SEC Filing | Velodyne Lidar

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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 March 31, 2022

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

For the transition period from ___________________to ___________________

Commission file number: 001-38703

VELODYNE LIDAR, INC.

(Exact name of registrant as specified in its charter)


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


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

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

VLDR

The Nasdaq Stock Market LLC

Warrants, each exercisable for three-quarters of one share of common stock

VLDRW

The Nasdaq Stock Market LLC

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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of April 29, 2022, the registrant had 207,956,625 shares of common stock, $0.0001 par value per share, outstanding.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Table of Contents


		Page
	PART I. Financial Information

Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40

	PART II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Default Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
	Signatures	69

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

•supply chain constraints in the semiconductor industry;

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

•the amount and timing of future sales;

•Velodyne’s ability to meet technical and quality specifications;

•Velodyne’s future market share;

•competition from existing or future businesses and technologies;

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

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

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

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

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

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

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

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

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

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

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

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

PART I. Financial Information

Item 1. Condensed Consolidated Financial Statements

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	March 31,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	31,119	$	24,064
Short-term investments	225,326		270,357
Accounts receivable, net	7,534		8,881
Inventories, net	12,498		9,299
Prepaid and other current assets	13,090		14,822
Total current assets	289,567		327,423
Property, plant and equipment, net	14,572		14,710
Goodwill	1,189		1,189
Intangible assets, net	586		724
Contract assets	9,182		12,962
Other assets	17,754		18,413
Total assets	$	332,850	$	375,421
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,130	$	5,105
Accrued expense and other current liabilities	32,564		35,651
Contract liabilities	5,656		6,348
Total current liabilities	45,350		47,104
Long-term tax liabilities	445		443
Other long-term liabilities	27,401		28,611
Total liabilities	73,196		76,158
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock	—		—
Common stock	20		20
Additional paid-in capital	836,229		825,988
Accumulated other comprehensive loss	(1,141)		(412)
Accumulated deficit	(575,454)		(526,333)
Total stockholders’ equity	259,654		299,263
Total liabilities and stockholders’ equity	$	332,850	$	375,421

See accompanying notes to condensed consolidated financial statements.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Revenue:
Product	$	4,362	$	10,593
License and services	1,818		7,133
Total revenue	6,180		17,726
Cost of revenue:
Product	15,196		15,629
License and services	267		179
Total cost of revenue	15,463		15,808
Gross profit (loss)	(9,283)		1,918
Operating expenses:
Research and development	21,297		18,378
Sales and marketing	6,005		7,075
General and administrative	12,317		17,036


Total operating expenses	39,619		42,489
Operating loss	(48,902)		(40,571)
Interest income	227		103
Interest expense	(3)		(36)
Other income (expense), net	4		(17)
Loss before income taxes	(48,674)		(40,521)
Provision for income taxes	447		296
Net loss	$	(49,121)	$	(40,817)
Net loss per share:
Basic and diluted	$	(0.25)	$	(0.22)
Weighted-average shares used in computing net loss per share:
Basic and diluted	198,166,060		189,222,807

See accompanying notes to condensed consolidated financial statements.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net loss	$	(49,121)	$	(40,817)
Other comprehensive loss, net of tax:
Changes in unrealized loss on available for sale securities	(712)		(11)
Foreign currency translation adjustments	(17)		(11)
Total other comprehensive loss, net of tax	(729)		(22)
Comprehensive loss	$	(49,850)	$	(40,839)

See accompanying notes to condensed consolidated financial statements.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share data)

(Unaudited)



	Common Stock	Additional Paid in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total Stockholders' Equity
							Shares		Amount

Balance at December 31, 2021				197,346,675	$	20	$	825,988	$	(412)	$	(526,333)	$	299,263
Common stock warrants				—	—		5,303		—		—		5,303
Issuance of common stock under employee stock award plans, net of taxes				916,819	—		—		—		—		—
Share-based compensation				—	—		4,938		—		—		4,938
Other comprehensive loss, net of tax				—	—		—		(729)		—		(729)
Net loss				—	—		—		—		(49,121)		(49,121)
Balance at March 31, 2022				198,263,494	$	20	$	836,229	$	(1,141)	$	(575,454)	$	259,654

