As filed with the Securities and Exchange Commission on March 8, 2021

Registration No. 333-           

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-8

REGISTRATION STATEMENT

Under

The Securities Act of 1933

 

 

VELODYNE LIDAR, INC.

(Exact name of Registrant as specified in its charter) 

   
Delaware 83-1138508

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

Velodyne Lidar, Inc.

5521 Hellyer Avenue

San Jose, California 95138

(Address of Principal Executive Offices)

 

VELODYNE LIDAR, INC. 2020 EQUITY INCENTIVE PLAN

VELODYNE LIDAR, INC. 2020 EMPLOYEE STOCK PURCHASE PLAN

(Full title of plan)

 

Anand Gopalan

Chief Executive Officer

5521 Hellyer Avenue

San Jose, California 95138

(Name and address of agent for service)

(415) 742-8199 

(Telephone number, including area code, of agent for service)

Please send copies of all communications to:

 

Jeffrey R. Vetter

Colin G. Conklin

Gunderson Dettmer Stough Villeneuve

Franklin & Hachigian, LLP

550 Allerton Street

Redwood City, California 94063

Tel: (650) 321-2400

 

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   x
         
Non-accelerated filer   ¨   Smaller reporting company   x
         
        Emerging growth company   x
               

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 7(a)(2)(B) of the Securities Act ¨.

 

CALCULATION OF REGISTRATION FEE

 

Title of Securities

to be Registered

 

Amount

to be

Registered(1)

 

Proposed

Maximum

Offering Price Per Share

 

Proposed

Maximum

Aggregate

Offering Price

 

Amount of

Registration Fee

Common Stock, $0.0001 par value per share, reserved for issuance pursuant to the Velodyne Lidar, Inc. 2020 Equity Incentive Plan   36,738,678(2)   $12.49(4)   $458,866,088.22   $50,062.29
Common Stock, $0.0001 par value per share, reserved for issuance pursuant to the Velodyne Lidar, Inc. 2020 Employee Stock Purchase Plan   5,293,055(3)   $10.62(5)   $56,212,244.00   $6,132.76
TOTAL   42,031,733        $515,078,332.30   $56,195.05

 

(1) Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement shall also cover any additional shares of the Registrant’s Common Stock that become issuable in respect of the securities identified in the above table by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the Registrant’s receipt of consideration which results in an increase in the number of the outstanding shares of the Registrant’s Common Stock.
(2) Represents 36,738,678 shares of Common Stock issued, issuable or reserved for issuance pursuant to the grant of awards under the Velodyne Lidar, Inc. 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”).  In general, to the extent that any awards under the 2020 Equity Incentive Plan are forfeited, cancelled or expire for any reason before being exercised or settled in full, if any awards are settled in cash or if shares issued under the 2020 Equity Incentive Plan are reacquired by the Registrant pursuant to a forfeiture provision, repurchase right or for any other reason, those shares will again become available for issuance under the 2020 Equity Incentive Plan, as will shares applied to pay the exercise or purchase price of an award or to satisfy tax withholding obligations related to any award.
(3) Represents 5,293,055 shares of Common Stock reserved for issuance under the Velodyne Lidar, Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”).  
(4) Estimated in accordance with Rule 457(h) under the Securities Act solely for the purpose of calculating the registration fee and based upon the average of the high and low prices of the shares of the Registrant’s Common Stock as reported on The Nasdaq Global Select Market on March 5, 2021.
(5) Estimated in accordance with Rule 457(h) under the Securities Act solely for the purpose of calculating the registration fee on the basis of 85% of the average of the high and low prices of the shares of the Registrant’s Common Stock as reported on The Nasdaq Global Select Market on March 5, 2021. Pursuant to the 2020 ESPP, the purchase price of shares of Common Stock will be at least 85% of the lower of the fair market value of the shares of Common Stock on the first trading day of the offering period or on the purchase date.

 

 

 

 

 

PART I

 

INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

 

Item 1. Plan Information.*

 

Item 2. Registrant Information and Employee Plan Annual Information.*

 

 
* In accordance with the instructional note to Part I of Form S-8 as promulgated by the SEC, the information specified by Part I of Form S-8 has been omitted from this Registration Statement. The documents containing the information specified in Part I will be delivered to the participants in the Plans covered by this Registration Statement as required by Rule 428(b)(1) under the Securities Act.

 

 

 

 

 

PART II

 

INFORMATION REQUIRED IN REGISTRATION STATEMENT

 

Item 3. Incorporation of Documents by Reference.

 

The following documents filed with the SEC are hereby incorporated by reference in this Registration Statement:

 

· our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 10, 2020;

 

· our Quarterly Report on Form 10-Q for the quarters ended March 31, 2020, filed with the SEC on May 11, 2020, June 30, 2020, filed with the SEC on August 10, 2020, and September 30, 2020, filed with the SEC on November 9, 2020;

 

· our Current Reports on Form 8-K filed with the SEC on April 16, 2020, July 6, 2020, July 23, 2020, August 6, 2020, August 21, 2020, September 15, 2020 (with respect to Item 3.01), September 25, 2020, September 29, 2020 (with respect to Item 5.07), October 5, 2020, January 13, 2021 and January 22, 2021, February 18, 2021, February 22, 2021, February 25, 2021, March 2, 2021 and March 4, 2021 (in each case, excluding “furnished” and not “filed” information); and

 

· the description of the Registrant’s Common Stock which is contained in a Registration Statement on Form 8-A12B filed on September 29, 2020, including any amendment or report filed for the purpose of updating such description.

 

All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act on or after the date of this Registration Statement and prior to the filing of a post-effective amendment to this Registration Statement that indicates that all securities offered have been sold or that deregisters all securities then remaining unsold shall be deemed to be incorporated by reference in this Registration Statement and to be part hereof from the date of filing of such documents; provided, however, that documents or information deemed to have been furnished and not filed in accordance with the rules of the SEC shall not be deemed incorporated by reference into this Registration Statement. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

 

Item 4. Description of Securities.

 

Not applicable.

 

Item 5. Interests of Named Experts and Counsel.

 

Not applicable.

 

Item 6. Indemnification of Directors and Officers.

 

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the Delaware General Corporation Law are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.

 

  II-1  

 

 

As permitted by the Delaware General Corporation Law, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions relating to the limitation of liability and indemnification of directors and officers. The amended and restated certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability:

 

  •   for any breach of the director’s duty of loyalty to us or our stockholders;

 

  •   for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

 

  •   in respect of unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

 

  •   for any transaction from which the director derives any improper personal benefit.

 

Our amended and restated certificate of incorporation also provides that if Delaware law is amended after the approval by our stockholders of the certificate of incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law.

Our amended and restated bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with their service for or on our behalf. Our amended and restated bylaws provide that we shall advance the expenses incurred by a director or officer in advance of the final disposition of an action or proceeding, and permit us to secure insurance on behalf of any director, officer, employee, or other enterprise agent for any liability arising out of his action in that capacity, whether or not Delaware law would otherwise permit indemnification.

 

We have entered into indemnification agreements with each of our directors and executive officers and intend to enter into indemnification agreements with certain other key employees. The form of agreement provides that we will indemnify each of our directors, executive officers and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his status as one of our directors, executive officers or other key employees, to the fullest extent permitted by Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws. In addition, the form agreement provides that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors, executive officers and other key employees in connection with a legal proceeding.

 

We maintain insurance policies that indemnify our directors and officers against various liabilities arising under the Exchange Act that might be incurred by any director or officer in his capacity as such.

 

Item 7. Exemption from Registration Claimed.

 

Not applicable.

 

  II-2  

 

 

Item 8. Exhibits.

 

EXHIBIT INDEX

 

        Incorporated by Reference
Exhibit Number   Description of Exhibit   Form   File Number   Exhibit   Filing Date
           
4.1   Amended and Restated Certificate of Incorporation of the Registrant.   8-K   001-38703   3.1   October 5, 2020
4.2   Amended and Restated Bylaws of the Registrant.   8-K   001-38703   3.2   October 5, 2020
4.3   Specimen Common Stock certificate of the Registrant.   S-1/A   333-227396   4.2   October 9, 2018
5.1*   Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP.                
23.1*   Consent of WithumSmith+Brown, PC.                
23.2*   Consent of KPMG LLP, independent  registered public accounting  firm.                
23.3*   Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (included in Exhibit 5.1).                
24.1*   Power of Attorney (included in the signature page to the registration statement).                
99.1   The Registrant’s 2020 Equity Incentive Plan, including form agreements.   8-K   001-38703   10.2   October 5, 2020
99.2   The Registrant’s 2020 Employee Stock Purchase Plan.   8-K   001-38703   10.3   October 5, 2020
99.3*   The Registrant’s Consolidated Financial Statements as of December 31, 2019 and 2018, and for each of the Years in the Three-Year Period Ended December 31, 2019.                
99.4*   Unaudited Pro Forma Condensed Consolidated Financial Information of the Registrant at September 30, 2020.                

_____________________

* Filed herewith.

 

Item 9. Undertakings.

 

A. The undersigned registrant hereby undertakes:

 

1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

 

i.      To include any prospectus required by Section 10(a)(3) of the Securities Act;

 

ii.     To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and

 

iii.     To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

 

  II-3  

 

 

Provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the SEC by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement.

 

2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

B.         The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

C.         Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

  II-4  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 8th day of March, 2021.

 

  VELODYNE LIDAR, INC.
   
  By: /s/ Anand Gopalan
    Anand Gopalan
    Chief Executive Officer

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Anand Gopalan and Andrew Dunn Hamer and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post- effective amendments, to this registration statement, and any registration statement relating to the offering covered by this registration statement and filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Title   Date
         

/s/ Anand Gopalan

Anand Gopalan

 

Chief Executive Officer and Director

(Principal Executive Officer)

  March 8, 2021
         

/s/ Andrew Hamer

Andrew Hamer

 

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

  March 8, 2021
         

/s/ Joseph B. Culkin

Joseph B. Culkin

  Chairman and Director   March 8, 2021
         

/s/ Michael E. Dee

Michael E. Dee

  Director   March 8, 2021
         
    Director   March 8, 2021
Marta Thoma Hall        

 

 

 

 

Name   Title   Date
         

/s/ Barbara Samardzich

Barbara Samardzich

  Director  

 March 8, 2021

         

/s/ Christopher Thomas

Christopher Thomas

  Director   March 8, 2021
         

/s/ Hamid Zarringhalam

Hamid Zarringhalam

  Director  

 March 8, 2021

 

 

 

 

 

 

Exhibit 5.1

 

 

March 8, 2021

 

Velodyne Lidar, Inc.

5521 Hellyer Avenue

San Jose, CA 95138

 

Ladies and Gentlemen:

 

We refer to the registration statement on Form S-8 (the “Registration Statement”) to be filed by Velodyne Lidar, Inc., a Delaware corporation (the “Company”), with the Securities and Exchange Commission (the “Commission”) in connection with the registration under the Securities Act of 1933, as amended (the “Act”), of an aggregate of 42,031,733 shares of the Company’s common stock, $0.0001 par value per share (the “Shares”), that are subject to issuance by the Company (i) upon the exercise or settlement of awards granted or to be granted under the Company’s 2020 Equity Incentive Plan and (ii) upon the exercise of purchase rights to acquire shares of common stock granted or to be granted under the Company’s 2020 Employee Stock Purchase Plan. The Company’s 2020 Equity Incentive Plan and 2020 Employee Stock Purchase Plan are collectively referred to in this letter as the “Plans.”

 

In connection with this opinion, we have reviewed the actions proposed to be taken by you in connection with the issuance and sale of the Shares to be issued under the Plans. We have also examined and relied upon the Registration Statement and the originals or copies certified to our satisfaction of such other documents, records, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. With your consent, we have relied upon certificates and other assurances of officers of the Company as to factual matters without having independently verified such factual matters. We have assumed the genuineness and authenticity of all documents submitted to us as originals, and the conformity to originals of all documents submitted to us as copies thereof and the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof.

 

This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement, other than as expressly stated herein. Our opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated. Our opinion herein is expressed solely with respect to the federal laws of the United States and the General Corporation Law of the State of Delaware. Our opinion is based on these laws as in effect on the date hereof, and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. We are not rendering any opinion as to compliance with any federal or state antifraud law, rule or regulation relating to securities, or to the sale or issuance thereof.

 

Based upon and subject to the foregoing and the other matters set forth herein, we advise you that, in our opinion, when the Shares have been issued and sold by the Company pursuant to the applicable provisions of the Plans and pursuant to the agreements which accompany the Plans, and in accordance with the Registration Statement, such Shares will be validly issued, fully paid and nonassessable.

 

 

 

 

 

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

 

  Sincerely,
   
  /s/ Gunderson Dettmer Stough
  Villeneuve Franklin & Hachigian, LLP
   
  GUNDERSON DETTMER STOUGH
  VILLENEUVE FRANKLIN & HACHIGIAN, LLP

 

 

 

Exhibit 23.1

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated March 10, 2020 (which includes an explanatory paragraph relating to Graf Industrial Corp.’s ability to continue as a going concern), relating to the balance sheets of Graf Industrial Corp. as of December 31, 2019 and 2018, and the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2019 and for the period from June 26, 2018 (inception) to December 31, 2018, appearing in the entity’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

 

/s/ WithumSmith+Brown, PC
 
New York, New York
March 5, 2021

 

 

 

Exhibit 23.2

 

Consent of Independent Registered Public Accounting Firm

 

The Board of Directors
Velodyne Lidar, Inc.

 

We consent to the use of our report dated April 15, 2020, except for Notes 1, 8, and 9, as to which the date is January 25, 2021, with respect to the consolidated balance sheets of Velodyne Lidar, Inc. as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes, included herein as Exhibit 99.3.

 

 

/s/ KPMG LLP

 

Santa Clara, California
March 5, 2021

 

 

 

 

TABLE OF CONTENTS​​
 
Exhibit 99.3​
VELODYNE LIDAR, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
​ ​ ​
Page
​
Consolidated Financial Statements ​ ​
​ ​ ​ ​ F-2 ​ ​
​ ​ ​ ​ F-3 ​ ​
​ ​ ​ ​ F-4 ​ ​
​ ​ ​ ​ F-5 ​ ​
​ ​ ​ ​ F-6 ​ ​
​ ​ ​ ​ F-7 ​ ​
​ ​ ​ ​ F-8 ​ ​
 
F-1
TABLE OF CONTENTS​
 
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Velodyne Lidar, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Velodyne Lidar, Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
Santa Clara, California
April 15, 2020, except for Notes 1, 8, and 9, as to which the date is January 25, 2021
 
