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 March 31, 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: 001-39463

_______________________

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 s›hell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No  ☒

As of May 5, 2022, the registrant had 173,664,057 shares of common stock, $0.0001 par value per share, outstanding.

1

TABLE OF CONTENTS

		Page
	Part I - Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	5
	Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
	Part II - Other Information
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits.	40
Signature		41

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. Ouster, Inc. (the “Company” or “Ouster”) 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 Ouster’s future operating results and financial position, its business strategy and plans, potential acquisitions, market growth and trends, and its 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. The Company has based these forward-looking statements largely on its current expectations and projections about future events and trends that it believes may affect its 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 its 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; its ability to maintain inventory and the risk of inventory write-downs; inaccurate forecasts of market growth; its ability to manage growth; the creditworthiness of its 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; and risks related to certain of its warrants being accounted for as liabilities. Other risk factors include the important factors described in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2022, that may cause its 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 SEC filings, 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)

	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	160,783	$	182,644
Restricted cash, current	977		977
Accounts receivable, net	9,881		10,723
Inventory	11,619		7,448
Prepaid expenses and other current assets	3,006		5,566
Total current assets	186,266		207,358
Property and equipment, net	8,968		10,054
Operating lease, right-of-use assets	14,582		15,156
Goodwill	51,076		51,076
Intangible assets, net	21,530		22,652
Restricted cash, non-current	1,035		1,035
Other non-current assets	452		371
Total assets	$	283,909	$	307,702
Liabilities, redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	9,469	$	4,863
Accrued and other current liabilities	11,789		14,173
Operating lease liability, current portion	2,888		3,067
Total current liabilities	24,146		22,103
Operating lease liability, long-term portion	15,685		16,208
Warrant liabilities (At March 31, 2022 and December 31, 2021 related party $2,058 and $2,669, respectively)	5,881		7,626
Other non-current liabilities	1,018		1,065
Total liabilities	46,730		47,002
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock, $0.0001 par value per share; 100,000,000 shares authorized at March 31, 2022 and December 31, 2021; Nil shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively (aggregate liquidation preference of nil at March 31, 2022 and December 31, 2021, respectively)	—		—
Stockholders’ equity:
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively; 173,602,503 and 172,200,417 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	17		17
Additional paid-in capital	572,933		564,045
Accumulated deficit	(335,753)		(303,356)
Accumulated other comprehensive loss	(18)		(6)
Total stockholders’ equity	237,179		260,700
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity	$	283,909	$	307,702

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 March 31,
	2022		2021
Product revenue	$	8,558	$	6,611
Cost of product revenue	5,967		4,868
Gross profit	2,591		1,743
Operating expenses:
Research and development	15,906		4,712
Sales and marketing	7,090		3,426
General and administrative	13,783		9,907
Total operating expenses	36,779		18,045
Loss from operations	(34,188)		(16,302)
Other (expense) income:
Interest income	154		1
Interest expense	—		(504)
Other income (expense), net	1,684		(4,152)
Total other expense, net	1,838		(4,655)
Loss before income taxes	(32,350)		(20,957)
Provision for income tax expense	47		—
Net loss	$	(32,397)	$	(20,957)
Other comprehensive loss
Foreign currency translation adjustments	$	(12)	—
Total comprehensive loss	$	(32,409)	$	(20,957)
Net loss per common share, basic and diluted	$	(0.19)	$	(0.38)
Weighted-average shares used to compute basic and diluted net loss per share	170,906,196		55,688,281

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		Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ Equity
	Shares (1)	Amount		Shares (1)	Amount
Balance — December 31, 2021	—	$	—	172,200,417	$	17	$	564,045	$	(303,356)	$	(6)	$	260,700
Issuance of common stock upon exercise of stock options	—	—		822,702	—		209		—		—		209
Issuance of common stock upon exercise of restricted stock awards - net of tax withholding	—	—		812,491	—		(59)		—		—		(59)
Repurchase of common stock	—	—		(233,107)	—		(31)		—		—		(31)
Stock-based compensation expense	—	—		—	—		8,750		—		—		8,750
Vesting of early exercised stock options	—	—		—	—		19		—		—		19
Net loss	—	—		—	—		—		(32,397)		—		(32,397)
Other Comprehensive loss	—	—		—	—		—		—		(12)		(12)
Balance — March 31, 2022	—	$	—	173,602,503	$	17	$	572,933	$	(335,753)	$	(18)	$	237,179
	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-in- Capital		Accumulated Deficit		Accumulated other comprehensive loss		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)
Stock-based compensation expense	—	—		—	—		5,256		—		—		5,256
Vesting of early exercised stock options	—	—		—	—		438		—		—		438
Net loss	—	—		—	—		—		(20,957)		—		(20,957)
Balance — March 31, 2021	—	$	—	161,449,205	$	16	$	482,071	$	(230,332)	$	—	$	251,755

