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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 September 30, 2023
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 shareOUSTNew York Stock Exchange
Warrants to purchase common stockOUST WSNew York Stock Exchange
Warrants to purchase common stock expiring 2025OUST WSANYSE American
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 filerAccelerated filer
Non-accelerated filerSmaller 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 November 9, 2023, the registrant had 40,692,290 shares of common stock, $0.0001 par value per share, outstanding.
1

TABLE OF CONTENTS
Page
Part II - Other Information
2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Ouster, Inc. (the “Company”, “Ouster,” or “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 other than statements of historical fact, including statements regarding the anticipated interest expense savings from the prepayment of the term loan facility with Hercules Capital, Inc.; the projected operational flexibility afforded to Ouster under its credit agreement with UBS Bank USA and UBS Financial Services Inc.; Ouster’s future restricted cash balances; the anticipated benefits of and costs associated with the Velodyne Merger (as defined herein) and related restructuring initiatives; Ouster’s expectations surrounding the Velodyne Merger and its ability to grow the Company’s sales and bolster the Company’s financial position; expected contractual obligations and capital expenditures; the capabilities of and demand for Ouster’s products; Ouster’s anticipated new product launches and developments, including software-related solution systems; Ouster’s ability to grow its sales and marketing organization; Ouster’s future results of operations and financial position; industry and business trends; the remediation of material weaknesses; potential risks of inventory obsolescence; Ouster’s expectations regarding the Hesai intellectual property patent infringement cases; the impact of market conditions and other macroeconomic factors on Ouster’s business, financial condition and results of operation; Ouster’s future business strategy, plans, distribution partnerships, market growth and its objectives for future operations; and Ouster’s competitive market position within its industry, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” “aim,” “forecast,” “should,” “can have,” “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 that may cause actual results to differ materially from those that Ouster expected, including, but not limited to, Ouster’s limited operating history and history of losses; its ability to successfully integrate its business with Velodyne and achieve the anticipated benefits and synergies of the Velodyne Merger; substantial research and development costs needed to develop and commercialize new products; fluctuations in its operating results; Ouster’s ability to maintain competitive average selling prices or high sales volumes or reduce product costs; conditions in its customers’ industries; the competitive environment in which Ouster operates; the negotiating power and product standards of its customers; the creditworthiness of Ouster’s customers; the ability of its lidar technology roadmap and new software solutions to catalyze growth; the selection of Ouster’s products for inclusion in target markets; risks of product delivery problems or defects; costs associated with product warranties; Ouster’s future capital needs and ability to secure additional capital on favorable terms or at all; inaccurate forecasts of market growth; Ouster’s ability to manage growth; Ouster’s ability to grow its sales and marketing organization; risks related to acquisitions; risks related to international operations and compliance; cancellation or postponement of contracts or unsuccessful implementations; Ouster’s ability to maintain inventory and the risk of inventory write-downs; its ability to use tax attributes; Ouster’s dependence on key third-party suppliers, in particular Benchmark Electronics, Inc. and Fabrinet; supply chain constraints and challenges; risks related to Ouster’s indebtedness; Ouster’s ability to recruit and retain key personnel; Ouster’s ability to effectively respond to evolving regulations and standards; Ouster’s ability to adequately protect and enforce its intellectual property rights, including as relates to Hesai; risks related to operating as a public company; and other important factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, that are further updated from time to time in the Company’s other filings with the Securities and Exchange Commission (the “SEC”) 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, 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 or to conform these statements to actual results or revised expectations.







3

GENERAL
Unless the context otherwise indicates, references in this Quarterly Report 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.

4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OUSTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share data)
September 30,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$75,585 $122,932 
Restricted cash, current540 257 
Short-term investments124,913  
Accounts receivable, net13,404 11,233 
Inventory26,474 19,533 
Prepaid expenses and other current assets11,971 8,543 
Total current assets252,887 162,498 
Property and equipment, net11,529 9,695 
Unbilled receivable, long-term portion7,583  
Operating lease, right-of-use assets19,812 12,997 
Goodwill 51,152 
Intangible assets, net26,053 18,165 
Restricted cash, non-current1,090 1,089 
Other non-current assets2,877 541 
Total assets$321,831 $256,137 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$7,932 $8,798 
Accrued and other current liabilities35,793 17,071 
Contract liabilities10,776 402 
Operating lease liability, current portion7,078 3,221 
Total current liabilities61,579 29,492 
Operating lease liability, long-term portion20,376 13,400 
Debt40,422 39,574 
Contract liabilities, long-term portion3,914 342 
Other non-current liabilities1,493 1,710 
Total liabilities127,784 84,518 
Commitments and contingencies (Note 8 )
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized at September 30, 2023 and December 31, 2022; 40,626,201 and 18,658,799 issued and outstanding at September 30, 2023 and December 31, 2022, respectively.
39 19 
Additional paid-in capital971,419 613,665 
Accumulated deficit(777,031)(441,916)
Accumulated other comprehensive loss(380)(149)
Total stockholders’ equity194,047 171,619 
Total liabilities and stockholders’ equity$321,831 $256,137 