F-2
TABLE OF CONTENTS​
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
​ ​ ​
December 31,
​
​ ​ ​
2019
​ ​
2018
​
Assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 60,004 ​ ​ ​ ​ $ 23,904 ​ ​
Short-term investments
​ ​ ​ ​ 2,199 ​ ​ ​ ​ ​ 35,487 ​ ​
Accounts receivable, net
​ ​ ​ ​ 11,863 ​ ​ ​ ​ ​ 21,545 ​ ​
Inventories, net
​ ​ ​ ​ 14,987 ​ ​ ​ ​ ​ 9,384 ​ ​
Notes receivable from stockholders
​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,512 ​ ​
Prepaid and other current assets
​ ​ ​ ​ 12,918 ​ ​ ​ ​ ​ 7,411 ​ ​
Total current assets
​ ​ ​ ​ 101,971 ​ ​ ​ ​ ​ 101,243 ​ ​
Property, plant and equipment, net
​ ​ ​ ​ 26,278 ​ ​ ​ ​ ​ 28,926 ​ ​
Goodwill
​ ​ ​ ​ 1,189 ​ ​ ​ ​ ​ — ​ ​
Intangible assets, net
​ ​ ​ ​ 982 ​ ​ ​ ​ ​ — ​ ​
Other assets
​ ​ ​ ​ 5,755 ​ ​ ​ ​ ​ 11,591 ​ ​
Total assets
​ ​ ​ $ 136,175 ​ ​ ​ ​ $ 141,760 ​ ​
Liabilities and Stockholders’ Equity
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accounts payable
​ ​ ​ $ 6,923 ​ ​ ​ ​ $ 7,089 ​ ​
Accrued expense and other current liabilities
​ ​ ​ ​ 31,160 ​ ​ ​ ​ ​ 17,443 ​ ​
Contract liabilities
​ ​ ​ ​ 18,261 ​ ​ ​ ​ ​ 20,359 ​ ​
Total current liabilities
​ ​ ​ ​ 56,344 ​ ​ ​ ​ ​ 44,891 ​ ​
Long-term tax liabilities
​ ​ ​ ​ 1,360 ​ ​ ​ ​ ​ 1,580 ​ ​
Other long-term liabilities
​ ​ ​ ​ 2,225 ​ ​ ​ ​ ​ 1,674 ​ ​
Total liabilities
​ ​ ​ ​ 59,929 ​ ​ ​ ​ ​ 48,145 ​ ​
Commitments and contingencies (Note 12) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Preferred stock, $0.0001 par value; 25,000,000 shares authorized, zero shares issued and outstanding
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Common stock, $0.0001 par value; 2,250,000,000 shares authorized; 137,911,975 and 133,033,927 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively
​ ​ ​ ​ 14 ​ ​ ​ ​ ​ 13 ​ ​
Additional paid-in capital
​ ​ ​ ​ 240,464 ​ ​ ​ ​ ​ 190,540 ​ ​
Accumulated other comprehensive loss
​ ​ ​ ​ (216) ​ ​ ​ ​ ​ (148) ​ ​
Accumulated deficit
​ ​ ​ ​ (164,016) ​ ​ ​ ​ ​ (96,790) ​ ​
Total stockholders’ equity
​ ​ ​ ​ 76,246 ​ ​ ​ ​ ​ 93,615 ​ ​
Total liabilities and stockholders’ equity
​ ​ ​ $ 136,175 ​ ​ ​ ​ $ 141,760 ​ ​
See accompanying notes to consolidated financial statements.
F-3
TABLE OF CONTENTS​
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share data)
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Product
​ ​ ​ $ 81,424 ​ ​ ​ ​ $ 132,933 ​ ​ ​ ​ $ 174,928 ​ ​
License and services
​ ​ ​ ​ 19,974 ​ ​ ​ ​ ​ 10,013 ​ ​ ​ ​ ​ 7,162 ​ ​
Total revenue
​ ​ ​ ​ 101,398 ​ ​ ​ ​ ​ 142,946 ​ ​ ​ ​ ​ 182,090 ​ ​
Cost of revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Product
​ ​ ​ ​ 69,903 ​ ​ ​ ​ ​ 111,081 ​ ​ ​ ​ ​ 101,422 ​ ​
License and services
​ ​ ​ ​ 1,727 ​ ​ ​ ​ ​ 985 ​ ​ ​ ​ ​ 291 ​ ​
Total cost of revenue
​ ​ ​ ​ 71,630 ​ ​ ​ ​ ​ 112,066 ​ ​ ​ ​ ​ 101,713 ​ ​
Gross profit
​ ​ ​ ​ 29,768 ​ ​ ​ ​ ​ 30,880 ​ ​ ​ ​ ​ 80,377 ​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 56,850 ​ ​ ​ ​ ​ 51,993 ​ ​ ​ ​ ​ 31,610 ​ ​
Sales and marketing
​ ​ ​ ​ 21,873 ​ ​ ​ ​ ​ 22,137 ​ ​ ​ ​ ​ 13,956 ​ ​
General and administrative
​ ​ ​ ​ 20,058 ​ ​ ​ ​ ​ 12,902 ​ ​ ​ ​ ​ 9,978 ​ ​
Total operating expenses
​ ​ ​ ​ 98,781 ​ ​ ​ ​ ​ 87,032 ​ ​ ​ ​ ​ 55,544 ​ ​
Operating income (loss)
​ ​ ​ ​ (69,013) ​ ​ ​ ​ ​ (56,152) ​ ​ ​ ​ ​ 24,833 ​ ​
Interest income
​ ​ ​ ​ 1,146 ​ ​ ​ ​ ​ 630 ​ ​ ​ ​ ​ 489 ​ ​
Interest expense
​ ​ ​ ​ (77) ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ — ​ ​
Other income (expense), net
​ ​ ​ ​ 35 ​ ​ ​ ​ ​ (136) ​ ​ ​ ​ ​ 249 ​ ​
Income (loss) before income taxes
​ ​ ​ ​ (67,909) ​ ​ ​ ​ ​ (55,672) ​ ​ ​ ​ ​ 25,571 ​ ​
Provision for (benefit from) income taxes
​ ​ ​ ​ (683) ​ ​ ​ ​ ​ 6,628 ​ ​ ​ ​ ​ 9,810 ​ ​
Net income (loss)
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,761 ​ ​
Net income (loss) attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,241 ​ ​
Diluted
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,268 ​ ​
Net income (loss) per share attributable to common stockholders:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ $ (0.50) ​ ​ ​ ​ $ (0.48) ​ ​ ​ ​ $ 0.12 ​ ​
Diluted
​ ​ ​ $ (0.50) ​ ​ ​ ​ $ (0.48) ​ ​ ​ ​ $ 0.11 ​ ​
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ ​ 133,942,714 ​ ​ ​ ​ ​ 129,948,023 ​ ​ ​ ​ ​ 128,373,783 ​ ​
Diluted
​ ​ ​ ​ 133,942,714 ​ ​ ​ ​ ​ 129,948,023 ​ ​ ​ ​ ​ 135,583,121 ​ ​
See accompanying notes to consolidated financial statements.
F-4
TABLE OF CONTENTS​
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
Net income (loss)
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,761 ​ ​
Other comprehensive income (loss), net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Changes in unrealized gain on available for sale securities
​ ​ ​ ​ 17 ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ 66 ​ ​
Foreign currency translation adjustments
​ ​ ​ ​ (85) ​ ​ ​ ​ ​ (128) ​ ​ ​ ​ ​ (1) ​ ​
Total other comprehensive income (loss), net of tax
​ ​ ​ ​ (68) ​ ​ ​ ​ ​ (118) ​ ​ ​ ​ ​ 65 ​ ​
Comprehensive income (loss)
​ ​ ​ $ (67,294) ​ ​ ​ ​ $ (62,418) ​ ​ ​ ​ $ 15,826 ​ ​
See accompanying notes to consolidated financial statements.
F-5
TABLE OF CONTENTS​
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(In thousands, except share and per share data)
​ ​ ​
Series A Convertible
Preferred Stock
​ ​
Series B Convertible
Preferred Stock
​ ​
Series B-1 Convertible
Preferred Stock
​ ​
Common Stock
(Pre-Combination)
​ ​
Common Stock
(Post-Combination)
​ ​
Additional
Paid in Capital
​ ​
Accumulated
Other
Comprehensive
Loss
​ ​
Accumulated
Deficit
​ ​
Total
Stockholders’
Equity
​
​ ​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​
Balance at December 31, 2016, as previously reported
​ ​ ​ ​ 8,772,852 ​ ​ ​ ​ $ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $  — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $  — ​ ​ ​ ​ ​ 34,325,728 ​ ​ ​ ​ $ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 143,291 ​ ​ ​ ​ $ (95) ​ ​ ​ ​ $ (47,781) ​ ​ ​ ​ $ 95,419 ​ ​
Retroactive application of the recapitalization
​ ​ ​ ​ (8,772,852) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (34,325,728) ​ ​ ​ ​ ​ (3) ​ ​ ​ ​ ​ 128,373,764 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Balance at December 31, 2016, as
adjusted
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 128,373,764 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 143,282 ​ ​ ​ ​ ​ (95) ​ ​ ​ ​ ​ (47,781) ​ ​ ​ ​ ​ 95,419 ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 234 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 234 ​ ​
Other comprehensive income, net of tax
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 65 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 65 ​ ​
Net income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 15,761 ​ ​ ​ ​ ​ 15,761 ​ ​
Balance at December 31, 2017, as
adjusted
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 128,373,764 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 143,516 ​ ​ ​ ​ ​ (30) ​ ​ ​ ​ ​ (32,020) ​ ​ ​ ​ ​ 111,479 ​ ​
Issuance of Series B convertible preferred stock on September 4, 2018, net of issuance cost of $3,182
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,878,048 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 46,817 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 46,817 ​ ​
Repurchase of common stock
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (217,885) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,659) ​ ​ ​ ​ ​ (2,659) ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 207 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 207 ​ ​
Other comprehensive loss, net of tax
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (118) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (118) ​ ​
Cumulative effect of changes in accounting policy
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 189 ​ ​ ​ ​ ​ 189 ​ ​
Net loss
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (62,300) ​ ​ ​ ​ ​ (62,300) ​ ​
Balance at December 31, 2018, as
adjusted
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 133,033,927 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 190,540 ​ ​ ​ ​ ​ (148) ​ ​ ​ ​ ​ (96,790) ​ ​ ​ ​ ​ 93,615 ​ ​
Issuance of Series B-1 convertible preferred stock on October 26, 2019, net of issuance cost of $210
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,878,048 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 49,789 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 49,790 ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 135 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 135 ​ ​
Other comprehensive loss, net of tax
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (68) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (68) ​ ​
Net loss
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (67,226) ​ ​ ​ ​ ​ (67,226) ​ ​
Balance at December 31, 2019, as
adjusted
​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ 137,911,975 ​ ​ ​ ​ $ 14 ​ ​ ​ ​ $ 240,464 ​ ​ ​ ​ $ (216) ​ ​ ​ ​ $ (164,016) ​ ​ ​ ​ $ 76,246 ​ ​
See accompanying notes to consolidated financial statements.
F-6
TABLE OF CONTENTS​
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income (loss)
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,761 ​ ​
Adjustments to reconcile net income (loss) to cash used in operating activities:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ 7,993 ​ ​ ​ ​ ​ 6,791 ​ ​ ​ ​ ​ 3,325 ​ ​
Stock-based compensation
​ ​ ​ ​ 135 ​ ​ ​ ​ ​ 207 ​ ​ ​ ​ ​ 234 ​ ​
Provision for doubtful accounts
​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 296 ​ ​
Deferred income taxes
​ ​ ​ ​ (1,941) ​ ​ ​ ​ ​ 5,845 ​ ​ ​ ​ ​ 1,022 ​ ​
Other
​ ​ ​ ​ (358) ​ ​ ​ ​ ​ (65) ​ ​ ​ ​ ​ 221 ​ ​
Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accounts receivable, net
​ ​ ​ ​ 9,573 ​ ​ ​ ​ ​ 2,446 ​ ​ ​ ​ ​ (15,116) ​ ​
Inventories, net
​ ​ ​ ​ (850) ​ ​ ​ ​ ​ 21,280 ​ ​ ​ ​ ​ (32,713) ​ ​
Prepaid and other current assets
​ ​ ​ ​ (3,602) ​ ​ ​ ​ ​ (1,325) ​ ​ ​ ​ ​ (3,370) ​ ​
Contract assets
​ ​ ​ ​ 38 ​ ​ ​ ​ ​ (38) ​ ​ ​ ​ ​ — ​ ​
Other assets
​ ​ ​ ​ 1,080 ​ ​ ​ ​ ​ (939) ​ ​ ​ ​ ​ (1,251) ​ ​
Accounts payable
​ ​ ​ ​ (45) ​ ​ ​ ​ ​ (4,391) ​ ​ ​ ​ ​ 7,519 ​ ​
Accrued expenses and other liabilities
​ ​ ​ ​ 13,609 ​ ​ ​ ​ ​ (2,356) ​ ​ ​ ​ ​ 16,472 ​ ​
Contract liabilities
​ ​ ​ ​ (1,746) ​ ​ ​ ​ ​ 4,265 ​ ​ ​ ​ ​ (4,984) ​ ​
Net cash provided by (used in) operating activities
​ ​ ​ ​ (43,230) ​ ​ ​ ​ ​ (30,503) ​ ​ ​ ​ ​ (12,584) ​ ​
Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Purchase of property, plant and equipment
​ ​ ​ ​ (5,225) ​ ​ ​ ​ ​ (6,886) ​ ​ ​ ​ ​ (18,140) ​ ​
Proceeds from sales of short-term investments
​ ​ ​ ​ 8,903 ​ ​ ​ ​ ​ 7,993 ​ ​ ​ ​ ​ 21,066 ​ ​
Proceeds from maturities of short-term investments
​ ​ ​ ​ 53,650 ​ ​ ​ ​ ​ 12,777 ​ ​ ​ ​ ​ 24,900 ​ ​
Purchase of short-term investments
​ ​ ​ ​ (28,823) ​ ​ ​ ​ ​ (35,331) ​ ​ ​ ​ ​ — ​ ​
Considerations paid for acquisition
​ ​ ​ ​ (2,473) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Proceeds from repayment of stockholder notes
​ ​ ​ ​ 3,512 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Proceeds from cancellation of (investment in) corporate-owned life insurance policies
​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,064 ​ ​ ​ ​ ​ (2,069) ​ ​
Net cash provided by (used in) investing activities
​ ​ ​ ​ 29,544 ​ ​ ​ ​ ​ (19,383) ​ ​ ​ ​ ​ 25,757 ​ ​
Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proceeds from issuance of preferred stock, net of issuance costs
​ ​ ​ ​ 49,790 ​ ​ ​ ​ ​ 46,658 ​ ​ ​ ​ ​ — ​ ​
Repurchase of common stock
​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,500) ​ ​ ​ ​ ​ — ​ ​
Net cash provided by (used in) financing activities
​ ​ ​ ​ 49,790 ​ ​ ​ ​ ​ 44,158 ​ ​ ​ ​ ​ — ​ ​
Effect of exchange rate fluctuations on cash and cash equivalents
​ ​ ​ ​ (4) ​ ​ ​ ​ ​ (128) ​ ​ ​ ​ ​ (1) ​ ​
Net increase (decrease) in cash and cash equivalents
​ ​ ​ ​ 36,100 ​ ​ ​ ​ ​ (5,856) ​ ​ ​ ​ ​ 13,172 ​ ​
Beginning cash and cash equivalents
​ ​ ​ ​ 23,904 ​ ​ ​ ​ ​ 29,760 ​ ​ ​ ​ ​ 16,588 ​ ​
Ending cash and cash equivalents
​ ​ ​ $ 60,004 ​ ​ ​ ​ $ 23,904 ​ ​ ​ ​ $ 29,760 ​ ​
Supplemental disclosures of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash paid for interest
​ ​ ​ $ 77 ​ ​ ​ ​ $ 14 ​ ​ ​ ​ $ — ​ ​
Cash paid for (received from) income taxes, net
​ ​ ​ ​ 545 ​ ​ ​ ​ ​ 2,412 ​ ​ ​ ​ ​ 8,450 ​ ​
Supplemental disclosure of noncash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Changes in accrued purchases of property, plant and equipment
​ ​ ​ $ (115) ​ ​ ​ ​ $ (417) ​ ​ ​ ​ $ 478 ​ ​
See accompanying notes to consolidated financial statements.
F-7
TABLE OF CONTENTS​
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Velodyne Lidar, Inc. (the Company) 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 began developing its lidar in 2005 as a division of Velodyne Acoustics, Inc. (Velodyne Acoustics). In December 2015, the Company was incorporated as the holding company for Velodyne Acoustics. All of the assets and operations related to its lidar business were assigned to the Company, and the Company distributed its interest in Velodyne Acoustics to certain stockholders in a spin-off transaction in August 2016. The results of the acoustics business have been excluded from the Company’s results of operations for all reported periods. Furthermore, the assets and liabilities of the acoustics business were removed from the Company’s consolidated balance sheets upon the spin-off transaction in August 2016.
On July 2, 2020, the Company entered into an Agreement and Plan of Merger, as amended on August 20, 2020 and clarified in an Acknowledgement Letter dated as of the same day (the “Merger Agreement”), with Graf Industrial Corp., a special purpose acquisition company incorporated in Delaware (“Graf”), and VL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Graf (“Merger Sub”). On September 29, 2020 (the Closing Date), Graf consummated a business combination (the Business Combination) pursuant to the Merger Agreement. Immediately upon the consummation of the Business Combination, VL Merger Sub Inc. merged with and into the pre-combination Velodyne, with the pre-combination Velodyne surviving the merger 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.
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. Unless the context otherwise requires, “we,” “us,” “our,” “Velodyne,” “Velodyne Lidar” and the “Company” refers to Velodyne Lidar Inc., the combined company and its subsidiaries following the Business Combination.
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 in accordance with U.S. GAAP, and are consolidated with the pre-combination Velodyne’s financial statements on the Closing date. The shares and net income (loss) per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement. Refer to Note 8, Stockholders’ Equity, and Note 9, Net Income (Loss) Per Share, for further discussion of the recapitalization and share adjustments.
The Company has evaluated how it is organized and managed and has identified only one operating segment.
Basis of Presentation and Liquidity
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.
 
F-8
TABLE OF CONTENTS
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
The Company has funded its operations primarily through preferred stock offerings and sales to customers. As of December 31, 2019, the Company’s existing sources of liquidity included cash, cash equivalents and short-term investments of $62.2 million. Cash used in operating activities was $43.2 million in 2019, and it expects to continue incurring losses in the upcoming year. If the Company incurs additional losses in the future, it may need to raise additional capital through issuances of equity and debt. However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least one year from the date the audited consolidated financial statements 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 (FDIC).
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 generally does not require collateral.
As of December 31, 2018, two customers each accounted for 10% or more of accounts receivable. As of December 31, 2019, three customers each accounted for 10% or more of accounts receivable. As of December 31, 2018, one vendor accounted for more than 10% of accounts payable. As of December 31, 2019, two vendors each accounted for more than 10% of the Company’s accounts payable, one of which accounted for 36% of accounts payable.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. 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 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 including the fair value of the Company’s common stock, 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.
Reclassification
Certain prior year balance sheet amounts have been reclassified to conform with current year presentation. The Company has adjusted the presentation of revenue and cost of revenue to conform to the statement of operations presentation requirements for all years presented.
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments with original maturity of three months or less at date of purchase to be cash equivalents. Cash equivalents were $44.7 million and $16.3 million as of December 31, 2019 and December 31, 2018, respectively.
 
