The following discussion of the results of operations and financial condition of
Ouster, Inc. ("we," "us," "our," the "Company," "Ouster") should be read in
conjunction with the information set forth in our condensed consolidated
financial statements and the notes thereto included elsewhere in this Form 10-Q,
as well as our audited consolidated financial statements and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Ouster's Annual Report on Form 10-K filed with the Securities and
Exchange Commission ("SEC") on February 28, 2022. This discussion may contain
forward-looking statements based upon current expectations that involve risks
and uncertainties. Ouster's actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth in the section titled "Risk Factors" in Ouster's
Annual Report on Form 10-K dated and filed with the SEC on February 28, 2022.

On December 21, 2020, Ouster Technologies, Inc. ("OTI", prior to the Merger
defined below, named Ouster, Inc.) entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Colonnade Acquisition Corp., a Cayman Islands
exempted company ("CLA" with CLA after the transactions pursuant to the Merger
Agreement being referred to as the "Company"), and Beam Merger Sub, Inc.
("Merger Sub"), a Delaware corporation and subsidiary of CLA. OTI's and CLA's
board of directors unanimously approved OTI's entry into the Merger Agreement,
and on March 11, 2021, the transactions contemplated by the Merger Agreement
were consummated (all such transactions, the "Merger"), as further described
below.

Unless the context otherwise requires, references in this subsection to "we",
"our" and "the Company" refer to the business and operations of OTI (formerly
known as Ouster, Inc.) and its consolidated subsidiaries prior to the Merger and
to Ouster, Inc. (formerly known as Colonnade Acquisition Corp.) and its
consolidated subsidiaries following the consummation of the Merger.

Overview



We are a leading provider of high-resolution digital lidar sensors that offer
advanced 3D vision to machinery, vehicles, robots, and fixed infrastructure
assets, allowing each to understand and visualize the surrounding world and
ultimately enabling safe operation and autonomy. We design and manufacture
digital lidar sensors that we believe are the highest-performing, lowest-cost
lidar solutions available today across each of our four target markets:
industrial automation; smart infrastructure; robotics; and automotive. We
shipped sensors to approximately 665 customers in the twelve months ended
June 30, 2022.

Our digital lidar sensors leverage a simplified architecture based on two
semiconductor chips and are backed by a suite of patent-protected technology. We
have invested heavily in patents since our inception, pursuing comprehensive
coverage of invention families and use cases, with broad international coverage.
We believe that our extensive patent coverage creates material barriers to entry
for anyone aiming to compete in the digital lidar space.

Our product offering today includes our OS scanning product line and our DF
solid-state product line. With our unique digital lidar technology, we offer
numerous customization options across our products, all enabled by flexible
technology and embedded software. Today, we offer short, medium, and long-range
lidar products at varying price points and with tailored capabilities to meet
the different needs of our diverse customer base.

We believe the simplicity of our digital lidar design gives us a meaningful
advantage in costs related to manufacturing, supply chain and production yields.
The same digital lidar components underpin our entire product portfolio, which
we believe drives economies of scale in our supply chains. With virtually
unlimited software-defined products driving low-cost customization, we are able
to increase stock keeping units ("SKUs") for industry-specific applications,
expanding our product offering with minimal manufacturing or inventory changes.
We currently offer many different software-defined product SKUs, all based on
this common architecture and shared core componentry. Additionally, by
outsourcing to our manufacturing partner, Benchmark Electronics, Inc.
("Benchmark") we are able to successfully expand our manufacturing capacity.
Benchmark manufactures our products at its facility in Thailand, which we expect
will reduce our product costs and allow us to rapidly scale production to meet
our anticipated product demand. Based on cost quotes for our products in mass
production, we believe our manufacturing costs to be lower than certain of our
competitors, and we expect our manufacturing costs per unit to decrease further
with higher volumes.

We have won and are actively negotiating several multi-year sales contracts,
including certain Strategic Customer Agreements ("SCAs"), which establish a
multi-year purchase and supply framework for Ouster and the customer, and
include details about customer programs and applications where the customer
intends to use Ouster products. SCAs also include multi-year non-binding
customer forecasts (typically of three to five years in length) giving Ouster
visibility to the customer's long-
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term purchasing requirements, mutually agreed upon pricing over the duration of the agreement, and, in certain cases, include multi-year binding purchase commitments.