(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 CASH FLOWS

(unaudited)

(in thousands)

	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(32,397)	$	(20,957)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,385		1,095
Stock-based compensation	8,750		5,256
Change in right-of-use asset	644		520
Interest expense on notes and convertible debt	—		36
Amortization of debt issuance costs and debt discount	—		250
Change in fair value of warrant liabilities	(1,745)		4,152
Inventory write down	203		—
Gain from disposal of property and equipment	(100)		—
Changes in operating assets and liabilities:
Accounts receivable	842		(140)
Inventory	(4,373)		(476)
Prepaid expenses and other assets	2,480		(1,202)
Accounts payable	4,807		(1)
Accrued and other liabilities	(2,551)		(254)
Operating lease liability	(772)		(678)
Net cash used in operating activities	(21,827)		(12,399)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment	275		—
Purchases of property and equipment	(416)		(597)
Net cash used in investing activities	(141)		(597)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the merger and private offering	—		291,454
Payment of offering costs	—		(26,116)
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	(31)		(43)
Proceeds from exercise of stock options	209		504
Taxes paid related to net share settlement of equity awards	(59)		—
Net cash provided by financing activities	119		258,799
Effect of exchange rates on cash and cash equivalents	(12)		—
Net increase (decrease) in cash, cash equivalents and restricted cash	(21,861)		245,803
Cash, cash equivalents and restricted cash at beginning of period	184,656		12,642
Cash, cash equivalents and restricted cash at end of period	$	162,795	$	258,445
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	—	$	635
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Property and equipment purchases included in accounts payable and accrued liabilities	$	377	$	100
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
Offering costs not yet paid	$	—	$	504

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

7

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 legal predecessor, was originally a blank check company incorporated as a Cayman Islands exempted company on June 4, 2020. CLA 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, 2021 and the notes related thereto, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022. 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, 2022 or for any other future years or interim periods.

Impact of the COVID-19 Pandemic

Ouster has been actively monitoring the COVID-19 pandemic on a global scale and continues to evaluate the long-term impacts on the business while keeping abreast of the latest developments, particularly the variants of the virus, to ensure preparedness for Ouster’s employees and its business. We maintain our commitment to protect the health and safety of our employees and customers. We continue to adapt and enhance our safety protocols as we follow the guidance from local authorities. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s 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 events that are by nature uncertain, including as a result of new information that continues to emerge concerning the virus, its variants, the deployment and effectiveness of vaccination roll-outs, vaccination hesitancy, and the actions taken to contain the virus or treat it, as well as the economic impact on local, regional, national and international customers and markets. Thus, the Company is not able to estimate the future consequences on its operations, its financial condition, or its liquidity.

8

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 March 31, 2022, the Company had an accumulated deficit of approximately $335.8 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 March 31, 2022 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 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

9

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 three months ended March 31, 2022, there were no significant changes made to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“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 adopted this ASU as of January 1, 2022 using a modified retrospective method of transition, which did not have an impact on its condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements not yet adopted

The Company considers the applicability and impact of all ASUs. ASUs not referenced below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends ASC 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.

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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:

	March 31, 2022	December 31, 2021
Customer A	*	11	%

* 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 March 31,
	2022	2021
Customer B	*	28	%

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

Concentrations of supplier risk

One supplier accounted for approximately 31% of total purchases during the three months ended March 31, 2022 and accounted for 52% of total accounts payable as of March 31, 2022. One supplier accounted for approximately 17% of total purchases during the three months ended March 31, 2021 and accounted for 55% of total accounts payable balance as of December 31, 2021.