F-9
TABLE OF CONTENTS
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
Short-term investments generally consist of commercial paper, corporate debt securities, U.S. government and agency securities, and asset backed securities. They are classified as available-for-sale securities and are recognized at fair value. Unrealized gains and losses, net of tax, are reported as a separate component of accumulated other comprehensive loss within the stockholders’ equity. Unrealized gains and losses on the Company’s short-term investments were not significant as of December 31, 2019 and December 31, 2018 and therefore, the amortized cost of the Company’s short-term investments approximated their fair value.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are reduced by an allowance for doubtful accounts, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. The Company writes off accounts receivable against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Changes in the Company’s allowance for doubtful accounts were as follows (in thousands):
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​
Beginning balance
​ ​ ​ $ 357 ​ ​ ​ ​ $ 387 ​ ​ ​ ​ $ 94 ​ ​
​ ​ ​ ​
Charged to costs and expenses
​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 296 ​ ​
​ ​ ​ ​
Uncollectible accounts written off, net of recoveries
​ ​ ​ ​ — ​ ​ ​ ​ ​ (107) ​ ​ ​ ​ ​ (3) ​ ​
​ ​ ​ ​
Ending balance
​ ​ ​ $ 467 ​ ​ ​ ​ $ 357 ​ ​ ​ ​ $ 387 ​ ​
The Company does not have any off-balance-sheet credit exposure related to its customers.
Inventories
Inventories are stated at the lower of cost or estimated net realizable value. Costs are computed under the standard cost method, which approximates actual costs determined on the first-in, first-out basis. The Company charges cost of revenue for write-downs of inventories which are obsolete or in excess of anticipated demand based on a consideration of marketability and product life cycle stage, product development plans, component cost trends, demand forecasts, historical revenue, and assumptions about future demand and market conditions. The net change in the Company’s inventory reserve was $(1.8) million, $1.2 million and $9.4 million for 2019, 2018 and 2017, respectively. The estimated cost of inventories not expected to be used in production within one year is reflected in other assets in the consolidated balance sheets.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is calculated based on the straight-line method over the estimated useful lives of the respective assets. Additions, major improvements and betterments are capitalized, and maintenance and repairs are expensed as incurred. Assets are held in asset under construction until placed in service, upon which date, the Company begins to depreciate the assets over their estimated useful lives. The estimated useful lives of the assets are as follows: buildings, 15-30 years; building improvements, 7-15 years, leasehold improvements, 5-7 years which is the lesser of the life of the improvement or the lease term; machinery and equipment, furniture and fixtures, vehicles and software, 3-5 years.
 
F-10
TABLE OF CONTENTS
 
VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
Business combinations
For acquisitions meeting the definition of a business combination, the acquisition method of accounting is used. The acquisition date is the date on which Velodyne Lidar obtains operating control over the acquired business. The consideration paid is determined on the acquisition date and the acquisition-related costs, such as professional fees, are excluded from the consideration transferred and are expensed as incurred. Assets acquired and liabilities assumed by the Company are recorded at their estimated fair values, while goodwill is measured as the excess of the consideration transferred over the fair value of the net identifiable assets acquired and liabilities assumed.
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets acquired and liabilities assumed when accounted for using the purchase method of accounting. Goodwill is not amortized, but reviewed for impairment. Goodwill is reviewed annually in the fourth quarter, and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. When evaluating recoverability, the Company compares the fair value of the reporting unit to its carrying value. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of our reporting unit, the Company would record an impairment loss equal to the difference.
Long-Lived Assets
Long-lived assets, such as property, plant and equipment and other long-term assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined using various valuation techniques including discounted cash flow models, quoted market values, as considered necessary. No impairment loss was recognized in 2019, 2018 and 2017.
Foreign Currency
The U.S. dollar is the functional currency of the Company’s consolidated entities operating in the U.S. and certain of its subsidiaries operating outside of the U.S. For transactions entered into a currency other than its functional currency, the monetary assets and liabilities are re-measured into U.S. dollars at the current exchange rate as of the applicable balance sheet date, and all non-monetary assets and liabilities are re-measured at historical rates. Income and expenses are re-measured at the average exchange rate prevailing during the period. Gains and losses resulting from the re-measurement of these subsidiaries’ financial statements are included in the consolidated statements of operations.
For foreign subsidiaries whose functional currency is the local currency, assets and liabilities are translated at the local current exchange rates in effect at the balance sheet date, and income and expense accounts are translated at the average exchange rates during the period. The resulting translation adjustments are included in accumulated other comprehensive loss.
Gains and losses resulting from foreign exchange transactions and revaluation of monetary assets and liabilities in non-functional currencies are included in other income (expense) in the consolidated statements of operations. Net foreign exchange gain (loss) recorded in the Company’s consolidated statements of operations was insignificant for all years presented.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
Revenue Recognition
Effective January 1, 2018, the Company early adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers and the related amendments (collectively, ASC 606) using the modified retrospective method. ASC 606 was applied to all uncompleted contracts by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of accumulated deficit at January 1, 2018. The adoption did not have a material effect on the Company’s consolidated financial statements. See Note 2, Revenue, for additional information related to the adoption of ASC 606. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while the comparative financial information for 2017 has not been adjusted and continues to be reported under ASC Topic 605, Revenue Recognition (ASC 605). For this reason, the discussion that follows describes the Company’s revenue recognition policies both before and after the adoption of ASC 606.
Revenue recognition — Prior to the adoption of ASC 606 on January 1, 2018
Prior to January 1, 2018, The Company recognized revenue from sales of its products provided that (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectibility is reasonably assured. Delivery occurred upon transfer of title and all risks and rewards of ownership to the customer, which is generally upon shipment. To the extent the Company entered into long-term production-type arrangements with customers involving significant customization of its products, revenue was recognized in accordance with ASC 605-35, Revenue Recognition — Construction-Type and Production Type Contracts either on a completed-contract or percentage of completion basis. Under the percentage of completion method of accounting, the Company primarily used the output method to measure progress towards completion and revenue recognition.
Sales taxes collected from customers and remitted to governmental authorities were accounted for on a net basis and therefore, were excluded from net sales. Shipping and handling costs billed to customers were recognized in revenue. Shipping and handling costs paid by the Company were included in cost of revenue.
Revenue from sales of products to resellers and distributors occurred upon delivery of products to the resellers and distributors assuming all other revenue recognition criteria were met.
The Company typically provides a one-year warranty on its products. If warranty period is sold or extended beyond the standard one-year term, revenue related to the extended warranty was recognized ratably over the related extended warranty period.
Revenue recognition — After the adoption of ASC 606 on January 1, 2018
Under ASC 606, the Company accounts for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration it is entitled to. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.
Nature of Products and Services and Revenue Recognition
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 are 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
 