We founded Ouster in 2015 with the invention of our high-performance digital
lidar. Since then, we have grown to approximately 290 employees serving
approximately 665 customers globally in the twelve months ended June 30, 2022.
To continue to grow our business in the coming years, we have expanded and plan
to continue to expand our sales and marketing efforts and our software
development capabilities, and to accelerate sensor development efforts. We are
headquartered in San Francisco, CA.

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



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

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

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

As a result of and upon the closing of the Merger, among other things, all
shares of OTI Capital Stock (after giving effect to the OTI Warrant Settlement)
outstanding immediately prior to the closing of the Merger together with shares
of OTI common stock reserved in respect of options to purchase shares of OTI
common stock and restricted shares of OTI common stock (together, the "OTI
Awards") outstanding immediately prior to the closing of the Merger that were
converted into awards based on Ouster common stock, were cancelled in exchange
for the right to receive, or the reservation of, an aggregate of $1.5 billion of
shares of Ouster common stock (at a deemed value of $10.00 per share), which, in
the case of OTI Awards, were shares underlying awards based on Ouster common
stock, representing a fully-diluted pre-transaction shares. Upon the closing of
the Merger, the Company received gross proceeds of $299.9 million from the
Merger and private offering, offset by $8.5 million of pre-merger costs relating
to CLA and transaction costs of $26.6 million.

Sense Acquisition



On October 22, 2021, we completed the acquisition of Sense Photonics, Inc.
("Sense"). Under the terms of the merger agreement, we acquired 100% of Sense
and all of its property for approximately 10 million shares of Ouster common
stock or approximately $63.0 million in equity value based on the closing price
of $6.55 per share as of the day the transaction closed on October 22, 2021,
inclusive of 0.8 million shares underlying assumed options, after closing
adjustments. This acquisition is expected to help Ouster expand its presence in
the automotive vertical by executing on our hiring goals and product roadmap on
a faster timeline.

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COVID-19 Impact



Beginning in 2020, the worldwide spread of the pandemic caused by the novel
coronavirus ("COVID-19"), including its variants, and the measures intended to
contain the spread of COVID-19, have resulted in a global slowdown of economic
activity and caused disruptions to our business.

Our suppliers are located worldwide, and some of our key suppliers have been
affected by the pandemic resulting in persistent supply chain disruptions. We
have experienced and continue to experience some unfavorable purchase price
variance and situational expedite fees in order to meet production and delivery
timelines. While we may experience additional and new pressures on our supply
chain that may or may not be related to the pandemic, we are actively taking
steps to mitigate the impact of the materials shortages on our business.

At times during the pandemic, some customers have delayed and continue to delay
orders and production schedules. The pandemic continues to evolve, and the full
extent to which it will directly or indirectly impact our business, results of
operations and financial condition, including sales, expenses, reserves and
allowances, manufacturing, research and development costs and personnel-related
costs, will depend on future developments that are highly uncertain, including
new information that may emerge concerning COVID-19, the impact of new variants
of the disease and the actions taken to contain, prevent or treat COVID-19, rate
and success of vaccination efforts, vaccination reticence, resurgence of the
pandemic in areas where we, Benchmark or our suppliers operate, and the economic
impact on local, regional, national and international customers and markets.

Going forward, the situation remains uncertain, rapidly changing and hard to
predict, and the COVID-19 pandemic may have a material negative impact on our
future results.

Factors Affecting Our Performance



Supply Chain Continuity. Beginning in 2021, a surge in demand for electronics
containing semiconductor chips and stockpiling of chips by certain companies
created disruptions in the supply chain, which continue to persist and have
resulted in a global chip shortage impacting our industry. Some chip
manufacturers are estimating that this supply shortage may continue through
mid-2023. These chip manufacturers are working to increase capacity in the
future, and we are managing our inventory and working closely with our regular
suppliers and customers to minimize the potential impacts of any supply
shortages including by securing additional inventory. While we do not expect the
shortage to have a material near-term impact on our ability to meet existing
demand for our current products, the shortage adversely impacted our gross
margins for the year ended December 31, 2021 and the six months ended June 30,
2022 and may continue to do so. We anticipate fluctuation in our cost of goods
sold over the next 12-18 months as a result of ongoing supply chain constraints.
These constraints have caused and may in the future cause us to implement
certain temporary price surcharges. Over time, we expect our overall average
selling prices to decline as our volume increases. If our mitigating efforts are
not successful or the shortage continues or worsens in ways we did not
anticipate, our ability to supply or improve our current products as well as our
development and rollout of future products could also be adversely affected.