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 March 31, 2022, 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.

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On December 31, 2021, 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.

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):

	March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	152,984	$	—	$	—	$	152,984
Total financial assets	$	152,984	$	—	$	—	$	152,984
Liabilities
Warrant liabilities	$	—	$	—	$	5,881	$	5,881
Total financial liabilities	$	—	$	—	$	5,881	$	5,881

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	177,513	$	—	$	—	$	177,513
Total financial assets	$	177,513	$	—	$	—	$	177,513
Liabilities
Warrant liabilities	$	—	$	—	$	7,626	$	7,626
Total financial liabilities	$	—	$	—	$	7,626	$	7,626

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 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		Private Placement Warrant Liability
Fair value as of December 31, 2021	$	—	$	(7,626)
Change in the fair value included in other income (expense), net	—		1,745
Fair value as of March 31, 2022	$	—	$	(5,881)
	Redeemable Convertible Preferred Stock Warrant Liability		Private Placement Warrant Liability
Fair value as of December 31, 2020	(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)		4,652
Issuance of preferred stock upon exercise of warrants	58,097		—
Fair value as of March 31, 2021	$	—	$	(14,725)

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):

	March 31, 2022		December 31, 2021
Cash	$	7,799	$	5,131
Cash equivalents:
Money market funds(1)	152,984		177,513
Total cash and cash equivalents	$	160,783	$	182,644

(1)The Company maintains a cash sweep account which is included in money market funds as of March 31, 2022. Cash is invested in the short-term money market funds, which is a cash sweep for uninvested 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 $2.0 million as of March 31, 2022 and December 31, 2021, respectively, which has been excluded from the Company’s cash and cash equivalents balances. The Company presented $1.0 million and $0.3 million of the total amount of restricted cash within current assets on the condensed consolidated balance sheets as of March 31, 2022 and March 31, 2021, respectively. The remaining restricted cash balance of $1.0 million was included in non-current assets on the condensed consolidated balance sheets as of March 31, 2022 and March 31, 2021, 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):

	As of March 31,
	2022		2021
Cash and cash equivalents	$	160,783	$	257,165
Restricted cash, current	977		276
Restricted cash, non-current	1,035		1,004
Total cash, cash equivalents and restricted cash	$	162,795	$	258,445

Inventory

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

	March 31, 2022		December 31, 2021
Raw materials	$	3,288	$	2,401
Work in process	2,280		1,951
Finished goods	6,051		3,096
Total inventory	$	11,619	$	7,448

Total inventory balance as of March 31, 2022 and December 31, 2021 includes a write down of $1.8 million and $1.7 million, respectively, for obsolete, scrap, or returned inventory. During the three months ended March 31, 2022 and 2021, $0.2 million and nil of inventory write downs were charged to cost of revenue, respectively.

Prepaid expenses and other current assets

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

	March 31, 2022		December 31, 2021
Prepaid expenses	$	1,408	$	1,970
Prepaid insurance	108		1,355
Receivable from contract manufacturer	1,343		1,344
Grant receivable	—		779
Security deposit	76		118
Value-added tax (VAT) receivable	71		—
Total prepaid and other current assets	$	3,006	$	5,566

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Property and Equipment, net

Property and equipment consists of the following (in thousands):

	Estimated Useful Life (in years)	March 31, 2022		December 31, 2021
Machinery and equipment	3	$	8,593	$	8,404
Computer equipment	3	504		498
Automotive and vehicle hardware	5	93		93
Software	3	104		104
Furniture and fixtures	7	730		730
Construction in progress		1,923		1,700
Leasehold improvements	Shorter of useful life or lease term	9,310		9,265
		21,257		20,794
Less: Accumulated depreciation		(12,289)		(10,740)
Property and equipment, net		$	8,968	$	10,054

Depreciation expense associated with property and equipment was $1.3 million and $1.1 million in the three months ended March 31, 2022 and 2021, respectively.

