customers industries; its ability to recruit and retain key personnel; its use of professional employer organizations; its ability to adequately protect and enforce its intellectual property rights; its ability to effectively respond to evolving regulations and standards; risks related to operating as a public company; risks related to the COVID-19 pandemic, including variants; and risks related to certain of our warrants being accounted for as liabilities. Other risk factors include the important factors described in the section titled “Risk Factors” in the final prospectus and definitive proxy statement, dated February 12, 2021 (the “Proxy Statement/Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2021, as updated by the risk factors disclosed in the section titled “Risk Factors” in our Form 8-K, filed with the SEC on March 15, 2021, as amended on July 12, 2021, and as further updated in this Quarterly Report on Form 10-Q under Part II. Item 1A. “Risk Factors,” and in our other filings with the SEC, that may cause our actual results, performance or achievements to differ materially and adversely from those expressed or implied by the forward-looking statements.

Any forward-looking statements made herein speak only as of the date of this Quarterly Report on Form 10-Q, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or achievements reflected in the forward-looking statements will be achieved or occur. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

GENERAL

Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Ouster,” “the Company,” “we,” “our” and “us” refer to Ouster, Inc.

We may announce material business and financial information to our investors using our investor relations website at https://investors.ouster.com/overview. We therefore encourage investors and others interested in Ouster to review the information that we make available on our website, in addition to following our filings with the SEC, webcasts, press releases and conference calls. Information contained on our website is not part of this Quarterly Report on Form 10-Q.

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OUSTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)

	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	240,148	$	11,362
Restricted cash, current	276		276
Accounts receivable, net	4,671		2,327
Inventory, net	4,721		4,817
Prepaid expenses and other current assets	6,367		2,441
Total current assets	256,183		21,223
Property and equipment, net	8,562		9,731
Operating lease, right-of-use assets	10,024		11,071
Restricted cash, non-current	1,004		1,004
Other non-current assets	—		3,385
Total assets	$	275,773	$	46,414
Liabilities, redeemable convertible preferred stock and stockholders’ equity / (deficit)
Current liabilities:
Accounts payable	$	3,825	$	6,894
Accrued and other current liabilities	6,259		4,121
Short-term debt	—		7,130
Operating lease liability, current portion	2,895		2,772
Total current liabilities	12,979		20,917
Operating lease liability, long-term portion	10,422		11,908
Warrant liabilities (At June 30, 2021 and December 31, 2020 related party $5,154 and Nil, respectively)	25,471		49,293
Other non-current liabilities	899		978
Total liabilities	49,771		83,096
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock, $0.0001 par value per share; Nil and 131,411,372 shares authorized at June 30, 2021 and December 31, 2020; Nil and 88,434,754 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively (aggregate liquidation preference of Nil and $41,791 at June 30, 2021 and December 31, 2020, respectively)	—		39,225
Stockholders’ equity / (deficit):
Common stock, $0.0001 par value; 1,000,000,000 and 210,956,516 shares authorized at June 30, 2021 and December 31, 2020, respectively; 161,449,205 and 33,327,294 issued and outstanding at June 30, 2021 and December 31, 2020, respectively	16		—
Preferred stock, $0.0001 par value; 100,000,000 and Nil shares authorized at June 30, 2021 and December 31, 2020, respectively; Nil and Nil issued and outstanding at June 30, 2021 and December 31, 2020, respectively	—		—
Additional paid-in capital	488,329		133,468
Accumulated deficit	(262,343)		(209,375)
Total stockholders’ equity / (deficit)	226,002		(75,907)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity / (deficit)	$	275,773	$	46,414

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

4

OUSTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
Product revenue	$	7,360	$	2,290	$	13,971	$	4,590
Service revenue	—		1,991		—		1,991
Total revenue	7,360		4,281		13,971		6,581
Cost of product revenue
Cost of product	5,465		3,862		10,333		8,078
Cost of services	—		26		—		26
Total cost of revenue	5,465		3,888		10,333		8,104
Gross profit (loss)	1,895		393		3,638		(1,523)
Operating expenses:
Research and development	6,474		5,678		11,186		10,152
Sales and marketing	4,614		1,685		8,040		3,911
General and administrative	12,197		3,678		22,104		7,344
Total operating expenses	23,285		11,041		41,330		21,407
Loss from operations	(21,390)		(10,648)		(37,692)		(22,930)
Other (expense) income:
Interest income	139		1		140		23
Interest expense	—		(398)		(504)		(1,675)
Other income (expense), net	(10,760)		(267)		(14,912)		(5,423)
Total other expense, net	(10,621)		(664)		(15,276)		(7,075)
Loss before income taxes	(32,011)		(11,312)		(52,968)		(30,005)
Provision for income tax expense	—		—		—		—
Net loss and comprehensive loss	$	(32,011)	$	(11,312)	$	(52,968)	$	(30,005)
Net loss per common share, basic and diluted	$	(0.21)	$	(0.59)	$	(0.50)	$	(2.23)
Weighted-average shares used to compute basic and diluted net loss per share	155,923,689		19,138,365		106,070,590		13,452,766