F-12
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
billed to customers for shipping and handling are included in revenue. Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. Accounts receivable are due under normal trade terms, typically 60 days or less.
The Company’s license and services revenue consist primarily of product development, validation and repair services, intellectual property (IP) license and royalties revenue. 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. For product repair service, revenue is recognized when the repair services are complete and repaired products are shipped to customer.
The Company licenses rights to its IP to certain customers and collects royalties based on customer’s product sales. IP revenue recognition is dependent on the nature and terms of each agreement. The Company recognizes license revenue upon delivery of the IP if there are no substantive future obligations to perform under the arrangement. 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.
Arrangements with Multiple Performance Obligations
When a contract involves multiple performance obligations, the Company accounts for individual products and services separately if the customer can benefit from the product or service on its own or with other resources that are readily available to the customer and the product or service is separately identifiable from other promises in the arrangement. The consideration is allocated between separate performance obligations in proportion to their estimated standalone selling price. The standalone selling price reflects the price the Company would charge for a specific product or service if it were sold separately in similar circumstances and to similar customers. If the selling price is not directly observable, the Company generally uses the cost plus margin approach to estimate standalone selling price. Costs related to products delivered are recognized in the period revenue is recognized.
The Company provides standard product warranties for a term of typically one year 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. Please see Product Warranty for accounting policy on standard warranties. The Company also provides service type extended warranties for 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 ratably over time during the effective period of the services.
Other Policies, Judgments and Practical Expedients
Costs to obtain a contract.   The Company generally 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 recorded at the time of the customer order or product shipment in sales and marketing expense in the Company’s consolidated statements of operations. Commission expense was $0.5 million, $0.5 million and $0.7 million for 2019, 2018 and 2017, respectively.
Right of return.   The Company’s general terms and conditions for its contracts do not contain a right of return that allows the customer to return products and receive a credit. Therefore the Company does not estimate returns and generally recognizes revenue at contract price upon product shipment or delivery.
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
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
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. Additionally, as a practical expedient, the Company has not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Because the majority of the Company’s customer contracts allow customers to terminate for convenience or have an original duration of one year or less, the total amount of the transaction price allocated to unsatisfied performance obligations with duration of more than 12 months was not significant as of December 31, 2019, 2018 and 2017.
Significant financing component.   In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The expected timing difference between the payment and satisfaction of performance obligations for the vast majority of the Company’s contracts is one year or less; therefore, the Company applies a practical expedient and does not consider the effects of the time value of money. The Company’s contracts with customer prepayment terms do not include a significant financing component because the primary purpose is not to receive financing from the customers.
Contract modifications.   The Company may modify contracts to offer customers additional products or services. Each of the additional products and services are generally considered distinct from those products or services transferred to the customer before the modification. The Company evaluates whether the contract price for the additional products and services reflects the standalone selling price as adjusted for facts and circumstances applicable to that contract. In these cases, the Company accounts for the additional products or services as a separate contract. In other cases where the pricing in the modification does not reflect the standalone selling price as adjusted for facts and circumstances applicable to that contract, the Company accounts for the additional products or services as part of the existing contract primarily on a prospective basis.
Judgments and estimates.   Accounting for contracts recognized over time under ASC 606 involves the use of various techniques to estimate total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. The Company reviews and updates its contract-related estimates regularly, and records adjustments as needed. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made.
Research and Development
Research and development costs are expensed as incurred.
Advertising
Advertising costs are expensed as incurred and were $2.3 million, $1.7 million and $0.8 million in 2019, 2018 and 2017, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount within a range of loss can be reasonably estimated. When no amount within the range is a better estimate than any other amount, the Company accrues for the minimum amount within the range. Legal costs incurred in connection with loss contingencies are expensed as incurred. No liabilities for loss contingencies were accrued as of December 31, 2019 and December 31, 2018.
Product Warranties
The Company typically provides a one-year warranty on its products. Estimated future warranty costs are accrued and charged to cost of revenue in the period that the related revenue is recognized. These estimates are based on historical warranty experience and any known or expected changes in warranty exposure, such as trends of product reliability and costs of repairing and replacing defective products. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
Changes in the Company’s accrued warranty liability, which is included as a component of other accrued expenses was as follows:
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​
Balance as of the beginning of the period
​ ​ ​ $ 3,531 ​ ​ ​ ​ $ 1,317 ​ ​ ​ ​ $ 254 ​ ​
​ ​ ​ ​
Warranty provision
​ ​ ​ ​ 6,531 ​ ​ ​ ​ ​ 5,469 ​ ​ ​ ​ ​ 2,341 ​ ​
​ ​ ​ ​
Consumption
​ ​ ​ ​ (4,939) ​ ​ ​ ​ ​ (4,055) ​ ​ ​ ​ ​ (1,011) ​ ​
​ ​ ​ ​
Changes in provision estimates
​ ​ ​ ​ (801) ​ ​ ​ ​ ​ 800 ​ ​ ​ ​ ​ (267) ​ ​
​ ​ ​ ​
Balance as of the end of the period
​ ​ ​ $ 4,322 ​ ​ ​ ​ $ 3,531 ​ ​ ​ ​ $ 1,317 ​ ​
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASU 2016-02), which supersedes FASB Accounting Standards Codification Topic 840, Leases (Topic 840), and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. Among its provisions, this standard requires lessees to recognize right-of-use assets and lease liabilities on the balance sheets for operating leases, and also requires additional qualitative and quantitative disclosures about lease arrangements. ASU 2016-02 is effective for public business entities for fiscal years beginning after December 15, 2018. For emerging growth companies, the ASU was to be effective for fiscal years beginning after December 15, 2019. However, in November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates (ASU 2019-10), which included a one-year deferral of the effective date of ASU 2016-02 for certain entities. As a result, the ASU is now effective for emerging growth companies for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company expects to adopt the new standard in the first quarter of 2021 using the modified retrospective method, under which the Company will apply Topic 842 to existing and new leases as of January 1, 2021, but prior periods will not be restated and
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
will continue to be reported under Topic 840 guidance in effect during those periods. The Company is currently evaluating the impact the adoption of these ASUs will have on its financial statements and related disclosures. The Company expects to recognize a right-of-use asset and corresponding lease liability for its real estate operating leases upon adoption. See Note 12 for more information related to the Company’s lease obligations, which are presented on an undiscounted basis therein.
In June 2016, the FASB issued 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, and ASU No. 2019-11. 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 public business entities, this standard is effective for fiscal years beginning after December 15, 2019. For emerging growth 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 is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2016-13 to be material.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):   Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by, among other things, eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new standard will have on its consolidated financial statements.
Recently Adopted Accounting Guidance
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, which amends the current definition of a business when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The new guidance also narrows the definition of the term output under Topic 805 to be consistent with how it is described in ASC 606. The amendments in ASU 2017-01 apply prospectively. The Company adopted the standard in 2019 and the adoption of this standard did not have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The standard simplifies the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. Instead, goodwill impairment is measured as the difference between the fair value and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. The Company early adopted this amendment on January 1, 2019, which did not have a material impact on its consolidated financial statements and its goodwill impairment measurement.
In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 eliminates the separate accounting model for nonemployee share-based payment awards and generally requires companies to account for share-based payment transactions with nonemployees
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies (continued)
in the same way as share-based payment transactions with employees. The accounting remains different for attribution, which represents how the equity-based payment cost is recognized over the vesting period, and a contractual term election exists for valuing nonemployee equity share options. The Company adopted the standard in 2019 and the adoption of this standard did not have a material impact on its consolidated financial statements.
Note 2. 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 are as follows (dollar in thousands):
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​
Revenue
​ ​
% of Revenue
​ ​
Revenue
​ ​
% of Revenue
​ ​
Revenue
​ ​
% of Revenue
​
Revenue by geography: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
North America
​ ​ ​ $ 49,634 ​ ​ ​ ​ ​ 49% ​ ​ ​ ​ $ 84,541 ​ ​ ​ ​ ​ 59% ​ ​ ​ ​ $ 139,005 ​ ​ ​ ​ ​ 76% ​ ​
Asia Pacific
​ ​ ​ ​ 28,791 ​ ​ ​ ​ ​ 28% ​ ​ ​ ​ ​ 39,770 ​ ​ ​ ​ ​ 28% ​ ​ ​ ​ ​ 26,562 ​ ​ ​ ​ ​ 15% ​ ​
Europe, Middle East and Africa
​ ​ ​ ​ 22,973 ​ ​ ​ ​ ​ 23% ​ ​ ​ ​ ​ 18,635 ​ ​ ​ ​ ​ 13% ​ ​ ​ ​ ​ 16,523 ​ ​ ​ ​ ​ 9% ​ ​
Total
​ ​ ​ $ 101,398 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 142,946 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 182,090 ​ ​ ​ ​ ​ 100% ​ ​
Revenue by products and services:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Products
​ ​ ​ $ 81,424 ​ ​ ​ ​ ​ 80% ​ ​ ​ ​ $ 132,933 ​ ​ ​ ​ ​ 93% ​ ​ ​ ​ $ 179,928 ​ ​ ​ ​ ​ 99% ​ ​
License and services
​ ​ ​ ​ 19,974 ​ ​ ​ ​ ​ 20% ​ ​ ​ ​ ​ 10,013 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 2,162 ​ ​ ​ ​ ​ 1% ​ ​
Total
​ ​ ​ $ 101,398 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 142,946 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 182,090 ​ ​ ​ ​ ​ 100% ​ ​
Revenue by timing of recognition:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Goods transferred at a point in time
​ ​ ​ $ 92,890 ​ ​ ​ ​ ​ 92% ​ ​ ​ ​ $ 139,852 ​ ​ ​ ​ ​ 98% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Goods and services transferred over time
​ ​ ​ ​ 8,508 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 3,094 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​ $ 101,398 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 142,946 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Contract Liabilities
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, 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 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
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2. Revenue (continued)
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 liabilities consisted of the following as of December 31, 2019 and December 31, 2018 (in thousands):
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​ Contract liabilities, current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Deferred revenue, current
​ ​ ​ $ 926 ​ ​ ​ ​ $ 812 ​ ​
​ ​ ​ ​
Customer advance payment
​ ​ ​ ​ 11,252 ​ ​ ​ ​ ​ 13,464 ​ ​
​ ​ ​ ​
Customer deposit
​ ​ ​ ​ 6,083 ​ ​ ​ ​ ​ 6,083 ​ ​
​ ​ ​ ​
Total
​ ​ ​ ​ 18,261 ​ ​ ​ ​ ​ 20,359 ​ ​
​ ​ ​ ​ Contract liabilities, long-term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Deferred revenue, long-term
​ ​ ​ ​ 903 ​ ​ ​ ​ ​ 552 ​ ​
​ ​ ​ ​
Total contract liabilities
​ ​ ​ $ 19,164 ​ ​ ​ ​ $ 20,911 ​ ​
The following table shows the significant changes in contract liabilities balances for 2019 and 2018 (in thousands):
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​ Contract liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Beginning balance
​ ​ ​ $ 20,911 ​ ​ ​ ​ $ 16,835 ​ ​
​ ​ ​ ​
Impact of ASC 606 adoption
​ ​ ​ ​ — ​ ​ ​ ​ ​ (256) ​ ​
​ ​ ​ ​
Revenue recognized that was included in the contract liabilities beginning balance
​ ​ ​ ​ (3,149) ​ ​ ​ ​ ​ (7,393) ​ ​
​ ​ ​ ​
Increase due to cash received and not recognized as revenue and billings in excess of revenue recognized during the period
​ ​ ​ ​ 1,402 ​ ​ ​ ​ ​ 11,725 ​ ​
​ ​ ​ ​
Ending balance
​ ​ ​ $ 19,164 ​ ​ ​ ​ $ 20,911 ​ ​
Note 3. 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
​
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 3. Fair Value Measurement (continued)
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):
​ ​ ​
December 31, 2019
​
​ ​ ​
Level 1
​ ​
Level 2
​ ​
Level 3
​ ​
Total
​
Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Money market fund
​ ​ ​ $ 44,669 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 44,669 ​ ​
Total cash equivalents
​ ​ ​ ​ 44,669 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 44,669 ​ ​
Short-term investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Commercial paper
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,099 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,099 ​ ​
Corporate debt securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,100 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,100 ​ ​
Total short-term investments
​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,199 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,199 ​ ​
Total assets measured at fair value
​ ​ ​ $ 44,669 ​ ​ ​ ​ $ 2,199 ​ ​ ​ ​ $  — ​ ​ ​ ​ $ 46,868 ​ ​
​ ​ ​
December 31, 2018
​
​ ​ ​
Level 1
​ ​
Level 2
​ ​
Level 3
​ ​
Total
​
Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Money market fund
​ ​ ​ $ 6,838 ​ ​ ​ ​ $ — ​ ​ ​ ​ $  — ​ ​ ​ ​ $ 6,838 ​ ​
Commercial paper
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,494 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,494 ​ ​
Securities sold under agreements to repurchase
​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,000 ​ ​
Total cash equivalents
​ ​ ​ ​ 6,838 ​ ​ ​ ​ ​ 9,494 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 16,332 ​ ​
Short-term investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Commercial paper
​ ​ ​ ​ — ​ ​ ​ ​ ​ 20,809 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 20,809 ​ ​
Corporate debt securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ 9,217 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 9,217 ​ ​
U.S. government and agency securities
​ ​ ​ ​ 2,487 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,487 ​ ​
Asset backed securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,974 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,974 ​ ​
Total short-term investments
​ ​ ​ ​ 2,487 ​ ​ ​ ​ ​ 33,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 35,487 ​ ​
Total assets measured at fair value
​ ​ ​ $ 9,325 ​ ​ ​ ​ $ 42,494 ​ ​ ​ ​ $  — ​ ​ ​ ​ $ 51,819 ​ ​
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 consist of investment securities with original maturities greater than three months and are included as current assets in the consolidated balance sheets.
There were no transfers between fair value measurement levels during 2019 and 2018.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 4. Balance Sheet Components
Inventories, Net
Inventories, net of reserve, consist of the following as of December 31, 2019 and December 31, 2018 (in thousands):
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​
Raw materials
​ ​ ​ $ 12,374 ​ ​ ​ ​ $ 14,981 ​ ​
​ ​ ​ ​
Work-in-process
​ ​ ​ ​ 1,748 ​ ​ ​ ​ ​ 2,414 ​ ​
​ ​ ​ ​
Finished goods
​ ​ ​ ​ 5,629 ​ ​ ​ ​ ​ 1,506 ​ ​
​ ​ ​ ​
Total inventories
​ ​ ​ ​ 19,751 ​ ​ ​ ​ ​ 18,901 ​ ​
​ ​ ​ ​
Less inventories not deemed to be current, included in other assets
​ ​ ​ ​ 4,764 ​ ​ ​ ​ ​ 9,517 ​ ​
​ ​ ​ ​
Inventories, included in current assets
​ ​ ​ $ 14,987 ​ ​ ​ ​ $ 9,384 ​ ​
Noncurrent inventories consist of raw material components forecasted to be used in production later than twelve months from the respective balance sheet dates. The Company believes that these inventories will be utilized for future production plans.
Prepaid and Other Current Assets
Prepaid and other current assets consist of the following as of December 31, 2019 and December 31, 2018 (in thousands):
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​
Prepaid expenses and deposits
​ ​ ​ $ 3,045 ​ ​ ​ ​ $ 3,031 ​ ​
​ ​ ​ ​
Due from contract manufacturers and vendors
​ ​ ​ ​ 4,068 ​ ​ ​ ​ ​ 3,324 ​ ​
​ ​ ​ ​
Prepaid taxes
​ ​ ​ ​ 2,122 ​ ​ ​ ​ ​ 572 ​ ​
​ ​ ​ ​
Other
​ ​ ​ ​ 3,683 ​ ​ ​ ​ ​ 484 ​ ​
​ ​ ​ ​
Total prepaid and other current assets
​ ​ ​ $ 12,918 ​ ​ ​ ​ $ 7,411 ​ ​
Property, Plant and Equipment, Net
Property, plant and equipment, at cost, consist of the following as of December 31, 2019 and December 31, 2018 (in thousands):
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 4. Balance Sheet Components (continued)
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​
Land
​ ​ ​ $ 2,340 ​ ​ ​ ​ $ 2,340 ​ ​
​ ​ ​ ​
Building
​ ​ ​ ​ 3,142 ​ ​ ​ ​ ​ 3,142 ​ ​
​ ​ ​ ​
Machinery and equipment
​ ​ ​ ​ 30,082 ​ ​ ​ ​ ​ 26,386 ​ ​
​ ​ ​ ​
Building improvements
​ ​ ​ ​ 4,194 ​ ​ ​ ​ ​ 4,194 ​ ​
​ ​ ​ ​
Leasehold improvements
​ ​ ​ ​ 5,581 ​ ​ ​ ​ ​ 4,376 ​ ​
​ ​ ​ ​
Furniture and fixtures
​ ​ ​ ​ 1,431 ​ ​ ​ ​ ​ 1,254 ​ ​
​ ​ ​ ​
Vehicles
​ ​ ​ ​ 759 ​ ​ ​ ​ ​ 416 ​ ​
​ ​ ​ ​
Software
​ ​ ​ ​ 1,343 ​ ​ ​ ​ ​ 1,155 ​ ​
​ ​ ​ ​
Assets under construction
​ ​ ​ ​ 170 ​ ​ ​ ​ ​ 1,093 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ 49,042 ​ ​ ​ ​ ​ 44,356 ​ ​
​ ​ ​ ​
Less: accumulated depreciation and amortization
​ ​ ​ ​ (22,764) ​ ​ ​ ​ ​ (15,430) ​ ​
​ ​ ​ ​
Property, plant and equipment, net
​ ​ ​ $ 26,278 ​ ​ ​ ​ $ 28,926 ​ ​
The aggregate depreciation and amortization related to property, plant and equipment was $3.3 million, $6.8 million and $7.8 million for 2017, 2018 and 2019, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of December 31, 2019 and December 31, 2018 (in thousands):
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​
Accrued payroll expenses
​ ​ ​ $ 10,537 ​ ​ ​ ​ $ 9,335 ​ ​
​ ​ ​ ​
Accrued manufacturing costs
​ ​ ​ ​ 3,344 ​ ​ ​ ​ ​ 444 ​ ​
​ ​ ​ ​
Accrued professional and consulting fees
​ ​ ​ ​ 5,572 ​ ​ ​ ​ ​ 1,504 ​ ​
​ ​ ​ ​
Accrued warranty costs
​ ​ ​ ​ 4,322 ​ ​ ​ ​ ​ 3,531 ​ ​
​ ​ ​ ​
Accrued taxes
​ ​ ​ ​ 944 ​ ​ ​ ​ ​ 950 ​ ​
​ ​ ​ ​
Refund liabilities
​ ​ ​ ​ 4,878 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Other
​ ​ ​ ​ 1,563 ​ ​ ​ ​ ​ 1,679 ​ ​
​ ​ ​ ​
Total accrued expense and other current liabilities
​ ​ ​ $ 31,160 ​ ​ ​ ​ $ 17,443 ​ ​
Note 5. Mapper Acquisition
On July 3, 2019, the Company acquired technology, workforce and certain assets of Mapper.ai, Inc. (“Mapper”), an on-demand map solution company, for a total of $2.5 million in cash. The acquisition was
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 5. Mapper Acquisition (continued)
accounted for using the purchase method of accounting for business combination. The total purchase price is allocated to acquired assets based on their estimated fair value at the acquisition date as follows:
​ ​ ​ ​
Assets Acquired
​ ​
Amount
​
​ ​ ​ ​
Developed technology
​ ​ ​ $ 1,140 ​ ​
​ ​ ​ ​
Property and equipment
​ ​ ​ ​ 144 ​ ​
​ ​ ​ ​
Goodwill
​ ​ ​ ​ 1,189 ​ ​
​ ​ ​ ​
Total purchase price
​ ​ ​ $ 2,473 ​ ​
The excess of the purchase price over the tangible and intangible assets acquired has been recorded as goodwill. The goodwill is attributable to the workforce of the acquired business and expected synergies with the Company’s existing operations and is amortizable for income tax purposes. Management plans to integrate the Mapper acquisition into its existing business structure, which is comprised of a single reporting unit.
Developed technology is amortized on a straight-line basis over its estimated useful life of 3 years. Acquisition-related costs of $0.2 million were expensed in the period incurred within general and administrative expense in the Company’s consolidated statement of operations.
The results of operations related to this acquisition have been included in the Company’s consolidated statements of operations from the acquisition date. Pro forma results of operations have not been presented because the acquisition was not material to the Company’s consolidated results of operations.
Note 6. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss was comprised of the following as of December 31, 2019 and December 31, 2018 (in thousands):
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​
Foreign currency translation loss
​ ​ ​ $ (216) ​ ​ ​ ​ $ (131) ​ ​
​ ​ ​ ​
Unrealized loss on investments
​ ​ ​ ​ — ​ ​ ​ ​ ​ (17) ​ ​
​ ​ ​ ​
Total accumulated other comprehensive loss
​ ​ ​ $ (216) ​ ​ ​ ​ $ (148) ​ ​
For 2019 and 2018, 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 7. Credit Facilities
On April 27, 2018, the Company entered into a loan and security agreement with a financial institution which provides a one-year $25.0 million revolving line of credit (the 2018 Revolving Line) with an option to increase the credit limit up to additional $15.0 million with the bank’s approval (Incremental Revolving Line). As part of the Revolving Line, there is a letter of credit sublimit of $5.0 million. The advances under the Revolving Line bear interest at a rate per annum equal to prime rate plus an applicable margin of 1.5% for prime rate advances, or LIBOR rate plus an applicable margin of 2.5% for LIBOR advances. Unused revolving line facility fee is 0.15% per annum of average unused portion of the Revolving Line. In addition, there is a $50,000 non-refundable commitment fee if the Company exercises the Incremental Revolving Line option. The Revolving Line is secured by certain assets of the Company. There were no outstanding borrowings under the Revolving Line as of December 31, 2018. The Revolving Line expired on April 26, 2019.
In January 2020, the Company entered into a loan and security agreement with the same financial institution (the 2020 Revolving Line), which provides a revolving line of credit of $25.0 million. The 2020
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 7. Credit Facilities (continued)
Revolving Line has a maturity date of September 30, 2020. The Company was in compliance with the financial covenants associated with the facility through the date the audited consolidated financial statements were available for issuance .
Note 8. Stockholders’ Equity
On September 30, 2020, Velodyne Lidar’s common stock began trading on the Nasdaq Global Select Market under the symbol “VLDR”. The Company has retroactively adjusted the 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.
Prior to the Closing, Velodyne Lidar had shares of no par value Series A, Series B and Series B-1 preferred stock outstanding, all of which were convertible into shares of common stock of the pre-combination Velodyne on a 1:1 basis, subject to certain anti-dilution protections. Upon the Closing, the outstanding shares of common stock, Series A, Series B and Series B-1 preferred stock were converted into common stock of the Company at 1:2.9786, 1:2.9786, 1:3.5465 and 1:3.5465, respectively, the exchange rates established in the Merger Agreement. The outstanding common shares of pre-combination Velodyne were converted into common stock of the Company at 1:2.9786. The following summarizes retroactive adjustment of the pre-combination Velodyne’s outstanding preferred stock and common stock into shares of the Company’s common stock as of December 31, 2019 and 2018:
​ ​ ​
Pre-Combination
Common/Preferred
Shares
​ ​
Conversion
Ratio
​ ​
Common Stock
Shares
​
As of December 31, 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Common stock (pre-combination)
​ ​ ​ ​ 34,252,578 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 102,024,991 ​ ​
Series A Convertible Preferred Stock (pre-combination)
​ ​ ​ ​ 8,772,852 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 26,130,888 ​ ​
Series B Convertible Preferred Stock (pre-combination)
​ ​ ​ ​ 1,375,440 ​ ​ ​ ​ ​ 3.5465 ​ ​ ​ ​ ​ 4,878,048 ​ ​
Series B-1 Convertible Preferred Stock (pre-combination)
​ ​ ​ ​ 1,375,440 ​ ​ ​ ​ ​ 3.5465 ​ ​ ​ ​ ​ 4,878,048 ​ ​
Total
​ ​ ​ ​ 45,776,310 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 137,911,975 ​ ​
As of December 31, 2018: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Common stock (pre-combination)
​ ​ ​ ​ 34,252,578 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 102,024,991 ​ ​
Series A Convertible Preferred Stock (pre-combination)
​ ​ ​ ​ 8,772,852 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 26,130,888 ​ ​
Series B Convertible Preferred Stock (pre-combination)
​ ​ ​ ​ 1,375,440 ​ ​ ​ ​ ​ 3.5465 ​ ​ ​ ​ ​ 4,878,048 ​ ​
Series B-1 Convertible Preferred Stock (pre-combination)
​ ​ ​ ​ — ​ ​ ​ ​ ​ 3.5465 ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ ​ 44,400,870 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 133,033,927 ​ ​
Common Stock
Prior to July 26, 2016, the total number of shares of common stock authorized was 20,000,000 at $0.0001 par value per share. Holders of common stock are entitled to one vote per share, and to receive dividends when, as and if declared by the Board of Directors, and, upon liquidation or dissolution, are entitled to receive all proceeds available for distribution to stockholders. The holders have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares.