Balance at December 31, 2020				175,912,194	$	18	$	656,717	$	(230)	$	(315,682)	$	340,823
Issuance of common stock under warrant exercises				6,973,882	1		80,199		—		—		80,200
Issuance of common stock under employee stock award plans, net of taxes				6,798,504	—		(37)		—		—		(37)
Share-based compensation				—	—		11,530		—		—		11,530
Other comprehensive loss, net of tax				—	—		—		(22)		—		(22)
Prior year adjustment on warrant liability (Note 9)				—	—		(1,585)		—		1,585		—
Net loss				—	—		—		—		(40,817)		(40,817)
Balance at March 31, 2021				189,684,580	$	19	$	746,824	$	(252)	$	(354,914)	$	391,677

See accompanying notes to condensed consolidated financial statements.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(49,121)	$	(40,817)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	2,172		2,053
Reduction of operating lease right-of-use (“ROU”) assets	670		787

Stock-based compensation	4,938		11,530
Reduction of revenue related to stock warrant granted to a customer	5,303		—
Provision for doubtful accounts	—		1,682


Amortization of investment premium or discount, net	427		—
Other	(1)		161
Changes in operating assets and liabilities:
Accounts receivable, net	1,347		(1,172)
Inventories, net	(3,199)		(2,762)
Prepaid and other current assets	2,249		1,702
Contract assets	3,262		(2,438)
Other assets	41		(2)
Accounts payable	2,114		(3,856)
Accrued expenses and other liabilities	(3,832)		(3,867)
Contract liabilities	(1,677)		1,892
Net cash used in operating activities	(35,307)		(35,107)
Cash flows from investing activities:
Purchase of property, plant and equipment and intangibles	(1,545)		(601)

Proceeds from sales of short-term investments	14,499		2,000
Proceeds from maturities of short-term investments	64,750		7,000
Purchase of short-term investments	(35,358)		(91,932)



Net cash provided by (used in) investing activities	42,346		(83,533)
Cash flows from financing activities:

Payment of transaction costs related to Business Combination	—		(20,006)

Proceeds from warrant exercises, net of issuance costs	—		89,222

Tax withholding payment for vested equity awards	—		(37)


Net cash provided by financing activities	—		69,179
Effect of exchange rate fluctuations on cash and cash equivalents	16		18
Net increase (decrease) in cash and cash equivalents	7,055		(49,443)
Beginning cash and cash equivalents	24,064		204,648
Ending cash and cash equivalents	$	31,119	$	155,205

Supplemental disclosures of cash flow information:
Cash paid for interest	$	3	$	36
Cash paid for income taxes, net	407		333
Cash paid for operating leases	883		1,119
Supplemental disclosure of noncash investing and financing activities:
Changes in accrued purchases of property, plant and equipment, and intangibles	$	791	$	105

ROU assets obtained in exchange for operating lease liabilities	55		340

Transaction costs included in accrued liabilities	—		5,000

See accompanying notes to condensed consolidated financial statements.

VELODYNE LIDAR, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Description of Business, Background and Nature of Operations

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

The Company’s predecessor, Graf Industrial Corp. (“Graf”), was originally incorporated in Delaware as a special purpose acquisition company (“SPAC”). On September 29, 2020 (the “Closing Date”), Graf consummated a business combination (the “Business Combination”) with Velodyne Lidar, Inc. (the “pre-combination Velodyne”). Immediately upon the consummation of the Business Combination, Graf merged into the pre-combination Velodyne, with the pre-combination Velodyne surviving as a wholly-owned subsidiary of the Company. Graf changed its name to Velodyne Lidar, Inc. and the pre-combination Velodyne changed its name to Velodyne Lidar USA, Inc. Refer to Note 2. Business Combination for further discussion of the Business Combination.

On September 30, 2020, Velodyne Lidar’s common stock and warrants began trading on the Nasdaq Global Select Market under the symbol “VLDR” and “VLDRW,” respectively.

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

Basis of Presentation

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

Liquidity

The Company has funded its operations primarily through the Business Combination, PIPE offering, public warrant exercises, private placements of the pre-combination Velodyne preferred stock, employee stock option exercises and ESPP share purchases, and sales to customers. As of March 31, 2022, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $256.4 million and available borrowing capacity of $25.0 million under a revolving credit facility. The Company has incurred losses and negative cash flows from operations. If the Company incurs additional losses in the future, it may need to raise additional capital through issuances of equity and debt. There can be no assurance that the Company would be able to raise such capital. However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least twelve months from the date the unaudited condensed consolidated financial statements for the quarter ended March 31, 2022 were available for issuance.