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

5

OUSTER, INC.

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

(unaudited)

(in thousands, except share data)

	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-in- Capital		Notes receivable from stockholders		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares (1)	Amount		Shares (1)	Amount
Balance — December 31, 2020	88,434,754	$	39,225	33,327,294	$	—	$	133,468	$	—	$	(209,375)	$	(75,907)
Issuance of common stock upon exercise of stock options	—	—		727,114	1		189		—		—		190
Repurchase of common stock	—	—		(220,561)	—		(43)		—		—		(43)
Issuance of redeemable convertible preferred stock upon exercise of warrants	4,232,947	58,097		—	—		—		—		—		—
Conversion of redeemable convertible preferred stock to common stock	(92,667,701)	(97,322)		92,667,701	12		97,322		—		—		97,334
Issuance of common stock upon merger and private offering, net of acquired private placement warrants of $19,377	—	—		34,947,657	3		272,061		—		—		272,064
Offering costs in connection with the merger	—	—		—	—		(26,620)		—		—		(26,620)
Vesting of early exercised stock options	—	—		—	—		438		—		—		438
Stock-based compensation expense	—	—		—	—		5,256		—		—		5,256
Net loss	—	—		—	—		—		—		(20,957)		(20,957)
Balance — March 31, 2021	—	—		161,449,205	16		482,071		—		(230,332)		251,755
Vesting of early exercised stock options	—	—		—	—		104		—				104
Stock-based compensation expense	—	—		—	—		6,154		—				6,154
Net loss	—	—		—	—		—		—		(32,011)		(32,011)
Balance — June 30, 2021	—	$	—	161,449,205	$	16	$	488,329	$	—	$	(262,343)	$	226,002

(1) The shares of the Company’s common and redeemable convertible preferred stock, prior to the Merger (as defined in Note 1), have been retroactively restated as shares reflecting the exchange ratio of approximately 0.703 established in the Merger as described in Note 1.

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

6

OUSTER, INC.

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

(unaudited)

(in thousands, except share data)

	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-in- Capital		Notes receivable from stockholders		Accumulated Deficit		Total Stockholders’ Deficit
	Shares (1)	Amount		Shares (1)	Amount
Balance — December 31, 2019	4,384,348	$	40,016	7,902,407	$	—	$	2,320	$	(44)	$	(102,595)	(100,319)
Issuance of common stock upon exercise of stock options	—	—		423	—		2		—		—		2
Reclassification of a note receivable from a stockholder	—	—		—	—		—		44		—		44
Vesting of early exercised stock options	—	—		—	—		12		—		—		12
Stock-based compensation expense	—	—		—	—		175		—		—		175
Net loss	—	—		—	—		—		—		(18,693)		(18,693)
Balance — March 31, 2020	4,384,348	40,016		7,902,830	—		2,509		—		(121,288)		(118,779)
Issuance of redeemable convertible preferred stock, net of discount and issuance cost	43,952,862	18,330		—	—		—		—		—		—
Conversion of redeemable convertible preferred stock to common stock	(6,234,955)	(40,016)		6,234,955	—		40,016		—		—		40,016
Conversion of convertible notes to common stock	—	—		10,241,795	—		78,311		—		—		78,311
Stock-based compensation expense	—	—		—	—		460		—		—		460
Vesting of early exercised stock options	—	—		—	—		12		—		—		12
Net loss	—	—		—	—		—		—		(11,312)		(11,312)
Balance — June 30, 2020	42,102,255	$	18,330	24,379,580	$	—	$	121,308	$	—	$	(132,600)	$	(11,292)

(1) The shares of the Company’s common and redeemable convertible preferred stock, prior to the Merger (as defined in Note 1), have been retroactively restated as shares reflecting the exchange ratio of approximately 0.703 established in the Merger as described in Note 1.