The accompanying notes are an integral part of these condensed consolidated financial statements
5

OUSTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue$22,209 $11,204 $58,835 $30,091 
Cost of revenue19,116 7,488 55,932 21,002 
Gross (loss) profit3,093 3,716 2,903 9,089 
Operating expenses:
Research and development16,678 17,212 75,584 49,011 
Sales and marketing7,887 8,541 33,086 23,194 
General and administrative14,270 14,008 63,437 40,306 
Goodwill impairment charges  166,675  
Total operating expenses38,835 39,761 338,782 112,511 
Loss from operations(35,742)(36,045)(335,879)(103,422)
Other income (expense):
Interest income2,495 733 6,459 1,231 
Interest expense(1,825)(699)(5,222)(1,143)
Other income (expense), net(13)61 (124)7,071 
Total other income, net657 95 1,113 7,159 
Loss before income taxes(35,085)(35,950)(334,766)(96,263)
Provision for income tax expense17 37 349 121 
Net loss$(35,102)$(35,987)$(335,115)$(96,384)
Other comprehensive loss
Changes in unrealized loss on available for sale securities63  40  
Foreign currency translation adjustments(213)(87)(271)(175)
Total comprehensive loss$(35,252)$(36,074)$(335,346)$(96,559)
Net loss per common share, basic and diluted$(0.89)$(1.98)$(9.39)$(5.48)
Weighted-average shares used to compute basic and diluted net loss per share39,228,118 18,136,135 35,670,408 17,576,509 
The accompanying notes are an integral part of these condensed consolidated financial statements
6

OUSTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands, except share data)

Common StockAdditional
Paid-in-
Capital
Accumulated
Deficit
Accumulated other comprehensive lossTotal
Stockholders’
Equity
SharesAmount
Balance — December 31, 202218,658,799 $19 $613,665 $(441,916)$(149)$171,619 
Issuance of common stock upon Velodyne Merger19,483,269 20 306,582 — — 306,602 
Issuance of common stock upon exercise of stock options10,007 — 18 — — 18 
Issuance of common stock upon vesting of restricted stock568,675 — — — — — 
Repurchase of common stock(3,753)— — — — — 
Vesting of early exercised stock options— — 27 — — 27 
Stock-based compensation expense— — 21,780 — — 21,780 
Net loss— — — (177,280)— (177,280)
Other Comprehensive loss— — — — (30)(30)
Balance — March 31, 202338,716,997 39 942,072 (619,196)(179)322,736 
Common Stock adjustment reflected as a result of the one-for-10 reverse stock split effectuated on April 6, 202385,893 — — — — — 
Issuance of common stock upon exercise of stock options69,080 — 131 — — 131 
Issuance of common stock upon vesting of restricted stock385,865 — — — — — 
Issuance of common stock to employees under employee stock purchase plan62,880 — 310 — — 310 
Common stock warrants issuable to customer— — 61 — — 61 
Vesting of early exercised stock options— — 71 — — 71 
Stock-based compensation expense— — 16,466 — — 16,466 
Net loss— — — (122,733)— (122,733)
Other Comprehensive loss— — — — (51)(51)
Balance — June 30, 202339,320,715 39 959,111 (741,929)(230)216,991 
Proceeds from at-the-market offering, net of commissions and fees of $122 and issuance costs of $327
802,832 — 3,616 — — 3,616 
Issuance of common stock upon exercise of stock options47,710 — 93 — — 93 
Issuance of common stock upon exercise of restricted stock454,944 — — — — — 
Common stock warrants issuable to customer— — 227 — — 227 
Vesting of early exercised stock options— — — — — — 
Stock-based compensation expense— — 8,372 — — 8,372 
Net loss— — — (35,102)— (35,102)
Other Comprehensive loss— — — — (150)(150)
Balance — September 30, 202340,626,201 $39 $971,419 $(777,031)$(380)$194,047 