Goodwill and Acquired Intangible Assets, Net

In the fourth quarter of 2021, the Company completed the acquisition of Sense Photonics Inc. (“Sense”), a privately held lidar technology company for autonomous vehicles. The transaction has been accounted for as a business combination. The Company purchased all of the outstanding shares of the capital stock of Sense and settled all Sense debt for total consideration of $72.8 million. Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and assumed liabilities acquired and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. Goodwill is not deductible for tax purposes. Sense’s revenue and pretax loss for the period from the acquisition date of October 22, 2021 to December 31, 2021 and March 31, 2022 were not material. In the three-month period ended March 31, 2022, the Company did not adjust the preliminary fair values of acquired assets that were recognized as of December 31, 2021.

The following tables present acquired intangible assets, net as of March 31, 2022 and December 31, 2021 (in thousands):

		March 31, 2022
	Estimated Useful Life (in years)	Gross Carrying amount		Accumulated Amortization		Net Book Value
Developed technology	8	$	15,900	$	(828)	$	15,072
Vendor relationship	3	6,600		(917)		5,683
Customer relationships	3	900		(125)		775
Intangible assets, net		$	23,400	$	(1,870)	$	21,530

		December 31, 2021
	Estimated Useful Life (in years)	Gross Carrying amount		Accumulated Amortization		Net Book Value
Developed technology	8	$	15,900	$	(331)	$	15,569
Vendor relationship	3	6,600		(367)		6,233
Customer relationships	3	900		(50)		850
Intangible assets, net		$	23,400	$	(748)	$	22,652

Amortization expense was $1.1 million during the three months ended March 31, 2022.

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The following table summarizes estimated future amortization expense of finite-lived intangible assets-net (in thousands):

Years:	Amount
2022 (the remainder of 2022)	$	3,366
2023	4,488
2024	4,071
2025	1,988
2026	1,988
Thereafter	5,629
Total	$	21,530

Accrued and Other Current Liabilities

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

	March 31, 2022		December 31, 2021
Accrued compensation	$	3,487	$	3,229
Uninvoiced receipts	7,182		9,835
Other	1,120		1,109
Total accrued and other current liabilities	$	11,789	$	14,173

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 no longer was attainable or ceased to fairly reflect the costs of the lender, in which case the applicable interest rate would be Prime Rate plus 6.0%. In an event of default, annual interest was increased by 5.0% above the otherwise applicable rate. The loan’s annual effective interest rate was approximately 16.4% for the three months ended March 31, 2021.

In conjunction with the Runway Loan and Security Agreement, OTI issued a warrant to purchase 35,348 shares of Series A redeemable convertible preferred stock (the “Series A Preferred Stock”) of OTI (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 OTI. 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 $0.6 million for the three months ended March 31, 2021 within other income (expense), net in the consolidated statements of operations and comprehensive loss. The warrant liability was remeasured to fair value as of March 31, 2021 and the reduction was recognized as a gain of $0.2 million.

On March 26, 2021, the Company terminated the Runway Loan and Security Agreement and repaid the $7.0 million principal amount outstanding as well as interest and fees amounting to $0.4 million. The Company incurred no prepayment fees in connection with the termination and all liens and security interests securing the loan made pursuant to the Runway Loan and Security Agreement were released upon termination. As of March 31, 2022 and December 31, 2021, the outstanding principal balance of the loan was nil, respectively.

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Promissory notes

The Company issued a $5 million promissory note in January 2021 to certain current investors of the Company (or their respective affiliates) to help continue to fund the Company’s ongoing operations through the consummation of the Merger. The note accrued interest at a rate equal to LIBOR plus 8.5% per annum and was repaid on March 11, 2021 in accordance with its terms in connection with the consummation of the Merger.

Note 6. Warrants

Series A and B Redeemable Convertible Preferred Stock Warrants

On November 27, 2018, in connection with the execution of the Runway Loan and Security Agreement, OTI issued a warrant to purchase 35,348 shares of Series A Preferred Stock of OTI at an exercise price of $11.3518 per share (the “Runway warrant”). On August 5, 2019, in connection with the second amendment to the Runway Loan and Security Agreement, OTI amended the Runway warrant to increase the number of shares available to purchase to 53,023 shares of Series A Preferred Stock of OTI at an exercise price of $11.3518 per share.