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

7

OUSTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(52,968)	$	(30,005)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,254		1,725
Stock-based compensation	11,410		635
Change in right-of-use asset	1,047		1,075
Interest expense on notes and convertible debt	36		962
Amortization of debt issuance costs and debt discount	250		146
Change in fair value of warrant liabilities	14,898		115
Change in fair value of derivative liability	—		5,308
Inventory write down	144		1,767
Changes in operating assets and liabilities:
Accounts receivable	(2,344)		(210)
Inventory	(48)		(2,933)
Prepaid expenses and other assets	(37)		130
Accounts payable	(3,317)		(831)
Accrued and other liabilities	1,692		(2,173)
Operating lease liability	(1,363)		20
Net cash used in operating activities	(28,346)		(24,269)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(659)		(1,775)
Net cash used in investing activities	(659)		(1,775)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the merger and private offering	291,454		—
Payment of offering costs	(27,124)		—
Repayment of debt	(7,000)		—
Proceeds from issuance of promissory notes to related parties	5,000		—
Repayment of promissory notes to related parties	(5,000)		—
Repurchase of common stock	(43)		—
Proceeds from exercise of stock options	504		2
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance cost of $265	—		20,631
Net cash provided by financing activities	257,791		20,633
Net increase (decrease) in cash, cash equivalents and restricted cash	228,786		(5,411)
Cash, cash equivalents and restricted cash at beginning of period	12,642		18,405
Cash, cash equivalents and restricted cash at end of period	$	241,428	$	12,994
SUPPLEMENTAL DISCLOSURES OF OPERATING ACTIVITIES:
Cash paid for interest	$	635	$	567
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Property and equipment purchases included in accounts payable and accrued liabilities	$	178	$	—
Private placement warrants acquired as part of the merger	$	19,377	$	—
Issuance of redeemable convertible preferred stock upon exercise of warrants	$	58,097	$	—
Conversion of redeemable convertible preferred stock to common stock	$	97,322	$	40,016
Right-of-use assets obtained in exchange for operating lease liability	$	—	$	6,409
Issuance of common stock pursuant to the conversion of convertible notes and accrued interest	$	—	$	73,003
Reclassification of common stock on exercise of stock options with notes receivable from stockholders	$	—	$	44
Warrants issued in connection with the closing of the Series B redeemable convertible preferred stock	$	—	$	691
Recognition of tranche right liability upon issuance	$	—	$	1,610

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

8

OUSTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 – Description of Business and Basis of Presentation

Description of Business

Ouster, Inc. was incorporated in the state of Delaware on June 4, 2020. The Company’s operating subsidiary, Ouster Technologies, Inc. (“OTI” and prior to the Merger (as defined below), named Ouster, Inc.), was incorporated in the state of Delaware on June 30, 2015. The Company is a leading provider of high-resolution digital lidar sensors that offer advanced 3D vision to machinery, vehicles, robots, and fixed infrastructure assets, allowing each to understand and visualize the surrounding world and ultimately enabling safe operation and ubiquitous autonomy. Unless the context otherwise requires, references in this subsection to “the Company” refer to the business and operations of OTI (formerly known as Ouster, Inc.) and its consolidated subsidiaries prior to the Merger (as defined below) and to Ouster, Inc. (formerly known as Colonnade Acquisition Corp.) and its consolidated subsidiaries following the consummation of the Merger.

Colonnade Acquisition Corp. (“CLA”), the Company’s predecessor, was originally a blank check company incorporated as a Cayman Islands exempted company on June 4, 2020. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On March 11, 2021, CLA consummated a merger with the Company pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of December 21, 2020, details of which are included below.

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries (all of which are wholly owned) and have been prepared in conformity with U.S. generally accepted accounting principles (“US GAAP”) applicable to interim periods. The functional currency for the Company is the United States dollar. All intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the results of operations for the periods shown. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020 and the notes related thereto, included as Exhibit 99.1 to the Form 8-K filed with the Securities and Exchange Commission (“SEC”) on March 15, 2021, as amended on July 12, 2021. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by US GAAP. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with US GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. The results of operations for any interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future years or interim periods.