7

Common StockAdditional
Paid-in-
Capital
Accumulated
Deficit
Accumulated other comprehensive lossTotal
Stockholders’
Equity
Shares
Amount
Balance — December 31, 202117,220,042 $17 $564,045 $(303,356)$(6)260,700 
Issuance of common stock upon exercise of stock options82,270  209 — — 209 
Issuance of common stock upon vesting of restricted stock - net of tax withholding81,249 — (59)— — (59)
Repurchase of common stock(23,311)— (31)— — (31)
Vesting of early exercised stock options— — 19 — — 19 
Stock-based compensation expense— — 8,750 — — 8,750 
Net loss— — — (32,397)— (32,397)
Other Comprehensive loss— — — — (12)(12)
Balance — March 31, 202217,360,250 17 572,933 (335,753)(18)237,179 
Proceeds from at-the-market offering, net of commissions and fees of $451 and issuance costs of $873
674,934 1 14,021 — — 14,022 
Issuance of common stock upon exercise of stock options23,424 — 45 — — 45 
Issuance of common stock upon exercise of restricted stock awards95,086 — — — — — 
Repurchase of common stock(5,730)— (12)— — (12)
Vesting of early exercised stock options— — 52 — — 52 
Cancellation of Sense acquisition shares(5,513)— (358)— — (358)
Stock-based compensation expense— — 8,119 — — 8,119 
Net loss— — — (28,000)— (28,000)
Other Comprehensive loss— — — — (76)(76)
Balance — June 30, 202218,142,451 $18 $594,800 $(363,753)$(94)$230,971 
Proceeds from at-the-market offering, net of commissions and fees of $54
108,437 1,754 — — 1,754 
Issuance of common stock upon exercise of stock options72,209 — 146 — — 146 
Issuance of common stock upon exercise of restricted stock awards97,515 — — — — — 
Repurchase of common stock(1,610)— (3)— — (3)
Vesting of early exercised stock options— — 43 — — 43 
Stock-based compensation expense— — 8,455 — — 8,455 
Net loss— — — (35,987)— (35,987)
Other Comprehensive loss— — — — (87)(87)
Balance — September 30, 202218,419,002 $18 $605,195 $(399,740)$(181)$205,292 

The accompanying notes are an integral part of these condensed consolidated financial statements
8

OUSTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended September 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(335,115)$(96,384)
Adjustments to reconcile net loss to net cash used in operating activities:
Goodwill impairment charges166,675  
Depreciation and amortization14,290 7,070 
Loss on write-off of construction in progress and right-of-use asset impairment1,423 
Gain on lease termination(807) 
Stock-based compensation46,618 25,324 
Reduction of revenue related to stock warrant issued to customer288  
Amortization of right-of-use asset3,268 2,075 
Interest expense1,112 290 
Amortization of debt issuance costs and debt discount190 104 
Accretion or amortization on short-term investments(3,303) 
Change in fair value of warrant liabilities(67)(7,350)
Inventory write-downs and purchase commitment losses8,223 894 
Provision for doubtful accounts1,015 9 
Gain from disposal of property and equipment(248)(100)
Changes in operating assets and liabilities, net of acquisition effects:
Accounts receivable4,498 (69)
Inventory(4,474)(14,249)
Prepaid expenses and other assets676 (1,540)
Accounts payable(4,112)3,225 
Accrued and other liabilities(10,229)(158)
Contract liabilities410  
Operating lease liability(4,034)(2,431)
Net cash used in operating activities(113,703)(83,290)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment560 275 
Purchases of property and equipment(2,633)(2,353)
Purchase of short-term investments(82,021) 
Proceeds from sales of short-term investments115,481  
Cash and cash equivalents acquired in the Velodyne Merger32,137  
Net cash provided by (used in) investing activities63,524 (2,078)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (46)
Proceeds from ESPP purchase310  
Proceeds from exercise of stock options243 398 
Proceeds from borrowings, net of debt discount and issuance costs 19,077 
Proceeds from the issuance of common stock under at-the-market offering, net of commissions and fees2,936 16,322 
At-the-market offering costs for the issuance of common stock(104)(278)
Taxes paid related to net share settlement of restricted stock units (59)
Net cash provided by financing activities3,385 35,414 
Effect of exchange rates on cash and cash equivalents(269)(175)
Net decrease in cash, cash equivalents and restricted cash(47,063)(50,129)
Cash, cash equivalents and restricted cash at beginning of period124,278 184,656 
Cash, cash equivalents and restricted cash at end of period$77,215 $134,527 


9




OUSTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
(in thousands)


Nine Months Ended September 30,
20232022
SUPPLEMENTAL DISCLOSURES OF OPERATING ACTIVITIES:
Cash paid for interest$4,362 $750 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Property and equipment purchases included in accounts payable and accrued liabilities$470 $45 
Common stock shares issued in the Velodyne Merger$297,425 $ 
Common stock warrants issued in the Velodyne Merger$9,177 $ 
Unpaid at-the-market offering costs$223 $267 
Right-of-use assets obtained in exchange for operating lease liability$ $571 



The accompanying notes are an integral part of these condensed consolidated financial statements
10