The Runway warrants included a cashless exercise provision under which their holders could, in lieu of payment of the exercise price in cash, surrender the Runway warrant and receive a net amount of shares based on the fair market value of OTI’s stock at the time of exercise of the warrants after deduction of the aggregate exercise price. The Runway warrants contained provisions for adjustment of the exercise price and number of shares issuable upon the exercise of the Runway warrants in the event of certain stock dividends, stock splits, reorganizations, reclassifications, and consolidations.

The fair value of the warrants issued was recorded as of the date of initial issuance in the amount of $0.1 million. The subsequent issuance of warrants pursuant to the August 5, 2019 amendment to the Runway Loan and Security Agreement was recorded in the amount of $0.1 million. Immediately prior to the Merger, the warrants were exercised in full in accordance with their terms.

On April 3, 2020, in connection with the closing of the Series B redeemable convertible preferred stock, OTI issued a warrant to purchase 4,513,993 shares of Series B redeemable convertible preferred stock of the Company at an exercise price of $0.3323 per share (the “Series B warrants”). The Series B warrants could be exercised prior to the earliest to occur of (i) the
10-year anniversary of the date of issuance, (ii) the consummation of a liquidation transaction, or (iii) the consummation of an initial public offering. The Series B warrants included a cashless exercise provision under which their holders may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of the Company’s stock at the time of exercise of the warrants after deduction of the aggregate exercise price. The Series B warrants contained provisions for adjustment of the exercise price and number of shares issuable upon the exercise of the Series B warrants in the event of certain stock dividends, stock splits, reorganizations, reclassifications, and consolidations.

The Series B warrants were initially recognized as a liability at a fair value of $0.7 million. The Series B warrants were exercised on February 11, 2021 and the warrant liability was remeasured to fair value as of that date, resulting in a loss of $8.3 million for the three months ended March 31, 2021, classified within other income (expense), net in the consolidated statements of operations and comprehensive loss. Upon exercise redeemable convertible preferred stock converted into common stock pursuant to the conversion rate effective immediately prior to the Merger.

Historically, value was assigned to each class of equity securities using an option pricing model method (“OPM”). In September 2020, OTI began allocating the equity value using a hybrid method that utilizes a combination of the OPM and the probability weighted expected return method (“PWERM”). The PWERM is a scenario-based methodology that estimates the fair value of equity securities based upon an analysis of future values for OTI, assuming various outcomes. As the probability of a transaction with a special purpose acquisition company (“SPAC”) increased, the fair value of the redeemable convertible preferred stock warrant liability increased as of the date of the exercise.

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The redeemable convertible preferred stock warrants were valued using the following assumptions under the Black-Scholes option-pricing model:

	Initial Issuance Date			Subsequent Issuance Date			December 31, 2020			February 11, 2021			March 11, 2021
Stock price	$	5.80		$	5.80		$	7.11		$	10.27		$	8.44
Expected term (years)	10.00			9.31			2.00			2.00			2.00
Expected volatility	57.81		%	57.35		%	76.00		%	76.00		%	76.00		%
Risk-free interest rate	3.06		%	1.75		%	0.13		%	0.13		%	0.13		%
Dividend yield	0		%	0		%	0		%	0		%	0		%

Private Placement Warrants

Simultaneously with the closing of the Company’s initial public offering (the “IPO”) in August 2020, the sponsor of CLA, Colonnade Sponsor LLC, purchased an aggregate of 6,000,000 Private Placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $6,000,000. The Private Placement warrants became exercisable 12 months following the closing of the Company’s IPO, and will expire five years from the completion of the Merger, or earlier upon redemption or liquidation. Each Private Placement warrant is exercisable for one Class A ordinary share at a price of $11.50 per share. On March 11, 2021, each outstanding Private Placement warrant automatically converted into a warrant to purchase one share of Ouster common stock pursuant to the Warrant Agreement.