Impact of the COVID-19 Pandemic

The Company has been actively monitoring the ongoing COVID-19 pandemic situation and its impact on the Company’s business. In response to the pandemic, numerous state and local jurisdictions have imposed “shelter-in-place” orders, quarantines and other restrictions. In the United States, governmental authorities have, at times, recommended, and in certain cases required, that elective, specialty and other procedures and appointments, be suspended or canceled. Similarly, in March and December 2020, the governor of California, where the Company’s headquarters are located, issued “stay at home” orders limiting non-essential activities, travel and business operations. Such orders or restrictions resulted in reduced operations at the Company’s headquarters (including its manufacturing facility), work stoppages, slowdowns and delays, travel restrictions and cancellation of events and have restricted the efforts of the Company’s sales representatives, thereby significantly and negatively impacting the Company’s operations.

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

9

Company increases the longer the virus impacts the level of economic activity in the United States and globally. Given the ongoing evolution of the COVID-19 and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 on its results of operations, financial condition, or liquidity for the year ending December 31, 2021 and beyond.

Liquidity

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis. The Company has experienced recurring losses from operations, and negative cash flows from operations. As of June 30, 2021, the Company had an accumulated deficit of approximately $262.3 million. The Company has historically financed its operations primarily through the Merger and related transactions, the sale of convertible notes, equity securities, proceeds from debt and, to a lesser extent, cash received from sales. Management expects significant operating losses and negative cash flows from operations to continue for the foreseeable future. The Company expects to continue investing in product development and sales and marketing activities. The long-term continuation of the Company’s business plan is dependent upon the generation of sufficient revenues from its products to offset expenses. In the event that the Company does not generate sufficient cash flows from operations and is unable to obtain funding, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue operations. The Company has concluded that its cash and cash equivalents as of June 30, 2021 are sufficient for the Company to continue as a going concern for at least one year from the date these unaudited condensed consolidated financial statements are available for issuance.

Merger Agreement with Colonnade Acquisition Corp. and Beam Merger Sub, Inc.

On December 21, 2020, OTI entered into the Merger Agreement with CLA and Beam Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and subsidiary of CLA. OTI’s board of directors unanimously approved OTI’s entry into the Merger Agreement, and on March 11, 2021, the transactions contemplated by the Merger Agreement were consummated. Pursuant to the terms of the Merger Agreement, (i) CLA domesticated as a corporation incorporated under the laws of the State of Delaware and changed its name to “Ouster, Inc.” and (ii) Merger Sub merged with and into OTI (such transactions contemplated by the Merger Agreement, the “Merger”), with OTI surviving the Merger.

As a result of the Merger, among other things, (1) each of the then issued and outstanding 5,000,000 CLA Class B ordinary shares, par value $0.0001 per share, of CLA (the “CLA Class B ordinary shares”) converted automatically, on a one-for-one basis, into a CLA Class A ordinary share (as defined below), (2) immediately following the conversion described in clause (1), each of the then issued and outstanding 25,000,000 Class A ordinary shares, par value $0.0001 per share, of CLA (the “CLA Class A ordinary shares”), converted automatically, on a one-for-one basis, into a share of common stock, par value $0.0001 per share, of Ouster (the “Ouster common stock”), (3) each of the then issued and outstanding 10,000,000 redeemable warrants of CLA (the “CLA warrants”) converted automatically into a redeemable warrant to purchase one share of Ouster common stock (the “Public warrants”) pursuant to the Warrant Agreement, dated August 20, 2020 (the “Warrant Agreement”), between CLA and Continental Stock Transfer & Trust Company (“Continental”), as warrant agent, and (4) each of the then issued and outstanding units of CLA that had not been previously separated into the underlying CLA Class A ordinary shares and underlying CLA warrants upon the request of the holder thereof (the “CLA units”), were cancelled and entitled the holder thereof to one share of Ouster common stock and one-half of one Public warrant, and (5) each of the then issued and outstanding 6,000,000 private placement warrants of CLA (the “Private Placement warrants”) converted automatically into a Public warrant pursuant to the Warrant Agreement. No fractional Public warrants were issued upon separation of the CLA units.

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

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

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

The Merger was accounted for as a reverse recapitalization under US GAAP. Under this method of accounting, CLA is treated as the “acquired” company for financial reporting purposes. This determination is primarily based on OTI stockholders comprising a relative majority of the voting power of the Company and having the ability to nominate the members of the board of directors of the Company after the Merger, OTI’s operations prior to the Merger comprising the only ongoing operations of the Company following the Merger, and OTI’s senior management prior to the Merger comprising a majority of the senior management of the Company following the Merger. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of OTI with the Merger being treated as the equivalent of OTI issuing stock for the net assets of CLA, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Transactions and balances prior to the Merger are those of OTI. The shares and net loss per share available to holders of OTI’s common stock prior to the Merger have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement.