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 Cayman Islands on June 4, 2020 as “Colonnade Acquisition Corp.” (“CLA”). Following the closing of the business combination in March 2021, the Company domesticated as a Delaware corporation and changed its name to “Ouster, Inc.” The Company’s prior operating subsidiary, Ouster Technologies, Inc. (“OTI” and prior to the Merger (as defined below)), 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 CLA) and its consolidated subsidiaries following the consummation of the Merger.
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 (the “Merger”) with OTI pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of December 21, 2020. The Merger was accounted for as a reverse recapitalization, CLA is treated as the “acquired” company for financial reporting purposes. 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.
On February 10, 2023, the Company completed the merger with Velodyne Lidar, Inc., a Delaware corporation (“Velodyne”) pursuant to the terms of the Agreement and Plan of Merger (the “Velodyne Merger Agreement”) with Velodyne, Oban Merger Sub, Inc. (“Merger Sub I”) and Oban Merger Sub II LLC (“Merger Sub II”) (the “Velodyne Merger”) dated as of November 4, 2022, accounted for as a business combination with the Company being an accounting acquiror (Note 3).
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 (“U.S. GAAP”) applicable to interim periods. All intercompany balances and transactions have been eliminated in consolidation. The presentation of certain prior period amounts has been reclassified to conform with current year presentation.
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, 2022 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 March 24, 2023. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. 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 applicable 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, 2023 or for any other future years or interim periods.
On April 6, 2023, the Board of Directors approved a one-for-10 reverse stock split and a corresponding reduction in authorized shares of common stock (the “Reverse Stock Split”). On April 20, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to effect the one-for-10 Reverse Stock Split of the Company’s common stock and a corresponding reduction in authorized shares of common stock. The par value of the Company’s common stock was not adjusted as a result of the Reverse Stock Split. All share and per share amounts and related stockholders’ equity balances presented herein have been retroactively adjusted to reflect the Reverse Stock Split.
11

Liquidity
The Company’s principal sources of liquidity are its cash and cash equivalents and short-term investments funded from the Merger and the Velodyne Merger, cash generated from revenues, sales of common stock under its at-the-market equity offering program and debt financing.
As of September 30, 2023, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $200.5 million. The Company has incurred losses and negative cash flows from operations for several years. If the Company continues to incur losses in the future, it may need to improve liquidity and raise additional capital through the issuance of equity and/or debt. There can be no assurance that the Company would be able to raise such capital. However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least twelve months from the date the condensed consolidated financial statements herein were available for issuance.
Note 2 – Summary of Significant Accounting Policies
During the nine months ended September 30, 2023, there were no significant changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2023, except for the changes described below. The Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements.
Revenue Recognition
The Company recognizes revenue when a customer obtains control of promised products or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these products or services. To achieve the core principle of this standard, the Company performs the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when the contract is approved, each party’s rights regarding the product or services to be transferred and the payment terms for the product or services can be identified, it is determined that the customer has the ability and intent to pay and the contract has commercial substance. The Company applies judgement in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. Accounts receivable are due under normal trade terms, typically three months or less.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the product or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the product or services is separately identifiable from other promises in the contract.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring product or services to the customer. Royalties from the license of IP are included in the transaction price in the period the sales occur. Other forms of variable consideration are included in the transaction price if the Company judges that it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component. All taxes assessed by a governmental authority on a specific revenue-producing transaction collected by the Company from a customer are excluded from the transaction price.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). In the three and nine months ended September 30, 2023 and 2022, respectively, the Company did not have a material volume of contracts that required the allocation of transaction price to multiple performance obligations.
5) Recognize revenue when or as the Company satisfies a performance obligation
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to a customer.
12

Product revenue
The majority of the Company’s revenue comes from product sales of lidar sensors to direct customers and distributors. Revenue is recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery dependent upon the terms of the underlying contract. Product sales to certain customers may require customer acceptance due to performance acceptance criteria that is considered more than a formality. For these product sales, revenue is recognized upon the expiration of the customer acceptance period. For custom products that require engineering and development based on customer requirements, the Company recognizes revenue over time using an output method based on units of product shipped to date relative to total production units under the contract. Amounts billed to customers for shipping and handling are included in revenue, and the Company has elected to recognize the cost of shipping activities that occur after control has transferred to the customer as a fulfillment cost rather than a separate performance obligation. All related shipping costs are accrued and recognized within cost of revenue when the related revenue is recognized.
Services
The Company’s services revenue consists primarily of product development, validation services and providing maintenance services under our extended warranty contracts. The obligation to provide services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For product development and validation service projects, the Company bills and recognizes revenue as the services are performed. For these arrangements, control is transferred over as the Company’s inputs incurred to complete the project; therefore, revenue is recognized over the service period with the measure of progress using the input method based on labor costs incurred to total labor cost (“cost-to-cost”) as the services are provided. The revenue from the sale of extended warranties is recognized over the warranty period on a ratable basis as the Company stands ready to provide services as needed.
Licenses
The Company licenses rights to its IP to certain third parties and collects royalties based on the third parties’ product sales. IP revenue recognition is dependent on the nature and terms of each agreement. The Company recognizes license revenue upon the later of (a) delivery of the IP or (b) commencement of the license term if there are no substantive future obligations to perform under the arrangement. Revenue for licenses to future technology developed on a when-and-if -available basis is recognized straight-line over the license period as long as customers continue to have access to the future technology. Royalties from the license of IP are recognized at the later of the period the sales occur or the satisfaction of the performance obligation to which some or all of the royalties have been allocated.
Product Warranties
The Company provides standard product warranties for a term of typically one to two years depending on the product to ensure that its products comply with agreed-upon specifications. Standard warranties are considered to be assurance type warranties and are not accounted for as separate performance obligations. The Company also provides service type extended warranties for typically an additional term ranging up to two additional years. For service type extended warranty contracts, the Company allocates revenue to this performance obligation on a relative standalone selling price basis and recognizes the revenue on a ratable basis over time during the effective period of the services.
Costs to obtain a contract
The Company expenses the incremental costs of obtaining a contract when incurred because the amortization period for these costs would be less than one year. These costs primarily relate to sales commissions and are expensed as incurred in sales and marketing expense in the Company’s consolidated statements of operations and comprehensive loss.
Remaining performance obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the customer is not committed. The customer is not considered committed where they are able to terminate for convenience without payment of a substantive penalty under the contract.