On July 26, 2016, the Board of Directors approved to increase the number of shares of common stock authorized for issuance to 55,000,000 shares and authorized to the issuance of up to 8,772,852 shares of preferred stock with par value of $0.0001 per share, all of which were designated as Series A Preferred Stock.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8. Stockholders’ Equity (continued)
In addition, each outstanding share of common stock was exchanged into ten shares of common stock. The stock split also applied to any outstanding securities or rights convertible into, or exchangeable or exercisable for, common stock of the Company. Unless otherwise indicated, all share numbers, share prices and exercise prices have been adjusted to reflect the stock split on a retroactive basis.
On July 28, 2016, in connection with the Series A Preferred Stock financing and a spin-off and distribution of assets associated with Velodyne Acoustics, the Company declared a pro rata distribution to certain shareholders where its CEO received units representing a 100% interest in Velodyne Acoustics valued at approximately $3.97 million and other shareholders received a cash dividend of approximately $2.8 million in total. Following the spin-off and distribution, Velodyne Acoustics is no longer a subsidiary of the Company.
On August 1, 2016, following the stock split, the Company issued 8,772,852 shares of Series A Convertible Preferred Stock (Series A Preferred Stock) at a price of $17.0982 per share and received net proceeds of $143.3 million. In September 2016, the Company used $50.0 million of the proceeds to repurchase and retire 2,924,272 shares of common stock from certain holders of the Company’s common stock at $17.0982 per share, which was equivalent to the price paid for each share of the Series A Preferred Stock by investor in the financing.
On August 28, 2018, the Board of Directors approved to increase the authorized number of shares of common stock to 58,000,000 shares with par value of $0.0001 per share, and approved an increase of the authorized number of shares of preferred stock to 11,523,732 shares with par value of $0.0001 per share, of which 2,750,880 shares were designated as Series B preferred stock.
On September 4, 2018, the Company issued 1,375,440 shares of Series B Convertible Preferred Stock (Series B Preferred Stock) at a price of $36.3520 per share and received net proceeds of $46.8 million. In December 2018, the Company used $2.7 million of the proceeds to repurchase and retire 73,150 shares of common stock from certain holders of the Company’s common stock at $36.3520 per share, which was equivalent to the price paid for each share of the Series B Preferred Stock.
On October 11, 2019, the Board of Directors approved to increase the authorized number of shares of common stock to 67,000,000 shares with par value of $0.0001 per share, and approved a decrease of the authorized number of shares of preferred stock to 14,274,612 shares with par value of $0.0001 per share, of which 1,375,440 shares were designated as Series B preferred stock and 4,126,320 shares were designated as Series B-1 preferred stock.
There were 34,252,578 shares of the Company’s common stock issued and outstanding as of December 31, 2019, December 31, 2018.
Series A Convertible Preferred Stock
On August 1, 2016, the Company entered into a share purchase agreement with two strategic investors pursuant to which the Company sold and issued to the investors 8,772,852 shares of Series A Preferred Stock at a price of $17.0982 per share. The total proceeds raised through the Series A Preferred Stock transaction was $143.3 million, net of issuance costs of $6.7 million.
Holders of the Series A Convertible Preferred Stock have a right to convert to common stock at any time. The number of converted shares is determined by dividing the original issue price by the applicable conversion price. The initial conversion price is the original issue price, but is subject to adjustment for certain dilutive issuances, splits and combinations. The Series A Preferred Stock automatically converts to common stock in the event of a qualified public offering or consent of the Series A Preferred Stock holders. The manner of settlement is an exchange of shares of common stock for converted shares of Series A Preferred Stock.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8. Stockholders’ Equity (continued)
Holders of the Series A Preferred Stock are entitled to dividends when and if declared by the Board of Directors. Such dividends are noncumulative. Dividends, if any, are distributed among all holders of common stock and Series A Preferred Stock in proportion to the number of shares held by each holder if all shares of Series A Preferred Stock were converted to common stock.
The Series A Preferred Stock has a liquidation preference entitling the holders of Series A Preferred Stock to an amount per share equal to the sum of the original issue price of $17.0982 per share and any declared but unpaid dividends prior to distribution of proceeds to common stock holders as a result of a liquidation event.
Each share of Series A Preferred Stock has substantially similar voting rights as one share of common stock. In addition, the holders of Series A Preferred Stock are entitled to elect two directors of the Company.
A majority vote of the Series A Preferred Stock is required to amend, waive, alter or repeal any provision of the Company’s certificate of incorporation or bylaws so as to adversely alter or change the powers, preferences or special rights of the shares of the Series A Preferred Stock in a manner different than all preferred stock.
Series B and Series B-1 Convertible Preferred Stock
On September 4, 2018, the Company entered into a share purchase agreement with strategic investors pursuant to which the Company sold and issued to the investors 1,375,440 shares of Series B Preferred Stock at a price of $36.3520 per share. The total proceeds raised through the Series B Preferred Stock transaction was $46.8 million, net of issuance costs of $3.2 million.
On October 25, 2019, the Company entered into a share purchase agreement with investors pursuant to which the Company sold and issued to the investors 1,375,440 shares of Series B-1 Preferred Stock at a price of $36.3520 per share. The total proceeds raised through the Series B-1 Preferred Stock transaction was $49.8 million, net of issuance costs of $0.2 million. Under the terms of the purchase agreement, the Company can sell up to an additional $100.0 million of Series B-1 Preferred Stock to investors on or before September 30, 2020.
Holders of the Series B and Series B-1 Preferred Stock have a right to convert to common stock at any time. The number of converted shares is determined by dividing the original issue price by the applicable conversion price. The initial conversion price is the original issue price, but is subject to adjustment for certain dilutive issuances, splits and combinations.
In addition, in the event the Company closes a public offering in which the Series B and Series B-1 Preferred Stock converts into common stock on or before September 4, 2020, and in which the public offering price per share is less than $36.3520 (adjusted for stock splits if any), then the conversion price used for the Series B Preferred Stock in the public offering will be adjusted to the offering price (not to be below $23.9196). The Series B and Series B-1 Preferred Stock automatically converts to common stock in the event of a qualified public offering or consent of the holders of a majority of the then outstanding shares of preferred stock. The manner of settlement is an exchange of shares of common stock for converted shares of Series B and Series B-1 Preferred Stock.
Holders of the Series B and Series B-1 Preferred Stock are entitled to dividends when and if declared by the Board of Directors. Such dividends are noncumulative. Dividends, if any, are distributed among all holders of common stock and convertible preferred stock in proportion to the number of shares held by each holder if all shares of Convertible Preferred Stock were converted to common stock.
Each share of the Series B and Series B-1 Preferred Stock has a liquidation preference entitling the holders of Series B and Series B-1 Preferred Stock to an amount per share equal to the sum of the original
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8. Stockholders’ Equity (continued)
issue price of $36.3520 per share and any declared but unpaid dividends, pari passu with the Series A Preferred Stock, and issuable prior to distribution of proceeds to common stock holders as a result of a liquidation event.
Each share of the Series B and Series B-1 Preferred Stock has substantially similar voting rights as one share of common stock. In addition, the holders of the Series B Preferred Stock are entitled to elect one director of the Company.
Other Features of Convertible Preferred Stock (Series A, Series B and Series B-1 Preferred Stock)
A majority vote of the convertible preferred stock, voting together as a single class, is required to, among other things, consummate certain liquidity events, amend or alter the Company’s Certification of Incorporation or Bylaws, increase or decrease the authorized shares of the preferred stock, or redeem, purchase or otherwise acquire any shares of preferred stock or common stock. Many of the foregoing protective rights are subject to certain exceptions.
Pursuant to a Voting Agreement by the Company and various investor parties thereto, certain individuals and entities have designation rights for certain directors of the Company.
The convertible preferred stock is not redeemable for cash.
Stock Incentive Plans
As a result of the Business Combination, the stockholders of the Company approved the Velodyne Lidar, Inc. 2020 Equity Incentive Plan (the “2020 Equity Plan”). In accordance with the Merger Agreement, the Board approved cancelling and converting all outstanding equity-awards granted under the 2007 Stock Plan and 2016 Stock Plan into equity-based awards under the 2020 Incentive Plan effective upon the consummation of the Business Combination, based on exchange ratios established in the Merger Agreement with the same general terms and conditions corresponding to the original awards.
The Company rolled forward all outstanding options, RSAs and RSUs granted under the 2007 Stock Plan and 2016 Stock Plan into same type of equity-based awards under the 2020 Equity Plan effective upon the consummation of the Business Combination. The shares under the 2007 Stock Plan and 2016 Stock Plan will be retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement as follows:
​ ​ ​ ​ ​ ​ ​
Pre-Combination
Shares
​ ​
Conversion
Ratio
​ ​
Adjusted Shares
​
​ ​ ​ ​ As of December 31, 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Option
​ ​ ​ ​ 53,333 ​ ​ ​ ​ ​ 2.9378 ​ ​ ​ ​ ​ 156,683 ​ ​
​ ​ ​ ​
RSA
​ ​ ​ ​ 1,404,557 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 4,183,625 ​ ​
​ ​ ​ ​
RSU
​ ​ ​ ​ 3,247,352 ​ ​ ​ ​ ​ 2.9378 ​ ​ ​ ​ ​ 9,540,145 ​ ​
​ ​ ​ ​ As of December 31, 2018: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Option
​ ​ ​ ​ 2,603,333 ​ ​ ​ ​ ​ 2.9378 ​ ​ ​ ​ ​ 7,648,131 ​ ​
​ ​ ​ ​
RSA
​ ​ ​ ​ 1,404,557 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 4,183,625 ​ ​
​ ​ ​ ​
RSU
​ ​ ​ ​ 2,186,915 ​ ​ ​ ​ ​ 2.9378 ​ ​ ​ ​ ​ 6,424,769 ​ ​
​ ​ ​ ​ As of December 31, 2017: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Option
​ ​ ​ ​ 2,603,333 ​ ​ ​ ​ ​ 2.9378 ​ ​ ​ ​ ​ 7,648,131 ​ ​
​ ​ ​ ​
RSA
​ ​ ​ ​ 1,404,557 ​ ​ ​ ​ ​ 2.9786 ​ ​ ​ ​ ​ 4,183,625 ​ ​
​ ​ ​ ​
RSU
​ ​ ​ ​ 1,670,669 ​ ​ ​ ​ ​ 2.9378 ​ ​ ​ ​ ​ 4,908,130 ​ ​
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8. Stockholders’ Equity (continued)
2007 Incentive Stock Plan
On January 3, 2008, the Board of Directors of Velodyne Acoustic, the Company’s predecessor entity, approved the 2007 Incentive Stock Plan (the “2007 Stock Plan”) and authorized a total of 10,250,000 shares of common stock for issuance. The 2007 Stock Plan provided for the granting of stock-based awards in the form of stock options and restricted stock awards (RSAs) to employees. On July 26, 2016, August 28, 2018 and October 11, 2019, the Board of Directors approved to decrease the number of shares of common stock authorized for issuance under the 2007 Stock Plan to 4,275,000, 3,904,557 and 1,404,557 shares, respectively. As of December 31, 2019, there were outstanding 1,404,557 shares of common stock subject to RSAs and zero shares of common stock remaining available for future issuance under the 2007 Stock Plan.
2016 Stock Plan
On July 26, 2016, the Board of Directors approved the adoption of the 2016 Stock Plan and authorized 5,263,731 shares of the Company’s common stock for issuance under the 2016 Stock Plan. The 2016 Stock Plan provides for the direct award or sale of shares, the grant of stock options and RSUs to employees, directors and consultants. On October 11, 2019, the Board of Directors approved to increase the number of shares of common stock authorized for issuance under the 2016 Stock Plan to 7,763,731 shares. The number of shares of common stock available for future issuance under the 2016 Stock Plan was 4,463,046 as of December 31, 2019.
Employee Stock Options, RSAs and RSUs
Pursuant to the 2007 Stock Plan, the Company granted options to certain employees to purchase shares of the Company’s common stock in 2008 and 2009. Options expire 10 years from the date of grant and vest 25 percent upon the one-year anniversary date from initial vesting date, with the remainder vesting monthly over the following three years.
In December 2015, the Company granted RSAs totaling 1,675,000 shares of common stock to two employees under the 2007 Stock Plan. The RSAs are subject to a time-based vesting condition and a market condition tied to a liquidity event requirement, both of which must be satisfied on or before the 10-year anniversary of the date of the grant in order for the RSAs to be vested and settled for shares of common stock. All shares of RSAs that do not vest on or before the 10-year anniversary of the date will be forfeited. Subject to certain terms, the RSAs provide voting rights equivalent to a common stockholder and are eligible for dividends. As of December 31, 2019, the market vesting condition tied to a liquidity event had not been met.
Beginning March 2017, the Company granted options and RSUs to certain employees, directors and consultants pursuant to the 2016 Stock Plan. Options expire in 10 years from the date of grant and typically vest 25 percent upon the one-year anniversary date from the initial vesting date, with the remainder vesting quarterly over the following three years. The RSUs are subject to a time-based vesting condition and a market condition tied to a liquidity event requirement, both of which must be satisfied on or before the 7-year anniversary of the date of the grant in order for the RSUs to be vested and settled for shares of common stock. All shares subject to RSUs that do not vest on or before the 7-year anniversary of the date will be forfeited. The RSUs typically vest 25 percent upon the one-year anniversary date from initial vesting date, with the remainder vesting quarterly over the following three years. Certain RSUs also contain performance conditions related to the Company’s product development and business performance for the performance periods specified in the RSU agreements. As of December 31, 2019, the market vesting condition tied to a liquidity event had not been met.
A summary of the combined stock option activity under the Company’s equity plans is as follows:
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8. Stockholders’ Equity (continued)
​ ​ ​ ​ ​ ​ ​
Shares
​ ​
Weighted
Average
Exercise Price
​ ​
Weighted Average
Remaining
Contractual Life
(Years)
​
​ ​ ​ ​ Option: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Options outstanding as of December 31, 2016
​ ​ ​ ​ 2,500,000 ​ ​ ​ ​ $ 0.37 ​ ​ ​ ​ ​ 2.09 ​ ​
​ ​ ​ ​
Granted
​ ​ ​ ​ 257,674 ​ ​ ​ ​ ​ 18.76 ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ (154,341) ​ ​ ​ ​ ​ 18.19 ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Options outstanding as of December 31, 2017
​ ​ ​ ​ 2,603,333 ​ ​ ​ ​ ​ 1.13 ​ ​ ​ ​ ​ 1.34 ​ ​
​ ​ ​ ​
Granted
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Options outstanding as of December 31, 2018
​ ​ ​ ​ 2,603,333 ​ ​ ​ ​ ​ 1.13 ​ ​ ​ ​ ​ 0.22 ​ ​
​ ​ ​ ​
Granted
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ (28,125) ​ ​ ​ ​ ​ 21.08 ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Expired
​ ​ ​ ​ (2,521,875) ​ ​ ​ ​ ​ 0.55 ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Options outstanding as of December 31, 2019
​ ​ ​ ​ 53,333 ​ ​ ​ ​ ​ 18.24 ​ ​ ​ ​ ​ 0.49 ​ ​
A summary of RSA and RSU activities under the Company’s equity plans is as follows:
​ ​ ​ ​ ​ ​ ​
Shares
​ ​
Weighted Average
Grant Date Fair
Value Per Share
​
​ ​ ​ ​ RSA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
RSAs outstanding as of December 31, 2016
​ ​ ​ ​ 1,675,000 ​ ​ ​ ​ $ 4.09 ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ (270,443) ​ ​ ​ ​ ​ 4.09 ​ ​
​ ​ ​ ​
RSAs outstanding as of December 31, 2017
​ ​ ​ ​ 1,404,557 ​ ​ ​ ​ ​ 4.09 ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
RSAs outstanding as of December 31, 2018
​ ​ ​ ​ 1,404,557 ​ ​ ​ ​ ​ 4.09 ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
RSAs outstanding as of December 31, 2019
​ ​ ​ ​ 1,404,557 ​ ​ ​ ​ ​ 4.09 ​ ​
​ ​ ​ ​ RSU: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
RSUs outstanding as of December 31, 2016
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Granted
​ ​ ​ ​ 1,954,639 ​ ​ ​ ​ $ 19.74 ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ (283,970) ​ ​ ​ ​ ​ 18.58 ​ ​
​ ​ ​ ​
RSUs outstanding as of December 31, 2017
​ ​ ​ ​ 1,670,669 ​ ​ ​ ​ ​ 19.94 ​ ​
​ ​ ​ ​
Granted
​ ​ ​ ​ 932,444 ​ ​ ​ ​ ​ 23.73 ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ (416,198) ​ ​ ​ ​ ​ 20.40 ​ ​
​ ​ ​ ​
RSUs outstanding as of December 31, 2018
​ ​ ​ ​ 2,186,915 ​ ​ ​ ​ ​ 21.47 ​ ​
​ ​ ​ ​
Granted
​ ​ ​ ​ 1,473,912 ​ ​ ​ ​ ​ 28.89 ​ ​
​ ​ ​ ​
Forfeited
​ ​ ​ ​ (413,475) ​ ​ ​ ​ ​ 24.39 ​ ​
​ ​ ​ ​
RSUs outstanding as of December 31, 2019
​ ​ ​ ​ 3,247,352 ​ ​ ​ ​ ​ 24.46 ​ ​
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8. Stockholders’ Equity (continued)
Stock-Based Compensation
As of December 31, 2019, no compensation expense had been recognized for the RSAs and RSUs because the performance vesting condition was not probable of being met. At the time the performance vesting condition becomes probable, which is not until the earlier of (i) an initial public offering, or (ii) a sale event, the Company will recognize the cumulative stock-based compensation expense for the outstanding RSAs and RSUs using the accelerated attribution method based on the grant-date fair value of the RSAs and RSUs.
The Company uses the Black-Scholes option pricing model to determine the fair value of its stock option awards. The determination of the fair value for stock options in connection with determining stock compensation expense requires judgment, including estimating the fair market value of common stock, stock-price volatility, expected term, expected dividends and risk-free interest rates. The expected volatility rates are estimated based on historical volatilities of the Company’s peers’ common stock over a period of time that approximates the expected term of the options. Due to lack of historical data on employees’ option exercises, the Company estimates the expected term of the options using the simplified method, which calculates the expected term equal to the midpoint between the vesting period and the maximum contractual term. Expected dividends are estimated based on the Company’s dividend history as well as the Company’s current projections. The risk-free interest rate for periods approximating the expected terms of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
The following table sets forth the weighted average grant date fair value for options and the assumptions used as inputs for the Black-Scholes option pricing model:
​ ​ ​ ​ ​ ​ ​
Year Ended
December 31, 2017
​
​ ​ ​ ​
Weighted average grant date fair value of options
​ ​ ​ $ 8.09 ​ ​
​ ​ ​ ​
Expected term, in years
​ ​ ​ ​ 5.14 ​ ​
​ ​ ​ ​
Expected volatility
​ ​ ​ ​ 47.23% ​ ​
​ ​ ​ ​
Risk-free interest rate
​ ​ ​ ​ 1.88% ​ ​
​ ​ ​ ​
Expected dividend yield
​ ​ ​ ​ — ​ ​
The following table presents stock-based compensation expense included in the Company’s consolidated statements of operations (in thousands):
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​
Research and development
​ ​ ​ $ 97 ​ ​ ​ ​ $ 93 ​ ​ ​ ​ $ 156 ​ ​
​ ​ ​ ​
General and administrative
​ ​ ​ ​ 38 ​ ​ ​ ​ ​ 114 ​ ​ ​ ​ ​ 78 ​ ​
​ ​ ​ ​
Total stock-based compensation expense
​ ​ ​ $ 135 ​ ​ ​ ​ $ 207 ​ ​ ​ ​ $ 234 ​ ​
The Company recognizes forfeitures as they occur. As of December 31, 2019, unrecognized compensation cost related to stock options was $41,000, which was expected to be recognized over a weighted average period of 0.49 years.
Note 9. Net Income (Loss) Per Share Attributable to Common Stockholders
The Company follows the two-class method when computing net income (loss) per common share when shares are issued that meet the definition of participating securities. The Company considers its convertible preferred stock and the RSAs to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of the declaration of a dividend for shares of common stock.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 9. Net Income (Loss) Per Share Attributable to Common Stockholders (continued)
During the periods when the Company is in a net loss position, the net loss attributable to common stockholders was not allocated to the convertible preferred stock and the RSAs under the two-class method as these securities do not have a contractual obligation to share in losses. Distributed and undistributed earnings allocated to participating securities are subtracted from net income (loss) in determining net income attributable to common stockholders. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding. The diluted net income per share attributable to common stockholders is computed by giving effect to all dilutive securities. Diluted net income per share attributable to common stockholders is computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding. During the periods when there is a net loss attributable to common stockholders, potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive.
Pursuant to the Amended and Restated Certificate of Incorporation and as a result of the Business Combination and reverse recapitalization, the Company has retrospectively adjusted the weighted average shares outstanding prior to September 29, 2020 to give effect to the exchange ratio used to determine the number of shares of common stock into which the pre-combination Velodyne common and preferred stock converted. The pre-combination Velodyne’s preferred shares are converted to and included in weighted average common shares outstanding and are not considered as participating securities when computing the post-combination adjusted net income (loss) per common share for all periods presented.
A reconciliation of the numerator and denominator used in the calculation of the basic and diluted earnings per share attributable to common stockholders is as follows (in thousands except share and per share amounts):
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
Pre-Combination Previously Reported: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income (loss)
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,761 ​ ​
Less: undistributed earnings to participating securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (3,622) ​ ​
Net income (loss) attributable to common stockholders – basic
​ ​ ​ ​ (67,226) ​ ​ ​ ​ ​ (62,300) ​ ​ ​ ​ ​ 12,139 ​ ​
Add: adjustments to undistributed earnings to participating securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 189 ​ ​
Net income (loss) attributable to common stockholders – diluted
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 12,328 ​ ​
Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Weighted-average shares of common stock – basic
​ ​ ​ ​ 34,252,578 ​ ​ ​ ​ ​ 34,320,311 ​ ​ ​ ​ ​ 34,325,728 ​ ​
Effect of dilutive stock options
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,453,973 ​ ​
Weighted-average shares of common stock – diluted
​ ​ ​ ​ 34,252,578 ​ ​ ​ ​ ​ 34,320,311 ​ ​ ​ ​ ​ 36,779,701 ​ ​
Net income (loss) per share attributable to common stockholders:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ $ (1.96) ​ ​ ​ ​ $ (1.82) ​ ​ ​ ​ $ 0.35 ​ ​
Diluted
​ ​ ​ $ (1.96) ​ ​ ​ ​ $ (1.82) ​ ​ ​ ​ $ 0.34 ​ ​
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 9. Net Income (Loss) Per Share Attributable to Common Stockholders (continued)
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
Post-Combination Adjusted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income (loss)
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,761 ​ ​
Less: undistributed earnings to participating securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (520) ​ ​
Net income (loss) attributable to common stockholders – basic
​ ​ ​ ​ (67,226) ​ ​ ​ ​ ​ (62,300) ​ ​ ​ ​ ​ 15,241 ​ ​
Add: adjustments to undistributed earnings to participating securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 27 ​ ​
Net income (loss) attributable to common stockholders – diluted
​ ​ ​ $ (67,226) ​ ​ ​ ​ $ (62,300) ​ ​ ​ ​ $ 15,268 ​ ​
Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Weighted-average shares of common stock – basic
​ ​ ​ ​ 133,942,714 ​ ​ ​ ​ ​ 129,948,023 ​ ​ ​ ​ ​ 128,373,783 ​ ​
Effect of dilutive stock options
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,209,338 ​ ​
Weighted-average shares of common stock – diluted
​ ​ ​ ​ 133,942,714 ​ ​ ​ ​ ​ 129,948,023 ​ ​ ​ ​ ​ 135,583,121 ​ ​
Net income (loss) per share attributable to common stockholders:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ $ (0.50) ​ ​ ​ ​ $ (0.48) ​ ​ ​ ​ $ 0.12 ​ ​
Diluted
​ ​ ​ $ (0.50) ​ ​ ​ ​ $ (0.48) ​ ​ ​ ​ $ 0.11 ​ ​
​
The following common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been antidilutive:
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​ Post-Combination Adjusted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Stock options to purchase common stock
​ ​ ​ ​ 156,683 ​ ​ ​ ​ ​ 7,648,131 ​ ​ ​ ​ ​ 303,574 ​ ​
​ ​ ​ ​
Restricted stock awards
​ ​ ​ ​ 4,183,625 ​ ​ ​ ​ ​ 4,183,625 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Restricted stock units
​ ​ ​ ​ 9,540,145 ​ ​ ​ ​ ​ 6,424,769 ​ ​ ​ ​ ​ 4,908,130 ​ ​
​ ​ ​ ​
Total
​ ​ ​ ​ 13,880,453 ​ ​ ​ ​ ​ 18,256,525 ​ ​ ​ ​ ​ 5,211,704 ​ ​
Note 10. Retirement Plan
The Company has a 401(k) savings and profit-sharing plan (the 401(k) Plan), which is intended to be a tax-qualified defined contribution plan that covers all eligible employees, as defined in the applicable plan documents. Under the 401(k) Plan, eligible employees may elect salary deferral contributions, not to exceed limitations established annually by the IRS. The Company matches 25% of employees’ eligible contributions. The Company’s matching contributions were $0.9 million, $0.9 million and $0.5 million, respectively, for 2019 2018 and 2017.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 11. Income Taxes