Concentration of Risk

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

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

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


	March 31,	December 31,
	2022	2021

Number of customers accounted for 10% or more of accounts receivable	2	3
Number of vendors accounted for 10% or more of accounts payable	4	1

Two customers accounted for a total of 25% and 30%, respectively, of the Company’s accounts receivable as of March 31, 2022 and December 31, 2021. Two vendors accounted for a total of 31% of accounts payable as of March 31, 2022. One vendor accounted for 28% of accounts payable as of December 31, 2021.

Use of Estimates

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

Significant Accounting Policies

Except for the change in certain policies described below, there have been no material changes to the Company's significant accounting policies, compared to the accounting policies described in Note 1, Description of Business and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2021.

Amazon Warrant

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

For awards granted to a customer, which are not in exchange for distinct goods or services, the fair value of the awards earned based on service or performance conditions is recorded as a reduction of the transaction price in accordance with ASC 606, Revenue from Contracts with Customers. Accordingly, when Amazon makes payments, and vesting conditions become probable of being achieved, the Company will record a non-cash stock-based reduction to revenue associated with the Amazon Warrant, that is calculated based on the grant date fair value of the Amazon Warrant shares.

Recently Accounting Pronouncements

Recently Issued Accounting Pronouncements

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

Recently Adopted Accounting Pronouncements

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

Note 2. Business Combination and Related Transactions

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

The aggregate consideration for the Business Combination and related transactions was approximately $1.8 billion, consisting of (i) $222.1 million in cash at the closing of the Business Combination, net of transaction expenses, and (ii) 150,277,532 shares of common stock valued at $10.25 per share, totaling approximately $1.5 billion. The Company used approximately $1.8 million of the proceeds to repurchase and retire 175,744 shares of Company common stock from certain stockholders in the pre-closing tender offer.

In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $29.1 million related to the equity issuance, consisting primarily of investment banking, legal, accounting and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds. As of March 31, 2022, the Company had $5.0 million of accrued transaction costs, consisting primarily of investment banking fees, in accrued expenses on the condensed consolidated balance sheet.

Note 3. Revenue

Disaggregation of Revenues

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

Total revenue based on the disaggregation criteria described above is as follows (dollar in thousands, percentage may not foot due to rounding difference):


	Three Months Ended March 31,
	2022				2021
			% of Revenue				% of Revenue
	Revenue				Revenue
Revenue by geography:
North America(1)	$	(1,304)	(21	%)	$	5,044	28	%
Asia Pacific(2)	4,906		79	%	9,506		54	%
Europe, Middle East and Africa	2,578		42	%	3,176		18	%
Total	$	6,180	100	%	$	17,726	100	%
Revenue by products and services:
Products(1)	$	4,362	71	%	$	10,593	60	%
License and services(2)	1,818		29	%	7,133		40	%
Total	$	6,180	100	%	$	17,726	100	%
Revenue by timing of recognition:
Goods transferred at a point in time(1)	$	4,758	77	%	$	16,670	94	%
Goods and services transferred over time(2)	1,422		23	%	1,056		6	%
Total	$	6,180	100	%	$	17,726	100	%

(1) Includes a non-cash stock-based reduction of revenue of $5.3 million for the three months ended March 31 2022 associated with the Amazon Warrant agreement entered into in February 2022. See Note 9 for more information.

(2) Includes license revenue of $0.9 million and $6.4 million, respectively, related to patent cross-license agreements for the three months ended March 31, 2022 and 2021. In June 2020, the Company entered into a patent cross-license agreement related to its litigation settlement with a customer in Asia Pacific. Under the terms of the arrangement, the customer agreed to make a one-time license payment upon settlement, will make annual fixed royalty payments through 2024, and thereafter, will make product sales royalty payments through February 2030. In September 2020, Velodyne entered into another patent cross-license agreement related to its litigation with a different customer in Asia Pacific. As of March 31, 2022 and December 31, 2021, the Company had $3.8 million and $3.8 million, respectively, of current deferred revenue, and $11.1 million and $11.9 million, respectively, of long-term deferred revenue associated with the rights granted as part of these patent cross-license agreements to receive future patents as they represent stand ready obligations. As of March 31, 2022 and December 31, 2021, the Company also had $13.0 million and $16.3 million, respectively, of contract assets related to these patent cross-license agreements.