13

Investments
The Company considers investments with an original maturity greater than three months and remaining maturities less than one year to be short-term investments. The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as long-term investments.
The Company classifies its investments as available for sale and reports them at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss. For investments sold prior to maturity, the cost of investments sold is based on the specific identification method. Realized gains and losses on the sale of investments are recorded in other income, net in the condensed consolidated statement of operations.
Amazon Warrant
The Amazon Warrant (as defined in Note 7) is accounted for as an equity instrument. To determine the fair value of the Amazon Warrant on its issuance date, the Company used the Black-Scholes option pricing model.
For awards granted to a customer, which are not in exchange for distinct goods or services, the fair value of the awards earned based on service or performance conditions is recorded as a reduction of the transaction price. Accordingly, when Amazon purchases goods or services and vesting conditions become probable of being achieved, the Company records a non-cash stock-based reduction to revenue associated with the Amazon Warrant, which is calculated based on the fair value of the Amazon Warrant shares as of the Velodyne Merger date.
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 condensed consolidated financial statements.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. Cash, cash equivalents, restricted cash and short-term investments are deposited with federally insured commercial banks. At times, cash balances in the U.S. may be in excess of federal insurance limits. As of September 30, 2023 and December 31, 2022, the Company had cash, cash equivalents and restricted cash with financial institutions in the U.S. of $72.8 million and $123.5 million, respectively. As of September 30, 2023 and December 31, 2022, the Company also had cash on deposit with financial institutions in countries other than the U.S. of approximately $4.4 million and $0.8 million, respectively, that was not federally insured.
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 and unbilled receivable was as follows:
September 30,
2023
December 31,
2022
Customer A36 %*
Customer B19 %*
*Customer accounted for less than 10% of total accounts and unbilled receivable in the period.





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

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Customer E16 %***
Customer F11 %***