The Private Placement warrants were initially recognized as a liability at a fair value of $19.4 million and the Private Placement warrant liability was remeasured to fair value as of March 31, 2022 and 2021, resulting in a gain of $1.7 million and $4.6 million for the three months ended March 31, 2022 and 2021, respectively, classified within other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

The Private Placement warrants were valued using the following assumptions under the Black-Scholes option-pricing model:

	March 11, 2021			March 31, 2021			December 31, 2021			March 31, 2022
Stock price	$	12.00		$	8.50		$	5.20		$	4.60
Exercise price of warrant	$	11.50		$	11.50		$	11.50		$	11.50
Expected term (years)	5.00			4.95			4.19			3.95
Expected volatility	27.00		%	43.00		%	57.00		%	56.81		%
Risk-free interest rate	0.78		%	0.92		%	1.14		%	2.55		%

Public Warrants

CLA, in its IPO in August 2020, issued 20,000,000 units that each consisted one Class A ordinary share and one half warrant to purchase a Class A ordinary share, which the Company refers to as CLA warrants before the Merger and Public warrants after the Merger. These warrants may only be exercised for a whole number of shares, and no fractional warrants were issued or issuable upon separation of the units and only whole warrants will trade. The warrants became exercisable 12 months following the closing of the Company’s IPO, and will expire five years from the completion of the Merger, or earlier upon redemption or liquidation. Each Public warrant is exercisable at a price of $11.50 per share. On March 11, 2021, upon the closing of the Merger pursuant to the Merger Agreement (Note 1), each of the 9,999,996 outstanding warrants, as adjusted for any fractional warrants that were not issued upon separation, was converted automatically into a redeemable Public warrant to purchase one share of the Company’s common stock. The Public warrants were recognized as equity upon the Merger in the amount of $17.9 million.

Prior to their expiration, the Company may redeem the Public warrants at a price of $0.01 per warrant, provided that the closing price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which the Company gives proper notice of such redemption to the warrants holders.

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Note 7. Commitments and Contingencies

Letters of credit

In connection with the lease agreements (collectively the “350 Treat Building Lease” and the “2741 16th Street Lease”), the Company obtained letters of credit from certain banks as required by the lease agreements. If the Company defaults under the terms of the applicable lease, the lessor will be entitled to draw upon the letters of credit in the amount necessary to cure the default. The amounts covered by the letters of credit are collateralized by certificates of deposit, which are included in restricted cash on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021. The outstanding amount of the letters of credit was $2.0 million as of March 31, 2022 and December 31, 2021.

Non-cancelable purchase commitments

As of March 31, 2022, the Company had non-cancelable purchase commitments to a third-party contract manufacturer for approximately $21.3 million and to other vendors for approximately $9.1 million.

Litigation

On June 10, 2021, the Company received a letter from the SEC notifying us of an investigation and document subpoena. The subpoena seeks documents regarding projected financial information in CLA’s Form S-4 registration statement filed on December 22, 2020. The Company has complied with the SEC’s requests to date; however, the SEC may request additional documents or information. Should the SEC pursue this matter further, it could have a material impact on our business and operations. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter.

The Company is involved in various legal proceedings arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. Based on the opinion of legal counsel and other factors, management believes that the final disposition of these existing matters will not have a material adverse effect on the business, results of operations, financial condition, or cash flows of the Company. The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate any loss is expected to be immaterial. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates. For other claims regarding proceedings that are in an initial phase, the Company is unable to estimate the range of possible loss, if any, but at this time believes that any loss related to such claims will not be material.

As of March 31, 2022 and December 31, 2021 there were no material litigation matters.

Indemnification

From time to time, the Company enters into agreements in the ordinary course of business that include indemnification provisions. Generally, in these provisions the Company agrees to defend, indemnify, and hold harmless the indemnified parties for claims and losses suffered or incurred by such indemnified parties for which the Company is responsible under the applicable indemnification provisions. The terms of the indemnification provisions vary depending upon negotiations between the Company and its counterpart; however, typically, these indemnification obligations survive the term of the contract and the maximum potential amount of future payments the Company could be required to make pursuant to these provisions are uncapped. To date, the Company has never incurred costs to defend lawsuits or settle claims related to these indemnification provisions.

The Company has also entered into indemnity agreements pursuant to which it has indemnified its directors and officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer, other than liabilities arising from willful misconduct of the individual. To date, the Company has never incurred costs to defend lawsuits or settle claims related to these indemnity agreements. The unaudited condensed consolidated financial statements do not include a liability for any potential obligations under the indemnification agreements at March 31, 2022 and December 31, 2021.