Contract Assets and Contract Liabilities

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

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

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


	March 31,		December 31,
	2022		2021
Contract assets, current
Unbilled accounts receivable	$	3,830	$	3,313
Contract assets, long-term
Unbilled accounts receivable	9,182		12,962
Total contract assets	$	13,012	$	16,275

Contract liabilities, current
Deferred revenue, current	$	5,452	$	6,209
Customer advance payment	204		139

Total	5,656		6,348
Contract liabilities, long-term
Deferred revenue, long-term	11,755		12,740
Total contract liabilities	$	17,411	$	19,088

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


	Three Months Ended March 31,
	2022		2021
Contract assets:
Beginning balance	$	16,275	$	11,253
Transferred to receivables from contract assets recognized at the beginning of the period	(3,313)		(2,813)
Increase due to unbilled and recognized as revenue in excess of billings during the period, net of amounts transferred to receivables	50		5,251
Ending balance	$	13,012	$	13,691
Contract liabilities:
Beginning balance	$	19,088	$	22,055
Revenue recognized that was included in the contract liabilities beginning balance	(2,374)		(1,434)
Increase due to cash received and not recognized as revenue and billings in excess of revenue recognized during the period	697		3,327

Ending balance	$	17,411	$	23,948

Note 4. Fair Value Measurement

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

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

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

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

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

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


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	6,826	$	—	$	—	$	6,826

Total cash equivalents	6,826		—		—		6,826
Short-term investments:
Money market fund	7		—		—		7
Commercial paper	—		92,774		—		92,774
Corporate debt securities	—		132,545		—		132,545

Total short-term investments	7		225,319		—		225,326



Total assets measured at fair value	$	6,833	$	225,319	$	—	$	232,152


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	391	$	—	$	—	$	391

Total cash equivalents	391		—		—		391
Short-term investments:
Money market fund	7		—		—		7
Commercial paper	—		130,983		—		130,983
Corporate debt securities	—		139,367		—		139,367

Total short-term investments	7		270,350		—		270,357



Total assets measured at fair value	$	398	$	270,350	$	—	$	270,748

Cash equivalents consist primarily of money market funds with original maturities of three months or less at the time of purchase, and the carrying amount is a reasonable estimate of fair value. Short-term investments represent highly liquid commercial paper and corporate debt securities with maturities greater than 90 days at the date of purchase. Marketable securities with maturities greater than one year are classified as current assets and were not significant for all periods presented. Unrealized gains and losses on the Company’s short-term investments were not significant as of March 31, 2022 and 2021 and therefore, the amortized cost of the Company’s short-term investments approximated their fair value.

Note 5. Balance Sheet Components

Accounts Receivables, Net

Accounts receivables, net consist of the following (in thousands):


	March 31,		December 31,
	2022		2021
Accounts receivable	$	10,741	$	12,088
Allowance for doubtful accounts	(3,207)		(3,207)
Accounts receivable, net	$	7,534	$	8,881

Inventories, Net

Inventories, net of reserve, consist of the following (in thousands):


	March 31,		December 31,
	2022		2021
Raw materials	$	7,640	$	6,585
Work-in-process	2,893		1,883
Finished goods	1,965		831
Total inventories	$	12,498	$	9,299

The raw materials inventory included consigned inventory of $1.8 million and $1.5 million, respectively, as of March 31, 2022 and December 31, 2021.

Prepaid and Other Current Assets

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


	March 31,		December 31,
	2022		2021
Prepaid expenses and deposits	$	5,458	$	7,883
Due from contract manufacturers and vendors	1,132		1,302
Prepaid taxes	1,012		1,223
Contract assets	3,830		3,313

Other	1,658		1,101
Total prepaid and other current assets	$	13,090	$	14,822

Property, Plant and Equipment, Net

Property, plant and equipment, at cost, consist of the following (in thousands):


	March 31,		December 31,
	2022		2021
Machinery and equipment	$	37,699	$	36,264
Leasehold improvements	6,887		6,752
Furniture and fixtures	1,500		1,497
Vehicles	359		359
Software	1,945		1,337
Assets under construction	1,613		1,900
	50,003		48,109
Less: accumulated depreciation and amortization	(35,431)		(33,399)
Property, plant and equipment, net	$	14,572	$	14,710

Finance lease equipment (included in machinery and equipment)	$	888	$	888
Less: accumulated depreciation	(603)		(559)
Finance lease equipment, net	$	285	$	329