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

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

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Supplier A15 %*12 %*
Supplier B18 %29 %20 %33 %
*Accounted for less than 10% of total purchases.
Accounts payable to the Company’s major suppliers and professional services vendors representing 10% or more of total accounts payable were as follows:
September 30, 2023December 31, 2022
Supplier A20 %*
Supplier B49 %39 %
Professional Services Vendor A*14 %
*Accounted for less than 10% of total accounts payable.
Note 3. Business Combination
On February 10, 2023, the Company completed the Velodyne Merger. Velodyne shares ceased trading on the Nasdaq Stock Market LLC after market close on February 10, 2023, and each Velodyne share was exchanged for 0.8204 shares of the Company’s common stock. Velodyne is treated as the acquired company for financial reporting purposes. This determination is primarily based on the Company’s senior management prior to Velodyne Merger comprising a majority of the senior management of the Company following Velodyne Merger, the Company being the initiator of acquiring Velodyne and the Company being the party issuing shares in the Velodyne Merger. The acquisition price for the Velodyne Merger was $306.6 million, primarily consisting of fair value of the Company’s common stock issued in exchange for Velodyne shares and fair value of the Amazon Warrant (Note 7) of $8.6 million. Through September 30, 2023, transaction costs incurred by the Company in connection with the Velodyne Merger, including professional fees, were $13.0 million.
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Under the acquisition method of accounting in accordance with ASC 805, the total purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their respective estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. The following table provides the assets acquired and liabilities assumed as of the date of acquisition (in thousands):
Estimated Fair Value
Purchase consideration$306,602 
Preliminary amounts of identifiable assets and liabilities assumed
Cash and cash equivalents$32,137 
Short-term investments155,031 
Accounts receivable, net8,611 
Inventory9,700 
Prepaid expenses and other current assets4,387 
Unbilled receivable, long-term portion6,657 
Property and equipment, net9,900 
Operating lease, right-of-use assets10,887 
Intangible assets, net13,000 
Other non-current assets1,047 
Accounts payable(3,356)
Accrued and other current liabilities(32,821)
Contract liabilities(5,475)
Operating lease liability, current portion(3,735)
Operating lease liability, long-term portion(11,940)
Contract liabilities, long-term portion(2,206)
Other non-current liabilities(745)
Total identifiable net assets$191,079 
Goodwill$115,523 
$306,602 
Under the acquisition method of accounting in accordance with ASC 805, the total purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. The initial purchase accounting, including the identification and allocation of consideration to assets acquired, is not complete and the preliminary purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed.
Identified intangible assets acquired and their estimated useful lives as of February 10, 2023, were (in thousands, except years):
Estimated Useful Life
(in years)
Estimated Fair Value
Developed technology - Hardware3$2,500 
Developed technology - Software55,100 
Customer relationships85,400 
Intangible assets, net5.9$13,000 
Developed technology relates to Velodyne’s lidar sensors and BlueCity AI software used to monitor traffic networks and public spaces. The Company valued the hardware developed technology using the relief-from-royalty method under the income approach. Software developed technology was valued using the excess earnings method. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecasted period.
The estimated fair value of the customer relationships was determined using the distributor method with the estimated useful life of 8 years that approximates the pattern in which the economic benefits are expected to be realized.
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The estimated fair value of the inventory was determined using the comparative sales method, which estimated the expected sales price of the product, reduced by all costs expected to be incurred to complete or dispose of the inventory, as well as a profit on the sale.
The estimated fair value of property and equipment utilized a replacement cost method incorporating the age, quality and condition of the assets.
The excess of the purchase consideration and the fair value of identifiable assets acquired and liabilities assumed at the acquisition date over the fair value of net tangible and identified intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributable to the assembled workforce and the anticipated operational synergies at the time of the Velodyne Merger.
The Company’s consolidated statement of operations as of September 30, 2023, includes Velodyne revenue of $21.5 million for the period from the acquisition date of February 10, 2023 to September 30, 2023. Due to the continued integration of the combined businesses, it was impractical to determine the earnings.
The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company and Velodyne as if the Velodyne Merger had been completed as of January 1, 2022 (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue$22,209 $20,845 $58,835 $57,419 
Net loss$(35,102)$(78,228)$(335,115)$(255,392)
The unaudited supplemental pro forma information above includes the following adjustments to net loss in the appropriate pro forma periods (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
An increase in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results$ $(678)$(277)$(2,186)
A decrease (increase) in expenses related to the transaction expenses$ $ $6,058 $(6,058)
A net increase in revenue related to the impact of the acceleration of the Amazon Warrant vesting recognized by Velodyne at the close of the Velodyne Merger transaction$ $ $3,656 $ 
A decrease in expenses related to the impact of the acceleration of the Amazon Warrant vesting recognized by Velodyne at the close of the Velodyne Merger transaction$ $ $26,704 $ 
Represents decrease (increase) in additional stock-based compensation expense related to Ouster employee terminations due to change in control.$ $ $6,383 $(5,195)
Represents a decrease (increase) in severance expense in connection with the Velodyne Merger transaction$ $ $10,586 (10,586)
The unaudited supplemental pro forma information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the Velodyne Merger taken place on the date indicated, or of the Company’s future consolidated results of operations. The supplemental pro forma information presented above has been derived from the Company’s historical consolidated financial statements and from historical consolidated financial statements and the historical accounting records of Velodyne.
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Note 4. Fair Value of Financial Instruments
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):
September 30, 2023
Level 1Level 2Level 3Total
Assets
Cash and cash equivalents:
Money market funds$45,974 $ $ $45,974 
Short-term investments:
Commercial paper $73,159  73,159 
Corporate debt and U.S. government agency securities $51,754  51,754 
Total short-term investments 124,913  124,913 
Total financial assets$45,974 $124,913 $ $170,887 
Liabilities
Warrant liabilities$ $ $113 $113 
Total financial liabilities$ $ $113 $113 
December 31, 2022
Level 1Level 2Level 3Total
Assets
Money market funds$121,100 $ $ $121,100 
Total financial assets$121,100 $ $ $121,100 
Liabilities
Warrant liabilities$ $ $180 $180 
Total financial liabilities$ $ $180 $180 
Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices.
Commercial paper, corporate debt and U.S. government agency securities are included within Level 2 of the fair value hierarchy because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.
The fair value of the warrant liabilities from the private placement warrants issued by CLA (“Private Placement warrants”) 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 7).
The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):
Private Placement Warrant Liability
Fair value as of December 31, 2022180 
Change in the fair value included in other income, net(67)
Fair value as of September 30, 2023113 
Fair value as of December 31, 2021$7,626 
Change in the fair value included in other income, net(7,350)
Fair value as of September 30, 2022$276 
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Non-Recurring Fair Value Measurements
The Company has certain assets, including intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used.
Disclosure of Fair Values
Financial instruments that are not re-measured at fair value include accounts receivable, accounts payable, accrued and other current liabilities and debt. The carrying values of these financial instruments approximate their fair values.
Note 5. Balance Sheet Components
Cash, Cash Equivalents and Short-Term Investments
The Company’s cash and cash equivalents consist of the following (in thousands):
 September 30,
2023
December 31,
2022
Cash$29,611 $1,832 
Cash equivalents:
Money market funds(1)
45,974 121,100 
Total cash and cash equivalents$75,585 $122,932 
(1)The Company maintains a cash sweep account, which is included in money market funds as of September 30, 2023 and December 31, 2022. Cash is invested in short-term money market funds that earn interest.
The Company acquired short-term investments consisting of commercial paper, corporate debt and U.S. government agency securities as a result of the merger with Velodyne that closed on February 10, 2023 (see Note 3). Short-term investments were $124.9 million as of September 30, 2023. Unrealized gains and losses on the Company’s short-term investments were not significant as of September 30, 2023 and therefore, the amortized cost of the Company’s short-term investments approximated their fair value.
Cash, Cash Equivalents and Restricted Cash
Restricted cash consists of collateral to merchant credit card and certificates of deposit held by a bank as security for outstanding letters of credit.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheets to the amounts reported in the condensed consolidated statements of cash flows (in thousands):
September 30,
2023
September 30,
2022
Cash and cash equivalents$75,585 $133,189 
Restricted cash, current540 250 
Restricted cash, non-current1,090 1,088 
Total cash, cash equivalents and restricted cash$77,215 $134,527 