PIPE Investment

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

Note 2 – Summary of Significant Accounting Policies

During the six months ended June 30, 2021, there were no significant changes to the Company’s significant accounting policies.

Recently Issued Accounting Pronouncements

Based on our public float as of June 30, 2021, we expect to become a large accelerated filer, and lose emerging growth company status, as of December 31, 2021. As of December 31, 2021, we will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“ECL”). Under the new model, an entity is required to estimate ECL on available-for-sale (AFS) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”. The new model also requires the impairment calculation on an individual security level and requires an entity to use the present value of cash flows when estimating the ECL. The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other comprehensive income. The Company will adopt ASC 2016-13 for the December 31, 2021 annual period, with a modified retrospective application to all outstanding instruments and a cumulative effect adjustment recorded to opening retained earnings as of January 1, 2021. The Company does not believe the adoption of this new guidance will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company will adopt ASC 2018-15 for the December 31, 2021 annual period. The Company does not believe the adoption of this new guidance will have a material impact on its consolidated financial statements.

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In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU also simplify the guidance in ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The new standard is effective for the Company for annual periods beginning December 15, 2021. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s condensed consolidated financial statements.

There have been no other newly issued or newly applicable accounting pronouncements that do not require adoption until a future date that have had, or are expected to have, a significant impact on the Company’s condensed consolidated financial statements.

Concentrations of credit risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, and restricted cash, and accounts receivable. Cash, cash equivalents and restricted cash are deposited with federally insured commercial banks in the United States and at times cash balances may be in excess of federal insurance limits. The Company generally does not require collateral or other security deposits for accounts receivable.

To reduce credit risk, the Company considers customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms when determining the collectability of specific customer accounts. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

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

	June 30, 2021	December 31, 2020
Customer A	*	13	%
Customer B	*	23	%

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

Revenue from the Company’s major customers representing 10% or more of total revenue was as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2021	2020		2021		2020
Customer C	*	*		15	%	16	%
Customer D	*	45	%	*		30	%

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

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Concentrations of supplier risk

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Supplier A	12	%	15	%	*		*
Supplier B	14	%	16	%	15	%	14	%

* Supplier accounted for less than 10% of total purchases in the period.

Supplier B accounted for 38% and 23% of total accounts payable balance as of June 30, 2021 and December 31, 2020.

Note 3. Fair Value of Financial Instruments

The Company applies the fair value measurement accounting standard whenever other accounting pronouncements require or permit fair value measurements. Fair value is defined in the accounting standard as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

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

•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

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

On June 30, 2021, the Company’s Level 3 liabilities consisted of the Private Placement warrant liability. The determination of the fair value of warrant liability is discussed in Note 6.

On December 31, 2020, the Company’s Level 3 liabilities consisted of the redeemable convertible preferred stock warrant liability. The determination of the fair value of warrant liability is discussed in Note 6.

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The following table provides information by level for the Company’s assets and liabilities that were measured at fair value on a recurring basis (in thousands):

	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	238,855	$	—	$	—	$	238,855
Total financial assets	$	238,855	$	—	$	—	$	238,855
Liabilities
Warrant liabilities	$	—	$	—	$	25,471	$	25,471
Total financial liabilities	$	—	$	—	$	25,471	$	25,471

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	10,493	$	—	$	—	$	10,493
Total financial assets	$	10,493	$	—	$	—	$	10,493
Liabilities
Warrant liabilities	$	—	$	—	$	49,293	$	49,293
Total financial liabilities	$	—	$	—	$	49,293	$	49,293

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

The fair value of the redeemable convertible preferred stock warrant, redeemable convertible preferred stock tranche and Private Placement warrant liabilities is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the warrant liabilities, the Company used the Black-Scholes option pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate and dividend yield (see Note 6).

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The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):

	Redeemable Convertible Preferred Stock Warrant Liability		Redeemable Convertible Preferred Stock Tranche Liability		Private Placement Warrant Liability		Derivative Liability
Fair value as of January 1, 2020	$	(162)	$	—	$	—	$	—
Change in the fair value included in other income (expense), net	(115)		—		—		(5,308)
Recognition of preferred stock warrant and tranche liability upon issuance	(691)		(1,610)		—		—
Extinguishment of derivative liability upon conversion of convertible notes	—		—		—		5,308
Fair value as of June 30, 2020	$	(968)	$	(1,610)	$	—	$	—
Fair value as of January 1, 2021	(49,293)		—		—		—
Private placement warrant liability acquired as part of the Merger	—		—		(19,377)		—
Change in the fair value included in other income (expense), net	(8,804)		—		(6,094)		—
Issuance of preferred stock upon exercise of warrants	58,097		—		—		—
Fair value as of June 30, 2021	$	—	$	—	$	(25,471)	$	—

Disclosure of Fair Values

Our financial instruments that are not re-measured at fair value include accounts receivable, accounts payable, accrued and other current liabilities, convertible notes and debt. The carrying values of these financial instruments approximate their fair values.