Commercialization of Lidar Applications. We believe that lidar is approaching
its inflection point of adoption across our target end market applications, and
that we are well-positioned to capitalize on this market adoption. However, as
our customers continue research and development projects to commercialize
semi-autonomous solutions that rely on lidar technology, it is difficult to
estimate the timing of ultimate end market and customer adoption. As a result,
we expect that our results of operations, including revenue and gross margins,
will continue to fluctuate on a quarterly and annual basis for the foreseeable
future. As the market for lidar solutions matures and more customers reach a
commercialization phase with solutions that rely on our technology, the
fluctuations in our operating results may become less pronounced. Nonetheless,
our revenue may not grow as we expect unless and until more customers
commercialize their products and lidar technology becomes more prevalent across
our target end markets.

Number of Customers in Production. For certain strategic customers and markets,
our products must be integrated into a broader platform, which then must be
tested, validated, and achieve system-level performance and reliability
thresholds that enable commercial production and sales. The time necessary to
reach commercial production varies from six months to seven years, based on the
market and application. For example, the production cycle in the automotive
market tends to be substantially longer than in our other target markets,
including industrial automation, smart infrastructure and robotics. It is
critical to our future success in each of our target end markets that our
customers reach commercial production and sales and that they select our
products in their commercial production applications. Because the timelines to
reach production vary significantly and the revenue generated by each customer
in connection with commercial production and sales is unpredictable, it is
difficult for us to reliably predict our financial performance.
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Customers' Sales Volumes. Our customer base is diversified and we will continue
to penetrate into diverse end markets to increase our sales volumes. Ultimately
widespread adoption of our customers' products that incorporate our lidar
solutions will depend on many factors, including the size of our customers' end
markets, end market penetration of our customer's products that incorporate our
digital lidar solutions, our end customers' ability to sell their products, and
the financial stability and reputation of the customers. We believe our sales
volume by customer depends on the end market demand for our customers' products
that incorporate our digital lidar solutions as well as our ability to grow our
sales force.

Average Selling Prices ("ASPs"), Product Costs and Margins. Our product costs
and gross margins depend largely on the volumes of sensors sold and the number
and variety of solutions we provide to our customers. We expect that our selling
prices will vary by target end market and application due to market-specific
supply and demand dynamics. We expect to continue to experience some downward
pressure on margins from signing anticipated large multi-year agreements
(including our SCAs) in the near term with multi-year negotiated pricing, as
well as the supply chain constraints discussed above. We expect that these
customer-specific selling price fluctuations combined with our volume-driven
product costs may drive fluctuations in revenue and gross margins on a quarterly
basis. However, notwithstanding any short-term price surcharges on our products,
we expect that over time our volume-driven product costs will lead to gross
margin improvement as our sales volume increases.

Competition. Lidar is an emerging market, and there are competitors for the
growing market. Competitors may offer lidar products at lower prices than ours,
including pricing that may be below their cost, or may offer superior performing
lidar products. These companies also compete with us indirectly by attempting to
solve some of the same challenges with different technology. Established
competitors in the market for lidar sensors have significantly greater resources
and more experience than we do. These competitors have commercialized lidar
technology that has achieved market adoption, strong brand recognition and may
continue to improve in both anticipated and unanticipated ways. They may also
enter, and have entered, into commercial relationships with key customers and
potential customers and have built relationships and dependencies between
themselves and those key customers and potential customers. This has created
downward pressure on our ASPs, particularly in the Asia and Pacific region. We
expect this pressure to continue to push our ASPs lower in the coming years.
However, we believe that because of our complementary metal-oxide-semiconductor
("CMOS"), digital lidar technology, we are in the position to scale more rapidly
than our analog competitors and leverage our scale to deliver positive gross
margins.