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Inventory
Inventory, consisting of material, direct and indirect labor, and manufacturing overhead, consists of the following (in thousands):
 September 30,
2023
December 31,
2022
Raw materials$9,768 $6,971 
Work in process2,916 3,857 
Finished goods13,790 8,705 
Total inventory$26,474 $19,533 
Total inventory balance as of September 30, 2023 includes remaining inventory balance acquired as part of the Velodyne Merger at its fair value as of February 10, 2023. During the nine months ended September 30, 2023 and 2022, the Company recorded the inventory write-downs of $7.2 million and $0.9 million, respectively.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
September 30,
2023
December 31,
2022
Prepaid expenses$7,426 $3,944 
Receivable from contract manufacturer2,083 2,526 
Other current assets2,462 2,073 
Total prepaid and other current assets$11,971 $8,543 
As of September 30, 2023, prepaid expenses included a $2.5 million prepayment made by the Company to a contract manufacturer for the purchase of inventories which the Company expects to be converted to finished goods.
Property and Equipment, Net
Property and equipment consists of the following (in thousands):
Estimated Useful Life
(in years)
September 30,
2023
December 31,
2022
Machinery and equipment3$15,710 $8,716 
Computer equipment31,101 340 
Automotive and vehicle hardware522 93 
Software3593 85 
Furniture and fixtures7943 848 
Construction in progress4,458 3,448 
Leasehold improvementsShorter of useful life or lease term10,879 9,319 
33,706 22,849 
Less: Accumulated depreciation(22,177)(13,154)
Property and equipment, net$11,529 $9,695 
Depreciation expense associated with property and equipment was $9.2 million and $3.7 million during the nine months ended September 30, 2023 and 2022, respectively.
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Goodwill
Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combinations. The following table displays the changes in the carrying amount of goodwill (in thousands):
Goodwill
Balance - December 31, 2022$51,152 
Goodwill addition related to Velodyne Merger115,523 
Goodwill impairment charges(166,675)
Balance - September 30, 2023$ 
Goodwill is not amortized and is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Since February 10, 2023, the date of the Velodyne Merger, the Company experienced a significant decline in its stock price. This decline resulted in the total market value of its shares of stock outstanding (“market capitalization”) being less than the carrying value of its reporting unit as of March 31, 2023 and June 30, 2023. The Company also considered the impact of current macroeconomic conditions in the lidar sensor industry that potentially impact the fair value of the Company’s reporting unit. The macroeconomic conditions considered include deterioration in the equity markets evidenced by sustained declines in the Company’s stock price, those of its peers, along with an increase in the weighted-average cost of capital primarily driven by an increase in interest rates. After considering all available evidence in the evaluation of goodwill impairment indicators, the Company determined it was appropriate to perform an interim quantitative assessment of its goodwill as of March 31, 2023 and June 30, 2023. In connection with the Company’s interim goodwill impairment assessments the Company recorded goodwill impairment charges of approximately $99.4 million in the three months ended March 31, 2023 and $67.3 million in the three months ended June 30, 2023. The Company’s goodwill impairment analysis included a comparison of the aggregate estimated fair value of our reporting unit to our total market capitalization.
As of September 30, 2023, remaining goodwill balance was nil. No goodwill impairment charges were recognized during the year ended December 31, 2022.
Intangible Assets, Net
The following tables present acquired intangible assets, net as of September 30, 2023 and December 31, 2022 (in thousands):
September 30, 2023
Estimated Useful Life
(in years)
Gross Carrying amountAccumulated AmortizationNet Book Value
Developed technology
3 - 8
$23,500 $(5,126)$18,374 
Vendor relationship36,600 (4,217)2,383 
Customer relationships
3 - 8
6,300 (1,004)5,296 
Intangible assets, net$36,400 $(10,347)$26,053 
December 31, 2022
Estimated Useful Life
(in years)
Gross Carrying amountAccumulated AmortizationNet Book Value
Developed technology8$15,900 $(2,318)$13,582 
Vendor relationship36,600 (2,567)4,033 
Customer relationships3900 (350)550 
Intangible assets, net$23,400 $(5,235)$18,165 
Amortization expense was $5.1 million and $3.4 million during the nine months ended September 30, 2023 and 2022, respectively.