Income (loss) before income taxes consisted of the followings (in thousands):
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​
Domestic
​ ​ ​ $ (68,645) ​ ​ ​ ​ $ (56,631) ​ ​ ​ ​ $ 24,970 ​ ​
​ ​ ​ ​
Foreign
​ ​ ​ ​ 736 ​ ​ ​ ​ ​ 959 ​ ​ ​ ​ ​ 601 ​ ​
​ ​ ​ ​
Income (loss) before income taxes
​ ​ ​ $ (67,909) ​ ​ ​ ​ $ (55,672) ​ ​ ​ ​ $ 25,571 ​ ​
Provision for (benefit from) income taxes consisted of the following (in thousands):
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​ Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Federal
​ ​ ​ $ 958 ​ ​ ​ ​ $ 8 ​ ​ ​ ​ $ 7,192 ​ ​
​ ​ ​ ​
State
​ ​ ​ ​ (130) ​ ​ ​ ​ ​ 507 ​ ​ ​ ​ ​ 1,428 ​ ​
​ ​ ​ ​
Foreign
​ ​ ​ ​ 430 ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 168 ​ ​
​ ​ ​ ​
Total Current
​ ​ ​ ​ 1,258 ​ ​ ​ ​ ​ 783 ​ ​ ​ ​ ​ 8,788 ​ ​
​ ​ ​ ​ Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Federal
​ ​ ​ ​ (1,942) ​ ​ ​ ​ ​ 3,805 ​ ​ ​ ​ ​ 1,690 ​ ​
​ ​ ​ ​
State
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 2,040 ​ ​ ​ ​ ​ (668) ​ ​
​ ​ ​ ​
Foreign
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Total Deferred
​ ​ ​ ​ (1,941) ​ ​ ​ ​ ​ 5,845 ​ ​ ​ ​ ​ 1,022 ​ ​
​ ​ ​ ​
Provision for (benefit from) income taxes
​ ​ ​ $ (683) ​ ​ ​ ​ $ 6,628 ​ ​ ​ ​ $ 9,810 ​ ​
On December 22, 2017, the Tax Cuts and Jobs Act (P.L. 115-97) was enacted (Tax Act). Among other changes is a permanent reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the reduction in the corporate income tax rate, the Company revalued its net deferred tax assets as of December 31, 2017 which resulted in a reduction in the value of the Company’s net deferred tax assets of approximately $1.9 million.
On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for tax effects of the Tax Act. SAB 118’s measurement period which closed on December 22, 2018, one year from the Tax Act’s enactment. In accordance with SAB 118, the Company took a provisional amount of bonus tax depreciation following the provisions under the Tax Act. Upon finalization, the provisional adjustment was deemed immaterial. The Tax Act provides for a one-time “deemed repatriation” of accumulated foreign earnings for 2017. The Company paid $0.1 million of U.S. federal cash taxes on the deemed repatriation tax in one installment for 2017.
The Tax Act includes certain anti-deferral and anti-abuse erosion provisions, including a new minimum tax on global intangible low-taxed income (GILTI) and base erosion and anti-abuse tax (BEAT). The Tax Act subjects the Company to current tax on GILTI of its controlled foreign corporations. At December 31, 2018, the Company recognized $0.2 million of tax related to GILTI inclusions reducing the deferred tax assets, which will be fully offset by the change in valuation allowance. GILTI is treated as a period cost using the current method. There is no tax expense impact related to GILTI inclusion. The BEAT, limits the ability of multinational corporations with gross receipts of more than $500 million (averaged over the prior three years) to shift profits from the United States by making deductible payments to their affiliates in low-tax countries. In 2019 and 2018, the Company’s gross receipts were less than the reporting threshold.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 11. Income Taxes (continued)
The provision for (benefit from) income taxes differ from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes for the following reasons:
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​
U.S. federal provision at statutory rate
​ ​ ​ ​ 21.0% ​ ​ ​ ​ ​ 21.0% ​ ​ ​ ​ ​ 35.0% ​ ​
​ ​ ​ ​
State income taxes, net of federal benefit
​ ​ ​ ​ 1.3 ​ ​ ​ ​ ​ 7.4 ​ ​ ​ ​ ​ 4.3 ​ ​
​ ​ ​ ​
Foreign income taxes at rates other than the U.S. rate
​ ​ ​ ​ (0.4) ​ ​ ​ ​ ​ (0.1) ​ ​ ​ ​ ​ (0.2) ​ ​
​ ​ ​ ​
Tax credits
​ ​ ​ ​ 5.2 ​ ​ ​ ​ ​ 4.5 ​ ​ ​ ​ ​ (6.0) ​ ​
​ ​ ​ ​
Permanent items
​ ​ ​ ​ (0.2) ​ ​ ​ ​ ​ (0.7) ​ ​ ​ ​ ​ 0.8 ​ ​
​ ​ ​ ​
Domestic manufacturing deduction
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2.3) ​ ​
​ ​ ​ ​
Uncertain tax benefits
​ ​ ​ ​ (0.2) ​ ​ ​ ​ ​ (0.5) ​ ​ ​ ​ ​ (3.8) ​ ​
​ ​ ​ ​
2017 Tax Cuts and Job Act impact
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6.9 ​ ​
​ ​ ​ ​
Prior year return to provision adjustments
​ ​ ​ ​ (0.1) ​ ​ ​ ​ ​ 0.2 ​ ​ ​ ​ ​ 3.7 ​ ​
​ ​ ​ ​
Change in valuation allowance
​ ​ ​ ​ (25.7) ​ ​ ​ ​ ​ (43.2) ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Other
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ (0.5) ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Effective tax rate
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ (11.9)% ​ ​ ​ ​ ​ 38.4% ​ ​
The Company’s effective tax rates differ from the federal statutory rate primarily due to state taxes, research and development credits, valuation allowance, and other permanent adjustments.
The Company’s deferred income tax assets and liabilities as of December 31, 2019 and 2018 were as follows (in thousands):
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​ Deferred tax assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Net operating loss carryforward
​ ​ ​ $ 27,325 ​ ​ ​ ​ $ 15,365 ​ ​
​ ​ ​ ​
Tax credits
​ ​ ​ ​ 5,099 ​ ​ ​ ​ ​ 2,522 ​ ​
​ ​ ​ ​
Deferred revenue
​ ​ ​ ​ 4,601 ​ ​ ​ ​ ​ 2,633 ​ ​
​ ​ ​ ​
Accruals and reserves
​ ​ ​ ​ 4,336 ​ ​ ​ ​ ​ 2,820 ​ ​
​ ​ ​ ​
Inventories
​ ​ ​ ​ 2,176 ​ ​ ​ ​ ​ 2,992 ​ ​
​ ​ ​ ​
Stock-based compensation
​ ​ ​ ​ 129 ​ ​ ​ ​ ​ 119 ​ ​
​ ​ ​ ​
Other
​ ​ ​ ​ 52 ​ ​ ​ ​ ​ 61 ​ ​
​ ​ ​ ​
Total deferred tax assets
​ ​ ​ ​ 43,718 ​ ​ ​ ​ ​ 26,512 ​ ​
​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ (1,820) ​ ​ ​ ​ ​ (2,475) ​ ​
​ ​ ​ ​
Prepaids
​ ​ ​ ​ (427) ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Total deferred tax liabilities
​ ​ ​ ​ (2,247) ​ ​ ​ ​ ​ (2,475) ​ ​
​ ​ ​ ​
Net deferred tax assets before valuation allowance
​ ​ ​ ​ 41,471 ​ ​ ​ ​ ​ 24,037 ​ ​
​ ​ ​ ​
Valuation allowance
​ ​ ​ ​ (41,473) ​ ​ ​ ​ ​ (24,037) ​ ​
​ ​ ​ ​
Net deferred tax assets (liabilities)
​ ​ ​ $ (2) ​ ​ ​ ​ $ — ​ ​
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 11. Income Taxes (continued)
Income taxes are accounted for using an asset-and-liability approach. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards measured by applying currently enacted tax laws. If applicable, a valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized. Further, the Company establishes liabilities or reduces assets for uncertain tax positions when it believes certain tax positions are not more likely than not of being sustained if challenged. Revaluation of tax positions considers factors such as changes in facts or circumstances, changes in or interpretations of tax law, effectively settled issues under audit or expiration of statute of limitation, and new audit activity.
The Company assesses the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. In assessing the realizability of deferred tax assets, The Company considers whether it is more likely than not that all or some portion of deferred tax assets will not be realized. Due to the losses the Company generated in the current year, and the projected losses in the future, the Company believes it is not more likely than not that all of the deferred tax assets can be realized. Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $41.5 million as of December 31, 2019 and $24.0 million as of December 31, 2018.
Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the “ownership change” limitations provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and other similar state provisions. Any annual limitation may result in the expiration of net operating loss and tax credit carryforwards before utilization.
Furthermore, under the Tax Act, although the treatment of tax losses generated in taxable years ending before December 31, 2017 has generally not changed, tax losses generated in taxable years beginning after December 31, 2017 may be utilized to offset no more than 80% of taxable income annually. This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in the current and prior years.
As of December 31, 2019, the Company had $107.4 million of U.S. federal and $73.4 million of state net operating loss carryforwards available to reduce future taxable income, which will be carried forward indefinitely for U.S. federal tax purposes and will expire beginning in 2028 through 2038 for state tax purposes.
The Company also has federal and California research and development tax credit carryforwards of $2.8 million and $3.9 million, respectively. The federal research credit carryforwards will expire in 2038 and California research credits can be carried forward indefinitely. The Company also has federal foreign tax credit carryforwards of $1.0 million that will expire in 2029.
The Company accrues for uncertain tax positions identified, which are not deemed more likely than not to be sustained if challenged, and recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company accrued immaterial interest on uncertain tax benefits associated with unrecognized tax benefits, and had immaterial cumulative interest and penalties as of December 31, 2019 and 2018.
The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. The following table summarizes the aggregate changes in the total gross amount of unrecognized tax benefits (in thousands):
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 11. Income Taxes (continued)
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​
Unrecognized tax benefits as of the beginning of the year
​ ​ ​ $ 2,824 ​ ​ ​ ​ $ 1,763 ​ ​ ​ ​ $ 1,884 ​ ​
​ ​ ​ ​
Increases related to prior year tax provisions
​ ​ ​ ​ 308 ​ ​ ​ ​ ​ 78 ​ ​ ​ ​ ​ 44 ​ ​
​ ​ ​ ​
Decrease related to prior year tax provisions
​ ​ ​ ​ — ​ ​ ​ ​ ​ (216) ​ ​ ​ ​ ​ (968) ​ ​
​ ​ ​ ​
Increase related to current year tax provisions
​ ​ ​ ​ 1,282 ​ ​ ​ ​ ​ 1,199 ​ ​ ​ ​ ​ 803 ​ ​
​ ​ ​ ​
Statue lapse
​ ​ ​ ​ (226) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Unrecognized tax benefits as of the end of the year
​ ​ ​ $ 4,188 ​ ​ ​ ​ $ 2,824 ​ ​ ​ ​ $ 1,763 ​ ​
The unrecognized tax benefits, if recognized, would impact the income tax provision by $1.3 million, $1.6 million, and $1.3 million as of December 31, 2019, 2018 and 2017, respectively. The remaining unrecognized tax benefits would not impact the income tax provision as there would be an offset by the reversal of related deferred tax assets subject to a full valuation allowance.
As of December 31, 2019, the Company does not believe that its estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next twelve months. The Company has elected to include interest and penalties as a component of income tax expense. The amounts were not material for 2018, 2018 and 2017.
The Company’s major tax jurisdictions are the United States and California and the earliest years open for examination are for 2016 and 2015 tax years, respectively.
Subsequent to December 31, 2019, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted in March 2020. The CARES Act provides emergency assistance and health care response for businesses affected by the 2020 coronavirus pandemic. The CARES Act includes tax reform that is applicable to the Company, most significantly relating to net operating losses. Under the provisions of the CARES Act, the Company qualifies for the net operating loss carryback provisions and is currently evaluating the tax impact.
Note 12. Commitments and Contingencies
Lease Commitments
The Company leases office and manufacturing facilities under non-cancelable operating leases expiring at various dates through December 2027, including office and manufacturing space in San Jose, California used as its corporate headquarters. The lessor company is owned by one of the Company’s officers. Please see Note 14. Related Party Transactions. The Company entered into capital leases for purchasing of information technology equipment in 2018 and 2019. The net book value of the capital lease assets was $0.7 million and $0.6 million, respectively, as of December 31, 2019 and 2018. The amortization of the capital lease assets was $0.1 million and $81,000, respectively, in 2019 and 2018 and was included in depreciation expense.
As of December 31, 2019, future minimum lease payments under all noncancelable capital and operating leases with an initial lease term in excess of one year were as follows (in thousands):
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 12. Commitments and Contingencies (continued)
​ ​ ​ ​
Years Ending December 31,
​ ​
Capital Leases
​ ​
Operating Leases
​
​ ​ ​ ​
2020
​ ​ ​ $ 310 ​ ​ ​ ​ $ 4,246 ​ ​
​ ​ ​ ​
2021
​ ​ ​ ​ 233 ​ ​ ​ ​ ​ 4,026 ​ ​
​ ​ ​ ​
2022
​ ​ ​ ​ 14 ​ ​ ​ ​ ​ 3,296 ​ ​
​ ​ ​ ​
2023
​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,358 ​ ​
​ ​ ​ ​
2024
​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,459 ​ ​
​ ​ ​ ​
Thereafter
​ ​ ​ ​ — ​ ​ ​ ​ ​ 11,012 ​ ​
​ ​ ​ ​
Net minimum lease payments
​ ​ ​ ​ 557 ​ ​ ​ ​ $ 29,397 ​ ​
​ ​ ​ ​
Less amount representing interest
​ ​ ​ ​ (33) ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Present value of net minimum lease payments
​ ​ ​ ​ 524 ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Less current portion
​ ​ ​ ​ (285) ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Long-term obligations as of December 31, 2019
​ ​ ​ $ 239 ​ ​ ​ ​ ​ ​ ​ ​
Rent expense under operating leases was approximately $4.3 million, $4.1 million and $4.0 million, respectively, for 2019, 2018 and 2017.
Purchase Commitments
The Company uses several contract manufacturers to manufacture components, subassemblies and products. The Company provides these contract manufacturers with demand information and they use this information to acquire components and build products. Contract manufacturer commitments consist of obligations for on-hand inventories and non-cancelable purchase orders with contract manufactures. If the Company cancels all or part of the orders, it may still be liable to the contract manufacturers for the cost of the materials and components purchased by the subcontractors to manufacture the Company’s products. The Company also obtain individual components for its products from a wide variety of individual suppliers. In addition, the Company has other contractual obligations for goods or services associated with its ordinary course of business. As of December 31, 2019, the Company has $41.6 million of outstanding purchase orders or commitments for goods or services with contract manufacturers and vendors.
Legal Proceedings
From time to time, the Company is involved in actions, claims, suits and other proceedings in the ordinary course of business, including assertions by third parties relating to intellectual property infringement, breaches of contract or warranties or employment-related matters. The Company is defending all current litigation matters. Although there can be no assurances and the outcome of these matters is currently not determinable, the Company currently believes that none of these claims or proceedings are likely to have a material adverse effect on the Company’s financial position.
In September 2016, Quanergy Systems, Inc. (“Quanergy”) filed a complaint against the Company and one of the Company’s customers in the Northern District of California, seeking a declaratory judgment of non-infringement of one of the Company’s patents, U.S. Patent No. 7,969,558 (the “‘558 patent”) and asserting state and federal trade secret misappropriation claims against the Company and its customer and breach of contract and constructive fraud claims against its customer. In November 2016, Quanergy filed an amended complaint, removing its trade secret misappropriation claims against the Company, dropping its customer from the suit and dropping the related claims of breach and constructive fraud. The amended complaint maintained only the declaratory judgment of non-infringement action against the Company. In December 2016, the Company filed an answer generally denying the allegations and relief requested in Quanergy’s amended complaint. The Company’s answer also included counterclaims against Quanergy asserting direct, indirect, and willful infringement of the ‘558 patent. In January 2017, Quanergy filed an
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 12. Commitments and Contingencies (continued)
answer generally denying the allegations in the Company’s patent infringement counterclaims and requesting relief. The court held a claim construction hearing on September 13, 2017 and issued a claim construction order on October 4, 2017, which adopted the majority of the Company’s proposed constructions. In June 2018, the district court entered an order granting a joint stipulation to stay the litigation.
Quanergy filed two petitions for inter partes review with the U.S. Patent Office’s Patent Trials and Appeal Board (PTAB) in November 2017, challenging all claims of the ‘558 patent that the Company asserted. The Company filed a Patent Owner Preliminary Response to Quanergy’s petitions on March 7, 2018. The PTAB issued an institution decision on May 25, 2018, instituting review of all challenged claims. The Company subsequently filed a Patent Owner Response and a Contingent Motion to Amend the claims. The PTAB held oral argument on February 27, 2019. On May 23, 2019, the PTAB issued a Final Written Decision upholding the validity of all the challenged claims, finding that Quanergy did not prove by a preponderance of the evidence that any of the challenged claims of the ‘558 patent were unpatentable, and denying the Company’s contingent motion as moot. In June 2019, Quanergy filed a request for rehearing. That motion has not yet been ruled upon by the PTAB.
On August 13, 2019, the Company filed separate complaints against Hesai Photonics Technology Co., Ltd. (Hesai) (5:19-cv-4742-EJD) and Suteng Innovation Technology Co., Ltd. (RoboSense) (5:19-cv-4746-EJD), in the United States District Court for the Northern District of California. These complaints allege infringement of the ‘558 patent by Hesai and RoboSense, respectively. In both cases, the Company is seeking, among other relief, a permanent injunction and to be determined monetary damages adequate to compensate us for the alleged infringement. Both cases have been stayed pending resolution of the ITC investigation (No. 337-TA-1173). In the Hesai case (5:19-cv-4742-EJD), the parties have been ordered to file status reports every six months to update the court on the status of the ITC investigation.
On August 15, 2019, the Company also filed a patent infringement complaint with the United States International Trade Commission (ITC) against Hesai and RoboSense. The complaint filed with the ITC alleges violations of Section 337 of the Tariff Act of 1930, as amended, by both Hesai and RoboSense and requests that the ITC investigate Hesai and RoboSense for unlawfully importing and selling products that infringe upon the ‘558 patent. On August 28, 2019, the Company filed a supplement with the ITC. The Company is asking the ITC to issue permanent limited exclusion orders and permanent cease and desist orders against Hesai and RoboSense to stop the importation and sale of the following products in the United States: (a) rotating 3-D lidar devices; (b) components thereof; and (c) sensing systems containing the same. On September 11, 2019, the Company received notice that the ITC instituted an investigation of Hesai and RoboSense (No. 337-TA-1173). The ITC set a target date of February 17, 2021. On March 19, 2020, due to travel restrictions and other associated difficulties related to COVID-19, Judge McNamara issued an Order suspending the Procedural Schedule in the case for 45 days for all active deadlines except for certain discovery, such as document production. The Order further stated that a teleconference will be scheduled on or about May 1, 2020 to revisit the status of the Procedural Schedule.
On November 8, 2019, Velodyne Lidar, Inc., Velodyne Europe GmbH, Gotting KG, and IFTAS GmbH were sued by Hesai for alleged patent infringement before the District Court of Frankfurt, Germany (Docket No. 2-6 O 461/19). The response to the Complaint is due in May 2020.
On April 3, 2020, a former employee filed a class action lawsuit in the United States District Court for the northern District of California. The complaint alleges that the Company violated the federal Worker Adjustment and Retraining Notification Act, or WARN Act, and California WARN Act in connection with its termination of the employment of the plaintiff and other similarly situation. The plaintiff is seeking to certify the action as a class action and is also seeking other remedies on behalf of himself and others, including unpaid wages, salaries, commissions, bonuses and other compensation and benefits for 60 days under the WARN Act, if applicable. The Company has not yet responded to the complaint.
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 12. Commitments and Contingencies (continued)
The Company records accruals for outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company evaluated developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. The Company has not recorded any accrual for loss contingencies associated with such legal claims or litigation discussed above.
Note 13. Segment, Geographic and Customer Concentration Information
The Company conducts its business in one operating segment that develops and produces Lidar sensors for use in industrial, 3D mapping, drones and auto applications. The Company’s Chief Executive Officer is the chief operating decision maker (CODM). The CODM allocates resources and makes operating decisions based on financial information presented on a consolidated basis, accompanied by disaggregated information about sales and gross margin by product group. The profitability of the Company’s product group is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company.
The Company reports revenue by region and country based on the location where its customers accept delivery of its products and services. Revenue by region was as follows (amount in thousands):
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​ Revenue by region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
North America
​ ​ ​ $ 49,634 ​ ​ ​ ​ $ 84,541 ​ ​ ​ ​ $ 139,005 ​ ​
​ ​ ​ ​
Asia Pacific
​ ​ ​ ​ 28,791 ​ ​ ​ ​ ​ 39,770 ​ ​ ​ ​ ​ 26,562 ​ ​
​ ​ ​ ​
Europe, Middle East and Africa
​ ​ ​ ​ 22,973 ​ ​ ​ ​ ​ 18,635 ​ ​ ​ ​ ​ 16,523 ​ ​
​ ​ ​ ​
Revenue
​ ​ ​ $ 101,398 ​ ​ ​ ​ $ 142,946 ​ ​ ​ ​ $ 182,090 ​ ​
​ ​ ​ ​ % of Revenue by region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
North America
​ ​ ​ ​ 49% ​ ​ ​ ​ ​ 59% ​ ​ ​ ​ ​ 76% ​ ​
​ ​ ​ ​
Asia Pacific
​ ​ ​ ​ 28% ​ ​ ​ ​ ​ 28% ​ ​ ​ ​ ​ 15% ​ ​
​ ​ ​ ​
Europe, Middle East and Africa
​ ​ ​ ​ 23% ​ ​ ​ ​ ​ 13% ​ ​ ​ ​ ​ 9% ​ ​
​ ​ ​ ​
Revenue
​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
Revenue from U.S. customers accounted for 46%, 59% and 72% of revenue in 2019, 2018 and 2017, respectively. There were no other countries attributing a material portion of revenue except for in 2019 and 2018, revenue from China customers accounted for 11% and 21%, respectively, of revenue.
In 2019, two customers each accounted for more than 10% of the Company’s revenues. In 2018, two customers each accounted for more than 10% of the Company’s total revenues. In 2017, three customers each accounted for more than 10% of the Company’s revenues, one of which accounted for 26% of revenue. There was at least one customer that accounted for more than 10% of revenues in all years presented.
The Company’s long-lived assets, consisting primarily of property, plant and equipment, were primarily located in the United States as of December 31, 2019 and December 31, 2018.
Note 14. Related Party Transactions
Three holders of the convertible preferred stock purchased products and services, directly or through a third party, from the Company. Revenue and accounts receivable for these holders were as follows (in thousands):
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 14. Related Party Transactions (continued)
​ ​ ​ ​ ​ ​ ​
Year Ended December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​ ​ Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Stockholder A
​ ​ ​ $ (3,514)(1) ​ ​ ​ ​ $ 9,447 ​ ​ ​ ​ $ 7,090 ​ ​
​ ​ ​ ​
Stockholder B
​ ​ ​ ​ 1,391 ​ ​ ​ ​ ​ 508 ​ ​ ​ ​ ​ 5,080 ​ ​
​ ​ ​ ​
Stockholder C
​ ​ ​ ​ 6,148 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​ ​ ​ ​ ​
2019
​ ​
2018
​
​ ​ ​ ​ Accounts receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Stockholder A
​ ​ ​ $ 9 ​ ​ ​ ​ $ 2,907 ​ ​
​ ​ ​ ​
Stockholder B
​ ​ ​ ​ 1,404 ​ ​ ​ ​ ​ 251 ​ ​
​ ​ ​ ​
Stockholder C
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​
(1)
The 2019 amount included a $4.1 million refund, net of taxes, the Company issued to entities affiliated with the stockholder in October 2019, in order to compensate them for unforeseen challenges associated with the use of certain new products purchased from the Company in 2018. The products purchased by these entities in 2018 were still under development at the time and the Company felt it appropriate to compensate these early purchasers for working with a new product.
​
In April 2019, the Company entered into a manufacturing agreement with one of its Series B Preferred Stock holders (Stockholder D), and the Company has one product that is currently being manufactured by Stockholder D. As of December 31, 2019, the Company had $2.7 million of accrued purchases and $24.9 million of outstanding purchase commitment for products with this stockholder. The Company procures equipment, materials and components for Stockholder D to build the product and had $2.7 million of receivables from this stockholder which was included in other current assets as of December 31, 2019.
In November 2018, in connection with its issuance of Series B Preferred Stock, the Company repurchased 73,150 shares of common stock from certain holders of its common stock, who are family members of one of the Company’s officers. The purchase price per share of $36.3520 was equivalent to the price paid for each share of the Series B Preferred Stock.
The Company currently rents its corporate headquarters facility in San Jose, California from a company owned by one of its officers. The lease was executed in January 2017 and expires in December 2027, as amended. As of December 31, 2019, future minimum lease payments totaled $27.3 million related to this facility. Rent expense under this lease was $3.1 million, $3.0 million and $3.0 million, respectively, for 2019, 2018 and 2017.
In January 2017 and December 2016, the Company issued two interest-bearing unsecured promissory notes totaling $3.5 million to one of its officers for purposes of financing the acquisition of the above headquarters facility. The loan accrued interest at a rate of 3.15% per annum. As of December 31, 2019, immediately prior to repayment, the aggregate outstanding balance of the loan was approximately $3.6 million, including aggregate accrued and unpaid interest of $0.1 million. The officer made monthly interest-only payments to the Company on the loan beginning in December 2017 and repaid all outstanding principal and interest due under the two promissory notes on December 31, 2019.
In addition, in March 2017, the Company entered into an unconditional payment guaranty with regard to one of its officers’ $15.0 million term loan. The loan was obtained for and secured by a Deed of Trust for the above headquarters facility in San Jose, California. Under the terms of the guaranty, the Company has
 