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Note 8. Redeemable Convertible Preferred and Common Stock

The Company’s common stock and warrants trade on the New York Stock Exchange under the symbol “OUST” and “OUSTWS”, respectively. Pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company is authorized and has available for issuance the following shares and classes of capital stock, each with a par value of $0.0001 per share: (i) 1,000,000,000 shares of common stock; (ii) 100,000,000 shares of preferred stock. Immediately following the Merger, there were 161,449,205 shares of common stock with a par value of $0.0001, and 15,999,996 warrants outstanding. The holder of each share of common stock is entitled to one vote.

The Company has retroactively adjusted the shares issued and outstanding prior to March 11, 2021 to give effect to the exchange ratio established in the Merger Agreement to determine the number of shares of common stock into which they were converted.

Immediately prior to the Merger, OTI’s certificate of incorporation, as amended, authorized it to issue 342,367,887 shares of $0.00001 par value, with 210,956,516 shares designated as common stock and 131,411,372 shares of redeemable convertible preferred stock.

On March 11, 2021, upon the closing of the Transaction pursuant to the Merger Agreement (Note 1), all of the outstanding redeemable convertible preferred stock was converted to the Company’s common stock pursuant to the conversion rate effective immediately prior to the Transaction and the remaining amount was reclassified to additional paid-in capital. As of March 31, 2022 and December 31, 2021, the Company does not have any redeemable convertible preferred stock outstanding.

Note 9. Stock-based compensation

As of March 31, 2022, the Company has three equity incentive plans, the 2015 Stock Plan (the “2015 Plan”), the 2021 Incentive Award Plan (the “2021 Plan”) and the Sense 2017 Equity Incentive Plan (the “Sense Plan” and together the “Plans”).

The Plans provide for the grant of stock options, stock appreciation rights, restricted stock awards (“RSA”), restricted stock units (“RSU”), performance stock unit awards and other forms of equity compensation (collectively, “equity awards”). In addition, the 2021 Plan provides for the grant of performance bonus awards. All awards within the Plans may be granted to employees, including officers, as well as directors and consultants, within the limits defined in the Plans.

Certain employees have the right to early exercise unvested stock options, subject to rights held by the Company to repurchase unvested shares in the event of voluntary or involuntary termination. The Company accounts for cash received in consideration for the early exercise of unvested stock options as a non-current liability, included as a component of other liabilities in the Company’s condensed consolidated balance sheets.

On October 12, 2020, the Company issued $1.1 million partial recourse promissory notes to certain executives and employees. The promissory notes carried 0.38% annual cash interest and were due on the earliest of 9th anniversary of the date of issuance of the notes, or termination of employment of the executive/employee, or filing by the Company of a registration statement under the Securities Act of 1933, or promissory notes being prohibited under Section 13(k) of the Securities Exchange Act of 1934 or closing of change a in control of the Company. At issuance, the promissory notes were used to settle certain executives’ and employees’ obligations for 2,883,672 vested and 4,603,833 unvested ISOs that were exercised and no cash was exchanged. In March 2021, in connection with the close of the Merger, the Company forgave half of the respective obligations under the promissory notes for certain executives and required such noteholders to repay the remaining balance of $0.3 million under each of their respective notes. Additional compensation expense of $0.3 million was recognized in general and administrative expenses for the three months ended March 31, 2021 for the value of the loans forgiven. No obligations under the promissory notes for non-executive noteholders were outstanding as of March 31, 2022 and December 31, 2021.

20

Stock Options

Stock option activity for the three months ended March 31, 2022 is as follows:

	Number of Shares Underlying Outstanding Options	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding—December 31, 2021	24,129,096	$	1.01	8.6	$	100,992
Options exercised	(797,380)	0.20
Options cancelled	(77,753)	4.21			$	—
Outstanding—March 31, 2022	23,253,963	$	1.03	8.3	$	84,888
Vested and expected to vest—March 31, 2022	23,253,963	$	1.03	8.3	$	84,888
Exercisable—March 31, 2022	9,954,974	$	0.80	8.1	$	37,186

The following table summarizes information about stock options outstanding and exercisable at March 31, 2022.