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

Years:Amount
2023 (the remainder of 2023)$1,759 
20246,604 
20254,515 
20263,776 
20273,682 
Thereafter5,717 
Total$26,053 
Accrued and Other Current Liabilities
Accrued and other current liabilities consist of the following (in thousands):
September 30,
2023
December 31,
2022
Accrued compensation$6,433 $3,758 
Uninvoiced receipts20,523 10,727 
Warranty3,319 937 
Other5,518 1,649 
Total accrued and other current liabilities$35,793 $17,071 
Note 6. Debt
Loan and Security Agreement
On April 29, 2022, the Company entered into a Loan Agreement with Hercules Capital, Inc. (“Hercules”) (as amended, the “Loan Agreement”). The Loan Agreement provided the Company with a term loan facility of up to $50.0 million, subject to certain terms and conditions. The Company borrowed the initial tranche of $20.0 million on April 29, 2022. On October 17, 2022, the Company borrowed an additional $20.0 million. As of September 30, 2023, the Company did not achieve certain conditions relating to trailing twelve month revenue and profit milestones under the Loan Agreement therefore an additional $10.0 million is no longer available to the Company.
The Loan Agreement included a minimum liquidity financial covenant whereby the Company was required to maintain at least $60.0 million of cash in deposit accounts that are subject to an account control agreement in favor of Hercules.
On February 10, 2023, the Company entered into the Third Amendment, which amended the Loan Agreement to (i) increase the existing debt baskets for (a) purchase money debt and capital leases and (b) letter of credit obligations, (ii) provide for increased flexibility to maintain cash in non-US accounts, and (iii) provide for increased flexibility to relocate certain equipment.
Advances under the Loan Agreement bore interest at the rate of interest equal to greater of either (i) (x) the prime rate as reported in The Wall Street Journal plus (y) 6.15%, and (ii) 9.40%, subject to compliance with financial covenants and other conditions. The Loan Agreement included covenants, limitations, and events of default customary for similar facilities. Prior to its termination (see Note 16), the Loan Agreement would mature on May 1, 2026.
In connection with the Loan Agreement, the Company paid the lender a cash facility and legal fees of $0.6 million and incurred debt issuance costs to third parties that were directly related to issuing debt in the amount of $0.3 million. The effective interest rate on this debt was 17.9% after giving effect to the debt discount, debt issuance costs and the end of term charge. Amortization expense included in the interest expense related to debt discount and debt issuance costs of the Loan Agreement was not material for the three and nine months ended September 30, 2023.
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Interest on amounts borrowed under the Loan Agreement were payable on a monthly basis until June 1, 2025 (the “Amortization Date”). On and as of the Amortization Date, payments were to consist of equal monthly installments of principal and interest payable until the secured obligations were repaid in full. However, if the Company achieved certain equity proceeds, revenue or profit targets for the twelve-month period ending December 31, 2023, then the Amortization Date would have been extended to the Maturity Date. The entire principal balance and all accrued but unpaid interest would be due and payable on the Maturity Date. On the earliest to occur of May 1, 2026, the date on which the obligations under the Loan Agreement were to be paid and the date on which such obligations become due and payable, the Company was also required to pay Hercules an end of term fee in an amount equal to 7.45% of the aggregated amount of all Advances made under the Loan Agreement.
The Company was permitted to prepay the principal of any advance made pursuant to the terms of the Term Loan Facility at any time subject to a prepayment charge equal to: 2.50%, if such advance was prepaid in any of the first 12 months following the Closing Date, 1.50%, if such advance was prepaid after 12 months but prior to 24 months following the Closing Date, and 1.0%, if such advance was prepaid anytime thereafter.
As of September 30, 2023, the Company was in compliance with all financial covenants under the Loan Agreement.
Long-term debt outstanding is summarized below (in thousands):
September 30,
2023
Long-term debt$40,000 
End of term fee994 
Less: unamortized debt discount(372)
Less: debt issuance costs (200)
Total debt$40,422 

The long-term debt was repaid with proceeds drawn under a credit line agreement with UBS Bank USA and UBS Financial Services Inc. on October 25, 2023 (see Note 16).
Note 7. Warrants
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 600,000 Private Placement warrants at a price of $10.00 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 5 years from the completion of the Merger, or earlier upon redemption or liquidation. On March 11, 2021, as adjusted to reflect the Reverse Stock Split, each outstanding Private Placement warrant automatically converted into a warrant to purchase one-tenth of a share of Ouster common stock pursuant to the Warrant Agreement. Each 10 Private Placement warrants is exercisable for one share of Ouster common stock at an exercise price of $115.00 per share, with no fractional shares being issuable upon exercise of a warrant.
The private placement warrant liability was remeasured to fair value as of September 30, 2023 and 2022, resulting in a loss of $0.1 million and $7.4 million gain for the nine months ended September 30, 2023 and 2022, respectively, classified within other income, 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:
September 30, 2022December 31,