The aggregate depreciation and amortization related to property, plant and equipment was as follows (in thousands):


	Three Months Ended March 31,
	2022		2021
Depreciation and amortization on property, plant and equipment	$	2,034	$	1,957
Depreciation on finance lease equipment (included in machinery and equipment)	44		44

Intangible Assets, Net

Intangible assets, net, consist of the following (in thousands):


	Gross Carrying Amount		Accumulated Amortization		Net Book Value
As of March 31, 2022:
Developed technology	$	1,696	$	1,110	$	586
As of December 31, 2021:
Developed technology	$	1,696	$	972	$	724

Amortization of intangible assets is as follows (in thousands):


	Three Months Ended March 31,
	2022		2021
Amortization of intangible assets	$	138	$	96

Other Assets

Other assets, non-current, consist of the following (in thousands):


	March 31,		December 31,
	2022		2021
Operating lease ROU assets	$	16,274	$	16,891
Notes receivable	750		750
Deposits and other	730		772
Total other assets	$	17,754	$	18,413

In May 2021, the Company entered into a convertible note receivable agreement (the “Note”) with a borrower wherein Velodyne agreed to lend $750,000 at an interest rate of 0% per annum as a nonrecourse investment. The Note is convertible into equity at the election of the borrower or the Company upon occurrence of certain new financing or corporate transactions. The maturity date of the Note is May 11, 2024.

Accrued Expenses and Other Current Liabilities

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


	March 31,		December 31,
	2022		2021
Accrued payroll expenses	$	8,383	$	13,550
Accrued manufacturing costs	5,963		3,925
Accrued transaction costs	5,000		5,000
Accrued professional and consulting fees	4,474		3,411
Accrued warranty costs	2,152		1,934
Accrued taxes	1,062		1,017
Lease liabilities	2,601		2,623
Legal proceedings accrual	825		825
Other	2,104		3,366
Total accrued expense and other current liabilities	$	32,564	$	35,651

Long-Term Liabilities

Long-term liabilities consisted of the following (in thousands):


	March 31,		December 31,
	2022		2021

Contract liabilities, long-term	$	11,755	$	12,740
Lease liabilities, long-term	14,624		15,210
Other	1,022		661
Total long-term liabilities	$	27,401	$	28,611

Note 6. Leases

The Company leases real estate, equipment and automobiles in the U.S. and internationally. The Company leases office facilities under non-cancelable operating leases that expire on various dates through December 2027, including office and manufacturing space in San Jose, California used as its corporate headquarters. The leases do not contain any material residual value guarantees or restrictive covenants.

Lease cost, which consisted primarily of operating lease cost, was $0.9 million and $1.1 million for the three months ended March 31, 2022 and 2021, respectively.

Other information related to leases were as follows (in thousands, except years and percentages):


	Three Months Ended March 31,
	2022			2021
Supplemental cash flow information:
Cash paid for operating leases included in operating cash flows	$	883		$	1,119
ROU assets obtained in exchange for new operating lease liabilities	$	55		$	340

	March 31, 2022			December 31, 2021
Supplemental balance sheet information:
Other assets	$	16,274		$	16,891
Total operating ROU assets	$	16,274		$	16,891

Other current liabilities	$	2,601		$	2,623
Other long-term liabilities	14,624			15,210
Total lease liabilities	$	17,225		$	17,833

Weighted average remaining lease term (years)	5.67			5.91
Weighted average discount rate	6.38		%	6.37		%

As of March 31, 2022, maturities of lease liabilities were as follows, which excludes $1.1 million of legally binding minimum lease payments for leases that have been signed but not yet commenced:


Years Ending December 31,	Operating Leases
2022 (remaining nine months)	$	2,666
2023	3,417
2024	3,479
2025	3,565
2026	3,670
Thereafter	3,779
Total lease payments	$	20,576
Less amount representing interest	(3,351)
Present value of lease liabilities	$	17,225

Note 7. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss was comprised of the following (in thousands):


	March 31,		December 31,
	2022		2021
Foreign currency translation loss	$	(201)	$	(184)
Unrealized loss on investments	(940)		(228)
Total accumulated other comprehensive loss	$	(1,141)	$	(412)

During the three months ended March 31, 2022 and 2021, there were no significant amounts related to foreign currency translation loss or realized gains or loss on investments reclassified to net loss from accumulated other comprehensive loss.