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VELODYNE LIDAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 14. Related Party Transactions (continued)
agreed to unconditionally guarantee the borrower’s obligations under the loan. As of December 31, 2018 and 2017, the outstanding principal balance of the term loan was $14.4 million and $14.8 million, respectively. As of December 31, 2019, the Company no longer guarantees the loan and has no further obligations under the unconditional payment guaranty.
In August 2016, the Company entered into an agreement with one of its officers and Velodyne Acoustics, LLC (Acoustics) pursuant to which Acoustics agreed to, among other things, indemnify, defend and hold harmless Velodyne Lidar, Inc. from and against any and all liabilities relating to, arising out of or resulting from certain litigation matters (Litigation Indemnification Agreement). The litigation matters giving rise to the indemnification obligations involved certain employment-related claims of two former employees of Velodyne Acoustics, which was the predecessor of Acoustics. In November 2019, the Company elected not to seek indemnification from Acoustics for the litigation matters under the terms of the Litigation Indemnification Agreement and assumed control and financial responsibility for the litigation matters. By not seeking indemnification from Acoustics, the Company currently estimates that the Company will pay approximately $2.5 million in settlements in connection with the litigation matters, and $2.0 million in legal costs, all of which are included in general and administration in the statement of operations. Such payments and costs incurred that were the subject of the Litigation Indemnification Agreement indirectly benefit the officer, the former sole owner of Acoustics. The Company believes that the litigation matters covered by the Litigation Indemnification Agreement are now substantially complete and the Company does not expect to incur significant additional expenses related to these litigation matters.
Note 15. Subsequent Events
The Company has evaluated subsequent events through April 15, 2020, which is the date the audited consolidated financial statements were available for issuance.
On April 1, 2020, the Company entered into a share purchase agreement with a new investor pursuant to which the Company sold and issued to the investor 550,176 shares of Series B-1 Preferred Stock at a price of $36.3520 per share, and received proceeds of $20.0 million.
On April 3, 2020, the Company entered into a Purchase and Sale Agreement with a third-party buyer to sell its Morgan Hill building for a purchase price of $13.2 million. The parties currently expect the transaction to close in July 2020, subject to the satisfaction of various closing conditions.
On April 8, 2020, the Company received loan proceeds of $10.0 million under the CARES Act’s Paycheck Protection Program (PPP). The principal and accrued interest are forgivable after eight 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 over two years at an interest rate of 1% per annum, with a deferral of payments for the first six months.
 