Continued Investment and Innovation. We believe that we are a leading digital
lidar provider. Our financial performance is significantly dependent on our
ability to maintain this leading position which is further dependent on the
investments we make in research and development. We believe it is essential that
we continue to identify and respond to rapidly evolving customer requirements,
including successfully realizing our product roadmap. If we fail to continue our
innovation, our market position and revenue may be adversely affected, and our
investments in that area will not be recovered.

Market Trends and Uncertainties. We anticipate robust demand for our digital
lidar solution. We estimate a multibillion-dollar total addressable market
("TAM") for our solutions in the near future. We define our TAM as automation
applications in the industrial, smart infrastructure, robotics and automotive
end markets where we actively engage and maintain customer relationships. Each
of our target markets is potentially a significant global opportunity, and these
markets have historically been underserved by limited or inferior technology or
not served at all. We believe we are well positioned in our market as a leading
provider of high-resolution digital lidar sensors.

Although increasing adoption of semi-autonomous solutions that rely on lidar
technology may generate higher demand, we may not be able to take advantage of
demand if we are unable to anticipate regulatory changes and adapt quickly
enough to meet such new regulatory standards or requirements applicable to us or
to our customers' products in which our digital lidar sensors are used. Market
acceptance of semi-autonomous solutions and active safety technology depend upon
many factors, including cost, performance, safety performance, regulatory
requirements and international taxes or tariffs related to such technologies.
These factors may impact the ultimate market acceptance of our lidar technology.


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International Expansion. We view international expansion as an important element
of our strategy to increase revenue and achieve profitability. We continue to
position ourselves in geographic markets that we expect to serve as important
sources of future growth. We have an existing presence in three regions: North
and South America; Asia and Pacific; and Europe, Middle East and Africa. We
intend to expand our presence in these regions over time including through
distribution partnerships. Expanded global reach will require continued
investment and may expose us to additional foreign currency risk, international
taxes and tariffs, legal obligations and additional operational costs, risks and
challenges that may impact our ability to meet our projected sales volumes,
revenue and gross margins.

Components of Results of Operations

Revenue



The majority of our revenue comes from the sale of our digital lidar sensors and
accessories both directly to end users and through distributors domestically and
internationally. We recognize revenue from product sales when the performance
obligation of transferring control of the product to the customer has been met,
which is generally when the product is shipped. We also recognize revenue by
performing services related to product development and validation, and shipping;
however, we do not expect product development and validation and license and
services to be material components of revenue, cost of revenue or gross margin
in the foreseeable future. Performance obligations related to services are
generally recognized over time, based on cost-to-cost input basis or
straight-line over time. Amounts billed to customers related to shipping and
handling are classified as product revenue, and we have elected to recognize the
cost of shipping activities that occur after control has transferred to the
customer as a fulfillment cost rather than a separate performance obligation.
All related costs are accrued and recognized within cost of revenue when the
related revenue is recognized.

Most of our customers are currently in the evaluation or early R&D stage with
our products. Currently, our product revenue consists of both customers ordering
small volumes of our products that are in an evaluation phase and customers that
order larger volumes of our products and have more predictable long-term
production schedules. However, we are still at the very beginning of the lidar
adoption curve, and some customers are still learning their ramp rates which can
impact the timing of purchase orders quarter to quarter. As we grow our
business, we expect to improve predictability into our customers' needs and
timelines, and expect the timing of orders will have a less notable impact on
our quarterly results. Over the coming years, as more of our customers move into
their respective production phases, we expect the majority of our product
revenue to shift to larger volume orders based on predictable production
schedules.

Cost of Revenue



Cost of revenue consists of the manufacturing cost of our digital lidar sensors,
which primarily consists of sensor components, personnel-related costs directly
associated with our manufacturing organization, and amounts paid to our
third-party contract manufacturer and vendors. Our cost of revenue also includes
depreciation of manufacturing equipment, an allocated portion of overhead,
facility and IT costs, stock-based compensation for manufacturing personnel,
reserves for estimated warranty expenses, excess and obsolete inventory and
shipping costs.