Note 4. Balance Sheet Components

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Cash	$	1,293	$	869
Cash equivalents:
Money market funds(1)	238,855		10,493
Total cash and cash equivalents	$	240,148	$	11,362

(1)The Company maintains a cash sweep account which is included in money market funds as of June 30, 2021. Cash is invested in the short-term money market funds, which is a cash sweep for uninvited cash that earns interest.

Restricted Cash

Restricted cash consists of certificates of deposit held by a bank as security for outstanding letters of credit. The Company had a restricted cash balance of $1.3 million and $1.3 million as of June 30, 2021 and December 31, 2020, respectively, which has been excluded from the Company’s cash and cash equivalents balances. The Company presented $0.3 million of the total amount of restricted cash within current assets on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020. The remaining restricted cash balance of $1.0 million and $1.0 million is included in non-current assets on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.

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Reconciliation of cash, cash equivalents and restricted cash as shown in the condensed consolidated statement of cash flows to the respective accounts within the condensed consolidated balance sheet is as follows (in thousands):

	June 30, 2021		June 30, 2020
Cash and cash equivalents	$	240,148	$	11,438
Restricted cash, current	276		276
Restricted cash, non-current	1,004		1,280
Total cash, cash equivalents and restricted cash	$	241,428	$	12,994

Inventory

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

	June 30, 2021		December 31, 2020
Raw materials	$	1,887	$	1,376
Work in process	1,360		1,249
Finished goods	1,474		2,192
Total inventory	$	4,721	$	4,817

Total inventory balance as of June 30, 2021 and December 31, 2020 includes a write down of $2.1 million and $2.7 million, respectively, for obsolete, scrap, or returned inventory. During the three months ended June 30, 2021 and 2020, $0.1 million and $0.1 million of inventory write offs were charged to cost of revenue. During the six months ended June 30, 2021 and 2020, respectively, $0.1 million and $1.8 million of inventory write offs were charged to cost of revenue.

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Prepaid insurance	$	3,281	$	206
Prepaid expenses	1,832		694
Receivable from contract manufacturer	43		1,521
Security deposit	1,211		20
Total prepaid and other current assets	$	6,367	$	2,441

Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Customer deposits	48		71
Accrued compensation	2,478		1,618
Uninvoiced receipts	2,777		1,947
Other	956		485
Total accrued and other current liabilities	$	6,259	$	4,121

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Note 5. Debt

Runway Growth Loan Agreement

On November 27, 2018, the Company entered into a Loan and Security Agreement with Runway Growth Credit Fund Inc. (“Runway Loan and Security Agreement”). The Runway Loan and Security Agreement provided for loans in an aggregate principal amount up to $10.0 million with a loan maturity date of November 15, 2021. The loan carried an interest rate equal to LIBOR plus 8.5%, unless LIBOR becomes no longer attainable or ceases to fairly reflect the costs of the lender, in which case the applicable interest rate shall be Prime Rate plus 6.0%. In an event of default, annual interest is increased by 5.0% above the otherwise applicable rate. The loan’s annual effective interest rate was approximately 16.4% for each of the six months ended June 30, 2021 and 2020.

In conjunction with the Runway Loan and Security Agreement, the Company issued a warrant to purchase 35,348 shares of Series A redeemable convertible preferred stock (the “Series A Preferred Stock”) of the Company (4.0% of original principal amount of $10.0 million, divided by the exercise price), with an exercise price of $11.3518 per share. The fair value of this warrant was estimated to be $0.1 million and accounted for as a debt discount. On August 5, 2019, in connection with the second amendment to the Runway Loan and Security Agreement, the Company amended the warrant issued to Runway Growth to increase the number of shares available to purchase to 53,023 shares of Series A Preferred Stock of the Company. The aggregate value of the warrants increased by $0.1 million after the warrant modification.

The warrants were exercised on March 11, 2021 and the warrant liability was remeasured to fair value with the increase recognized as a loss of $