F-40

 

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Unless the context otherwise requires, the “Company” refers to Velodyne Lidar, Inc. and its subsidiaries after the closing of the Business Combination, and Graf Industrial Corp. prior to the closing of the Business Combination.

 

Introduction

 

The Company is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of Velodyne becoming a wholly-owned subsidiary of the Graf as a result of Graf’s wholly-owned subsidiary, Merger Sub, merging with and into Velodyne, with Velodyne surviving the merger as a wholly owned subsidiary of Graf, which was renamed Velodyne Lidar, Inc. (the “Transaction”). The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

 

The following unaudited pro forma condensed combined balance sheet of the post-combination company as of September 30, 2020 and pro forma condensed combined statement of operations of the post- combination company for the nine months ended September 30, 2020 and year ended December 31, 2019 present the combination of the financial information of Graf and Velodyne, after giving effect to the Transaction and related adjustments described in the accompanying notes.

 

The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the post-combination company’s results of operations would have been had the acquisition occurred on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting the future results of operations of the Company. The actual results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

The historical financial information of Graf was derived from the books and records of Graf for the period between January 1, 2020 to September 29, 2020 and the audited financial statements of Graf for the year ended December 31, 2019, respectively. The historical financial information of Velodyne was derived from the unaudited and audited consolidated financial statements of Velodyne for the nine months ended September 30, 2020 and for the year ended December 31, 2019, respectively. This information should be read together with Graf’s and Velodyne’s unaudited and audited financial statements and related notes included in our Current Report on Form 8-K, initially filed with the SEC on October 5, 2020 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, initially filed with the SEC on November 11, 2020.

 

Description of the Transaction

 

Subject to the terms and conditions of the Merger Agreement and Merger Agreement Amendment, Graf was obligated to pay to Velodyne equity holders aggregate consideration consisting of up to (1) 143,575,763 shares of Company common stock, including shares issuable in respect of vested equity awards of Velodyne, plus (2) 2,000,000 shares of Company common stock earned due to the satisfaction of the Earnout Condition on July 30, 2020 pursuant to the Earnout, including 187,680 Earnout RSUs, which are subject to a six-month service condition and are not legally issued and outstanding shares of Company common stock at Closing, plus (3) 4,702,304 shares of Company common stock that were issued to Velodyne equity holders that did not opt to have their respective shares repurchased by Velodyne for cash in a pre- closing tender offer conducted by Velodyne (the “Pre-Closing Tender Offer”) that expired on September 22, 2020.

 

Each share of Velodyne’s common stock and Series A Convertible Preferred Stock was converted into approximately 2.9786 shares of common stock of the Company based on the determined exchange ratio, which is inclusive of shares payable due to the satisfaction of the Earnout. Each share of Velodyne’s Series B Convertible Preferred Stock and Series B-1 Convertible Preferred Stock was converted into approximately 3.5465 shares of common stock of the Company based on the determined exchange ratio.

 

1

 

 

In addition, following the Sponsor’s cancellation of 3,519,128 Founder Shares held by it pursuant to the terms of the Sponsor Agreement dated July 2, 2020, the Sponsor retained 2,507,000 Founder Shares, 275,000 of which were deemed Earnout Founder Shares that vest at such time that the closing price of our common stock is greater than or equal to $15.00 for any 20 trading days within any 30 trading-day period, commencing on the date of the Merger Agreement and ending on the date that is six months after the closing of the Business Combination. Any Earnout Founder Shares that do not vest on or prior to such date shall be forfeited. As noted, the Earnout Condition was met on July 30, 2020 and the Sponsor retained all 275,000 Earnout Founder Shares. Further, at Closing, the Sponsor transferred 560,000 founder shares to third- parties for no consideration and retained 1,947,000 founder shares.

 

The following summarizes the consideration:

 

(in thousands, except for share and per share amounts)   ​  
Shares transferred at Closing(1)(2)     148,277,532  
Earnout shares(3)     2,000,000  
Value per share(4)   $ 10.25  
Total Share Consideration   $ 1,540,345  

 

 

(1) Reflects the total share consideration transferred inclusive of 4,702,304 additional shares issued as a result of the Pre-Closing Tender Offer and the effects of rounding to eliminate fractional shares.

 

(2) The number of outstanding shares in the table above assumes the issuance of approximately 6,218,778 shares of Company common stock underlying RSUs and options as of September 29, 2020 that are expected to be vested as a result of a deemed liquidity event. Although the shares underlying these RSUs and options do not represent legally issued and outstanding shares of the Company common stock at the closing of the Business Combination, for pro forma purposes, they are reflected as outstanding as they are expected to be issued upon the liquidity event being deemed to have occurred. The shares underlying these RSUs and options are included in the calculation of pro forma net loss per share.

 

(3) Includes the issuance of approximately 187,680 shares of stock underlying RSUs and options. However, they are not be legally outstanding shares at Closing as they are in the form of Earnout RSUs that are subject to a six-month service condition. The grant date fair value for the Earnout RSUs is approximately $4.6 million, which was determined based on the closing share price on the date of the consummation of the Transaction and will be recognized over the six-month service term.

 

(4) Share Consideration is calculated using a $10.25 reference price. The closing share price on the date of the consummation of the Transaction was $24.75. As the Transaction was accounted for as a reverse recapitalization, the value per share is disclosed for informational purposes only in order to indicate the fair value of shares transferred.

 

The following summarizes the pro forma common stock at Closing:

 

    Shares     %  
Velodyne Shares(1)(2)     144,058,754       80.3 %
Velodyne RSUs and Options(3)     6,218,778       3.5 %
Common shares held by current Graf shareholders     11,450,846       6.4 %
Founder Shares(4)(5)     2,575,000       1.4 %
PIPE Shares     15,000,000       8.4 %
Pro Forma Common Stock     179,303,378       100.0 %

 

 

(1) Reflects the repurchase of 175,744 shares of Velodyne capital stock for $1.8 million in the Pre-Closing Velodyne Tender Offer such that Velodyne received 4,702,304 additional shares, including RSUs and options.

 

(2) Includes 2,000,000 of Company common stock in earnout consideration (including in the form of awards of Earnout RSUs settleable in common stock) as the price threshold has been triggered. Earnout RSUs of 187,680 shares are subject to a six-month service condition and are not legally outstanding shares of the Company’s common stock at Closing. Further, the Earnout RSUs are excluded from the calculation of net loss per share.

 

2

 

 

(3) Reflects the issuance of approximately 6,218,778 shares of Company common stock underlying RSUs and options as of September 29, 2020 that are expected to be vested as a result of a deemed liquidity event. Although the shares underlying these RSUs and options do not represent legally issued and outstanding shares of the Company common stock at closing of the Business Combination, for pro forma purposes, they are reflected as outstanding as they are expected to be exercised and issued upon the liquidity event being deemed to have occurred. The shares underlying these RSUs and options are included in the calculation of pro forma net loss per share. As of September 29, 2020, there were 172,896,920 shares of common stock legally outstanding.

 

(4) Includes 275,000 of Earnout Founder Shares as the price threshold has been triggered.

 

(5) Includes 68,000 Founder Shares held by the Graf’s independent directors not subject to Earnout and 560,000 founder shares transferred to third-parties for no consideration.

 

The following unaudited pro forma condensed combined balance sheets as of September 30, 2020 and pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 are based on the historical financial statements of Graf and Velodyne. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.

 

3

 

 

Velodyne Lidar, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

(In thousands)

 

    As of September 30, 2020  
    Velodyne     Merger Related
Pro Forma
Adjustments 		          Pro Forma
Combined 		 
Assets                                
Current assets:                                
Cash and cash equivalents   $ 297,853     $ —             $ 297,853  
Accounts receivable, net     19,405                       19,405  
Inventories, net     16,422                       16,422  
Prepaid and other current assets     10,906                     10,906  
Total current assets     344,586       —               344,586  
Property, plant and equipment, net     17,808                       17,808  
Goodwill     1,189                       1,189  
Intangible assets, net     723                       723  
Contract assets     5,626                       5,626  
Other assets     632                       632  
Total assets   $ 370,564     $ —             $ 370,564  
Liabilities and Stockholders’ Equity                                
Current liabilities:                                
Accounts payable   $ 10,447                     $ 10,447  
Accrued expense and other current liabilities     41,134       7,250       (B)       48,384  
Contract liabilities     6,574                       6,574  
Total current liabilities     58,155       7,250               65,405  
Long-term tax liabilities     605                       605  
Other long-term liabilities     26,302                       26,302  
Total liabilities     85,062       7,250               92,312  
Commitments and contingencies                                
Stockholders’ equity:                                
Preferred stock     —                       —  
Common stock     17                       17  
Additional paid-in capital     489,920       173,512       (A)       656,182  
          (7,250 )     (B)        
Accumulated other comprehensive loss     (211 )     —               (211 )
Accumulated deficit     (204,224 )     (173,512 )     (A)       (377,736 )
Total stockholders’ equity     285,502       (7,250 )             278,252  
Total liabilities and stockholders’ equity   $ 370,564     $ —             $ 370,564  

 

4

 

 

Velodyne Lidar, Inc.

Unaudited Pro Forma Condensed Combined Detailed Adjusted Statement of Operations

For the Nine Months Ended September 30, 2020

(In thousands, except per share data)

 

    For the Nine
Months Ended
September 30, 2020 		    January 1–
September 29, 2020 		              For the Nine
Months Ended
September 30, 2020 		 
    Velodyne
(Historical) 		    Graf
(Historical) 		    Pro Forma
Adjustments 		        Pro Forma
Combined 		 
Revenue:                                    
Product   $ 53,948     $ —     $ —         $ 53,948  
License and services     23,568       —       —           23,568  
Total revenue     77,516       —       —           77,516  
Cost of revenue:                                    
Product     46,027       —       —           46,027  
License and services     1,032       —       —           1,032  
Total cost of revenue     47,059       —       —           47,059  
Gross profit     30,457       —       —           30,457  
Operating expenses:                                    
Research and development     39,653       —       —           39,653  
Sales and marketing     12,798       —       —           12,798  
General and administrative     26,942       17,080       (15,908 )   (DD)     28,114  
Gain on sale of assets held-for-sale     (7,529 )     —       —           (7,529 )
Restructuring     1,043       —       —           1,043  
Total operating expenses     72,907       17,080       (15,908 )         74,079  
Operating loss     (42,450 )     (17,080 )     15,908           (43,622 )
Interest income     119       —       —           119  
Interest expense     (69 )     —       —           (69 )
Other income (expense), net     (105 )     —       —           (105 )
Change in fair value of warrant liability     —       (2,800 )     2,800     (AA)     —  
Investment income on Trust Account     —       875       (875 )   (BB)     —  
Income (loss) before income taxes     (42,505 )     (19,005 )     17,833           (43,677 )
Provision for (benefit from) income taxes     (4,098 )     157       (157 )   (CC)     (4,098 )
Net loss attributable to common stockholders   $ (38,407 )   $ (19,162 )   $ 17,990         $ (39,579 )
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders     139,426                           179,116  
Basic and diluted net income (loss) per share   $ (0.28 )                       $ (0.22 )

 

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Velodyne Lidar, Inc.

Unaudited Pro Forma Condensed Combined Detailed Adjusted Statement of Operations

For the Year ended December 31, 2019

(In thousands, except per share data)

 

    For the Year ended
December 31, 2019 		              For the Year ended
December 31, 2019 		 
    Velodyne
(Historical) 		    Graf
(Historical) 		    Pro Forma
Adjustments 		        Pro Forma
Combined 		 
Revenue   $ 101,398     $ —     $ —         $ 101,398  
Cost of revenue     71,630       —       —           71,630  
Gross profit     29,768       —       —           29,768  
Operating expenses:                                    
Research and development     56,850       —       —           56,850  
Sales and marketing     21,873       —       —           21,873  
General and administrative     20,058       617       —           20,675  
Franchise tax expense     —       100       —           100  
Total operating expenses     98,781       717       —           99,498  
Operating loss     (69,013 )     (717 )     —           (69,730 )
Interest income     1,146       —       —           1,146  
Interest expense     (77 )     —       —           (77 )
Other income (expense), net     35       —       —           35  
Change in fair value of warrant liability     —       (17,366 )     17,366     (AA)     —  
Investment income on Trust Account     —       5,240       (5,240 )   (BB)     —  
Income (loss) before income taxes     (67,909 )     (12,843 )     12,126           (68,626 )
Provision for (benefit from) income taxes     (683 )     1,079       2,983     (CC)     3,379  
Net loss attributable to common stockholders   $ (67,226 )   $ (13,922 )   $ 9,143         $ (72,005 )
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders     34,252,578       24,376,512                   179,115,698  
Basic and diluted net income (loss) per share   $ (1.96 )   $ 0.17                 $ (0.40 )

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

1. Basis of Presentation

 

The Transaction was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Graf was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Transaction was treated as the equivalent of Velodyne issuing stock for the net assets of Graf, accompanied by a recapitalization whereby no goodwill or other intangible assets was recorded. Operations prior to the Transaction are those of Velodyne.

 

The unaudited pro forma condensed combined balance sheet has been prepared using, and should be read in conjunction with, the Company’s unaudited condensed consolidated balance sheet as of September 30, 2020 included in our Current Report on Form 8-K, initially filed with the SEC on October 5, 2020 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, initially filed with the SEC on November 11, 2020.

 

The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 present pro forma effect to the Transaction as if it had been completed on January 1, 2019 and combined the historical results of operations of Graf and Velodyne. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 combines the unaudited condensed consolidated statement of operations of the Company for the nine months ended September 30, 2020, with Graf’s consolidated statement of operations for the period from January 1, 2020 through September 29, 2020 derived from the books and records of Graf.

 

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

 

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Transaction.

 

The pro forma adjustments reflecting the consummation of the Transaction are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated.

 

Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Transaction based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined financial information is being provided for illustrative purposes only and is not necessarily indicative of what the actual results of operations and financial position would have been had the Transaction taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Graf and Velodyne.

 

2. Accounting Policies

 

Based on its initial analysis of the accounting policies of Graf and Velodyne, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.

 

3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

 

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Transaction and has been prepared for informational purposes only.

 

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The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are (1) directly attributable to the Transaction, (2)  factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the results of the post-combination company. Velodyne and the Company have not had any historical relationship prior to the Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented.

 

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of the post-combination company’s shares outstanding, assuming the Transaction occurred on January 1, 2019.

 

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

 

The adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2020 are as follows:

 

(A) Reflects an incremental stock-based compensation charge of approximately $173.5 million that resulted from or will result from post-combination modifications of vesting of certain equity awards. On October 30, 2020, the Board waived the liquidity event vesting condition applicable to the pre-combination Velodyne’s RSUs. It is anticipated that the Board will waive the liquidity event condition applicable to the RSAs in 2021. As a result of such determinations, the Company’s outstanding RSUs and RSAs vested to the extent the applicable service condition are satisfied as of such respective dates. The vesting of the outstanding RSUs and RSAs is expected to result in approximately $77.5 million and $96.0 million, respectively, of incremental stock-based compensation expense, which was estimated utilizing the closing stock price of the Company on the date of the modification ($12.23) for the RSUs and on January 15, 2021 ($22.95) for the RSAs. The actual compensation charge for the RSAs will be calculated using the fair value of the Company’s stock upon the board’s approval, and the actual compensation charge may differ materially from the estimated amount. Such incremental stock-based compensation charge will increase the Company’s accumulated deficit and additional paid-in capital in its unaudited pro forma condensed combined balance sheet.

 

(B) Represented an increase of $7.25 million payable of transaction cost by the Company related to investment banking fees. The transaction cost was estimated at $17.75 million as of September 30, 2020 and the final amount payable is $25.0 million pursuant to the agreement entered into by the Company and the banker on January 20, 2021.

 

Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations

 

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and year ended December 31, 2019 are as follows:

 

(AA) Elimination of the change in fair value of warrant liability as the Company has equity- classified warrants as part of the recapitalization, and there will be no fair value fluctuations.

 

(BB) Elimination of interest income on the Trust Account.

 

(CC) Reflects adjustments to income tax expense as a result of the tax impact on the pro forma adjustments.

 

(DD) Reflects elimination of transaction related costs incurred and recorded by Graf during the nine months ended September 30, 2020.

 

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4. Net loss per Share

 

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Transaction, assuming the shares were outstanding since January 1, 2019. As the Transaction and related proposed equity transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Transaction have been outstanding for the entire periods presented.

 

The unaudited pro forma condensed combined financial information has been prepared for the nine months ended September 30, 2020 and for the year ended December 31, 2019 (in thousands, except per share data):

 

    For the
Nine Months Ended
September 30, 2020 		    For the
Year Ended
December 31, 2019 		 
Pro forma net loss   $ (39,579 )   $ (72,005 )
Weighted average shares outstanding of common stock(1)(2)     179,116       179,116  
Net loss per share (Basic and Diluted) attributable to common stockholders(3)   $ (0.22 )   $ (0.40 )

  

 

(1) Includes approximately 6,218,778 shares of Company common stock underlying RSUs and options as of September 29, 2020 that are expected to be vested as a result of a deemed liquidity event. Although the shares underlying these RSUs and options do not represent legally issued and outstanding shares of the Company common stock at closing of the Business Combination, for pro forma purposes, they are reflected as outstanding as they are expected to be exercised and issued upon the liquidity event being deemed to have occurred.

 

(2) Excludes approximately 187,680 shares of Earnout RSUs as they are subject to a six-month service condition and are not legally outstanding shares of the Company common stock at Closing.

 

(3) For the purposes of calculating diluted earnings per share, it was assumed that all outstanding warrants sold in the IPO, as well as the 500,000 warrants issued as a result of the Sponsor Convertible Note are exchanged to common stock. Further, since the Earnout RSUs include a service condition, they would generally be included in the computation of diluted EPS using the treasury stock method. However, since these items result in anti-dilution, the effect of such adjustments were not included in calculation of diluted net loss per share.

 

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