Gross Profit and Gross Margin



Our gross profit equals total revenues less our total cost of revenues, and our
gross margin is our gross profit expressed as a percentage of total revenue.
Subject to quarterly fluctuations and volatility, we expect unit costs to
improve as we manufacture higher unit volumes of sensors and a greater portion
of our sensors are produced by our contract manufacturer in Thailand.

Operating Expenses

Research and Development Expenses

Research and development ("R&D") activities are primarily conducted at our San Francisco based headquarters and our additional R&D facility in Edinburgh, Scotland and consist of the following activities:

•Design, prototyping, and testing of proprietary electrical, optical, and mechanical subsystems for our digital lidar products;

•Robust testing for industrial and autonomous vehicle safety certifications;


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•Development of new products and enhancements to existing products in response
to customer requirements including firmware development and software development
of lidar integration products;

•Custom system-on-a-chip ("SoC") design for Ouster's digital lidar products; and

•Development of custom manufacturing equipment.

R&D expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, for all personnel directly involved in R&D activities, third-party engineering and contractor costs, and prototype expenses.



R&D costs are expensed as they are incurred. Our investment in R&D will continue
to grow as we invest in new lidar technology and related software. Our absolute
amount of R&D expense will grow over time; however, we expect R&D as a
percentage of revenue to decrease annually as our business grows.

Sales and Marketing Expenses



Our business development, customer support and marketing teams are located in
offices worldwide. Selling and marketing expenses consist of personnel-related
expenses, including salaries, benefits, and stock-based compensation, for all
personnel directly involved in business development, customer support, and
marketing activities, and marketing expenses including trade shows, advertising,
and demonstration equipment. Our investment in sales and marketing will continue
to grow as we continue to expand our sales team globally, and our absolute
amount of sales and marketing expenses will grow over time. We expect sales and
marketing spend as a percentage of revenue to decrease over time as our business
grows.

General and Administrative Expenses



General and administrative expenses consist of personnel-related expenses,
including salaries, benefits, and stock-based compensation, of our executives
and members of the board of directors, finance, human resource, IT, and legal
departments as well as fees related to legal fees, patent prosecution,
accounting, finance and professional services as well as insurance, and bank
fees. Our absolute amount of general and administrative expense will grow over
time; however, we expect the general and administrative spend as a percentage of
revenue to decrease annually as our business grows. Near term increases in
general and administrative expenses are expected to be related to hiring more
personnel and consultants to support our growing international expansion and
compliance with the applicable provisions of U.S. generally accepted accounting
principles and other SEC rules and regulations.

Stock-Based Compensation



We measure stock options granted based on the fair value on the date of the
grant and recognize compensation expense of those awards, over the requisite
service period, which is the vesting period of the respective award. Forfeitures
are accounted for as they occur. The fair value of each stock option grant is
estimated on the date of grant using the Black-Scholes option pricing model. The
grant date fair value of restricted stock unit awards is based on the grant date
share price.

Interest Income, Interest Expense, and Other Income (Expense), Net



Interest income consists primarily of income earned on our cash and cash
equivalents. These amounts will vary based on our cash and cash equivalents
balances and market rates. Interest expense consists primarily of interest on
our debt and convertible notes and amortization of debt issuance costs and
discount. Other income (expense), net consists primarily of realized and
unrealized gains and losses on foreign currency transactions and balances, the
change in fair value of financial instruments, including warrants issued in
connection with a debt agreement, and private placement warrants acquired as
part of the Merger.

Income Taxes

Our income tax provision consists of federal, state and foreign current and
deferred income taxes. Our income tax provision for interim periods is
determined using an estimate of our annual effective tax rate, adjusted for
discrete items arising in the quarter. Our effective tax rate differs from the
U.S. statutory tax rate primarily due to valuation allowances on its deferred
tax assets as it is more likely than not that some, or all, of our deferred tax
assets will not be realized. We continue to maintain a full valuation allowance
against its net deferred tax assets. Income tax provision for the three and six
months ended June 30, 2022 and 2021, respectively, was not material to the
Company's condensed consolidated financial statements.
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Results of Operations:

The following table sets forth our condensed consolidated results of operations data for the periods presented:



                                                     Three Months Ended June 30,                 Six Months Ended June 30,
                                                       2022                  2021                 2022                  2021
                                                        (dollars in thousands)                     (dollars in thousands)