Note 8. Credit Facilities and Notes Payable

The Company has a loan and security agreement with a financial institution that expires on February 24, 2023. The credit agreement, which was entered into in September 2020 and last amended in February 2022, provides a $25.0 million revolving line of credit, with a $5.0 million letter of credit sublimit. The agreement includes an option to increase the credit limit up to an additional $15.0 million with the bank’s approval. The advances under the credit facility bear interest at a rate per annum equal to the prime rate plus an applicable margin of 1.5% for prime rate advances, or the SOFR rate plus an applicable margin of 2.5% for SOFR advances. The unused revolving line facility fee is 0.15% per annum of the average unused portion of the credit facility. The revolving line of credit is secured by certain assets of the Company. As of March 31, 2022, the Company was compliant with all associated covenants in the agreement. No amounts were drawn against this credit facility during any of the periods presented.

On April 8, 2020, the Company received loan proceeds of $10.0 million under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Paycheck Protection Program (“PPP”). The principal and accrued interest are forgivable after 24 weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels and that approval is received from the relevant government entity. The unforgiven portion of the PPP loan is payable in two years at an interest rate of 1% per annum, with a deferral of interest payments for ten months after the expiration of the 24-week covered period. The Company filed for the forgiveness of the PPP loan and was approved for forgiveness of such loan and interest on June 30, 2021. The Company recorded a $10.1 million gain from the forgiveness of the PPP loan and related interest in other income for 2021.

Note 9. Stockholders’ Equity

Common Stock

On September 29, 2020, the Company consummated a business combination with the pre-combination Velodyne. On September 30, 2020, Velodyne Lidar’s common stock and warrants began trading on the Nasdaq Global Select Market under the symbol “VLDR” and “VLDRW,” respectively. In connection with the Business Combination, outstanding common stock and preferred stock of the pre-combination Velodyne were converted into common stock of the Company. As discussed in Note 2, Business Combination, the Company has retroactively adjusted the pre-combination common and preferred shares issued and outstanding prior to September 29, 2020 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.

The Company is authorized to issue up to 2,250,000,000 shares of common stock, each with a par value of $0.0001 per share. The following summarizes the Company’s common stock outstanding as of March 31, 2022 and December 31, 2021:


	March 31,	December 31,
	2022	2021
Converted pre-combination Velodyne common stock outstanding	23,788,619	82,024,874
Converted pre-combination Velodyne preferred stock outstanding	24,772,759	24,772,759
Graf Founder shares	142,800	157,800
Other stockholders	149,559,316	90,391,242
Total common stock issued and outstanding	198,263,494	197,346,675

Preferred Stock

The Company is authorized to issue up to 25,000,000 shares of preferred stock, each with a par value of $0.0001 per share. As of March 31, 2022, no shares of preferred stock were issued and outstanding.

Dividends

The Company has not paid any cash dividends on the common stock to date. The Company may retain future earnings, if any, for future operations, expansion and debt repayment and has no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, the Company’s results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, the Company’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness the Company or its subsidiaries incur.

Public Warrants

Upon the closing of the Business Combination, there were 24,876,512 outstanding warrants to purchase shares of the Company’s common stock that were issued by Graf prior to the Business Combination. Each whole warrant entitles the holder to purchase three-quarters of one share of the Company’s common stock at a price of $11.50 per share, subject to adjustments. The warrants are exercisable at any time commencing 30 days after the completion of the Business Combination and expire five years after the completion of the Business Combination. The Company may redeem the outstanding warrants in whole and not in part at a price of $0.01 per warrant at any time after they become exercisable, provided that the last sale price of the Company’s common stock equals or exceeds $18.00 per share, subject to adjustments, for any 20-trading days within a 30-trading day period ending three business days prior to the date on which the Company sends the notice of redemption to the warrant holders.

In connection with the Business Combination, on October 19, 2020, the Company registered the issuance of an aggregate of up to 18,657,384 shares of its common stock that are issuable upon the exercise of its warrants, including up to 375,000 shares of its common stock issuable upon exercise of its working capital warrants issued to Graf LLC. The following summarizes the Company’s outstanding warrants and common stock issuance related to the warrant exercises:


	March 31,	December 31,
	2022	2021
Warrants outstanding upon Closing	24,876,512	24,876,512
Warrants exercised to date	18,902,642	18,902,642
Warrants outstanding	5,973,870