Product revenue                                  $       10,329          $   7,360          $       18,887          $  13,971

Cost of product revenue(1)                                7,547              5,465                  13,514             10,333

Gross profit                                              2,782              1,895                   5,373              3,638
Operating expenses(1):
Research and development                                 15,893              6,474                  31,799             11,186
Sales and marketing                                       7,563              4,614                  14,653              8,040
General and administrative                               12,515             12,197                  26,298             22,104
Total operating expenses                                 35,971             23,285                  72,750             41,330
Loss from operations                                    (33,189)           (21,390)                (67,377)           (37,692)
Other (expense) income:
Interest income                                             344                139                     498                140
Interest expense                                           (444)                 -                    (444)              (504)
Other income (expense), net                               5,326            (10,760)                  7,010            (14,912)
Total other expense, net                                  5,226            (10,621)                  7,064            (15,276)
Loss before income taxes                                (27,963)           (32,011)                (60,313)           (52,968)
Provision for income tax expense                             37                  -                      84                  -
Net loss                                         $      (28,000)         $ (32,011)         $      (60,397)         $ (52,968)


The following table sets forth the components of our condensed consolidated
statements of operations and comprehensive loss data as a percentage of revenue
for the periods presented:

                                                           Three Months Ended June 30,                           Six Months Ended June 30,
                                                           2022                       2021                      2022                       2021
                                                               (% of total revenue)                                 (% of total revenue)

Product revenue                                                    100  %                 100  %                        100  %                 100  %

Cost of product revenue(1)                                          73                     74                            72                     74

Gross profit                                                        27                     26                            28                     26
Operating expenses (1):
Research and development                                           154                     88                           168                     80
Sales and marketing                                                 73                     63                            78                     58
General and administrative                                         121                    166                           139                    158
Total operating expenses                                           348                    316                           385                    296
Loss from operations                                              (321)                  (291)                         (357)                  (270)
Other (expense) income:
Interest income                                                      3                      2                             3                      1
Interest expense                                                    (4)                     0                            (2)                    (4)
Other income (expense), net                                         52                   (146)                           37                   (107)
Total other expense, net                                            51                   (144)                           37                   (109)
Loss before income taxes                                          (271)                  (435)                         (319)                  (379)
Provision for income tax expense                                     -                      -                             -                      -
Net loss                                                          (271) %                (435) %                       (319) %                (379) %


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(1)Includes stock-based compensation expense as follows:



                                                      Three Months Ended June 30,                 Six Months Ended June 30,
                                                        2022                  2021                 2022                 2021
                                                         (dollars in thousands)                    (dollars in thousands)
Cost of revenue                                   $          146          $     133          $         365          $     251
Research and development                                   3,806              1,321                  7,566              2,242
Sales and marketing                                        1,839                719                  3,362                985
General and administrative                                 2,328              3,981                  5,576              7,932
Total stock-based compensation                    $        8,119          $ 

6,154 $ 16,869 $ 11,410

Comparison of the three months ended June 30, 2022 and 2021



Revenue

                                                   Three Months Ended June 30,               Change               Change
                                                     2022                  2021                $                    %
                                                                          (dollars in thousands)

Product revenue                               $        10,329          $   7,360          $   2,969                     40  %

Revenue by geographic location:
United States                                 $         2,977          $   2,572          $     405                     16  %
North and South America, excluding United                 208                161                 47                     29

States


Asia and Pacific                                        2,575              1,696                879                     52
Europe, Middle East and Africa                          4,569              2,931              1,638                     56
Total                                         $        10,329          $   7,360          $   2,969                     40  %


Product Revenue

Product revenue increased by $3.0 million, or 40%, to $10.3 million for the
three months ended June 30, 2022 from $7.4 million for the comparable period in
the prior year. The increase in product revenue was driven by a 38% increase in
volume which we attribute primarily to the global expansion of our sales team
and the increase of high volume, long-term agreements as some of our customers
begin to move into a production stage with their autonomous products. Our
average selling price increased by 1.5% when compared to the comparable period
in the prior year. As our volumes increase we expect further reductions in our
costs per unit.

Geographic Locations

Revenue increased across the geographic regions of the United States; North and
South America, excluding the United States; Asia and Pacific; and Europe, Middle
East and Africa by $0.4 million, $0.047 million, $0.9 million, and $1.6 million,
respectively, as compared to the comparable period in the prior year. The
revenue increases in those geographic regions was primarily attributable to our
continued focus and investment in our global sales team and an expansion in the
demand of our customers as only 11% of our revenue was from new customers during
the three months ended June 30, 2022.
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Cost of Product Revenue and Gross Margin



                                 Three Months Ended June 30,             Change       Change
                                      2022                   2021           $           %
                                                (dollars in thousands)

Cost of product revenue   $        7,547                   $ 5,465      $ 2,082         38  %


Cost of product revenue increased by $2.1 million, or 38%, to $7.5 million for
the three months ended June 30, 2022 from $5.5 million for the comparable period
in the prior year. The increase in cost of product revenue was primarily because
of an increase of $0.8 million in purchase price variance due to the supply
chain shortage, increases related to volume of $0.8 million in material costs,
$0.1 million in freight costs and $0.6 million in manufacturing overhead costs.
The increases were partially offset by a decrease of $0.2 million in per unit
costs of materials, labor and overhead and other costs related to product
revenue.

Product gross margin increased from 26% for the three months ended June 30, 2021
to 27% for the three months ended June 30, 2022. The increase in product gross
margin was due to the 2% increase in average selling price.

Operating Expenses

                                    Three Months Ended June 30,             Change       Change
                                        2022                   2021           $            %
                                                   (dollars in thousands)
Operating expenses:
Research and development     $       15,893                 $  6,474      $  9,419        145  %
Sales and marketing                   7,563                    4,614         2,949         64
General and administrative           12,515                   12,197           318          3
Total operating expenses:    $       35,971                 $ 23,285      $ 12,686         54  %


Research and Development

Research and development expenses increased by $9.4 million, or 145%, to $15.9
million for the three months ended June 30, 2022 from $6.5 million for the
comparable period in the prior year. The increase was primarily attributable to
an increase of $2.2 million in stock-based compensation expense, $4.3 million in
payroll-related expenses, $0.6 million in depreciation and amortization expense,
$1.8 million increase in contractor, prototype, and equipment costs related to
product development, and $0.6 million in other materials and supplies,
facilities, professional fees and other miscellaneous costs attributable to
research and development functions. The increase in employee-related costs was
mainly due to the higher headcount associated with the Sense Photonics, Inc.
acquisition.

Sales and Marketing

Sales and marketing expenses increased by $2.9 million, or 64%, to $7.6 million
for the three months ended June 30, 2022 from $4.6 million for the comparable
period in the prior year. The increase was primarily attributable to an increase
of $1.8 million in payroll and personnel-related costs and $1.1 million in
stock-based compensation expense driven by the addition of sales personnel in
all our global regions.

General and Administrative

General and administrative expenses increased by $0.3 million, or 3%, to $12.5
million for the three months ended June 30, 2022 from $12.2 million for the
comparable period in the prior year. The increase was primarily due to an
increase of $1.2 million in payroll and personnel-related costs, $0.5 million in
depreciation expenses and $0.8 million in office, facility and other expenses
partially offset by a decrease of $1.7 million in stock-based compensation
expenses, $0.4 million in professional services fees and $0.1 million in
insurance premiums.
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Interest Income, Interest Expense and Other Income (Expense), Net



                                                   Three Months Ended June 30,                Change                Change
                                                    2022                  2021                  $                     %
                                                                           (dollars in thousands)
Interest income                               $          344          $      139          $       205                    147  %
Interest expense                                        (444)                  -                 (444)                        *
Other income (expense), net                            5,326             (10,760)              16,086                   (149)


*Not meaningful

The increase in interest income was primarily related to an increase in our cash and cash equivalent balances.



Interest expense was $0.4 million for the three months ended June 30, 2022
relating to term loan borrowings and amortization of debt issuance costs and
discount under our Loan Agreement. There was no interest expense in the three
months ended June 30, 2021 as we did not have outstanding debt in that period.

Other income (expense), net was $5.3 million for the three months ended June 30,
2022 compared to $(10.8) million for the comparable period in the prior year.
During the three months ended June 30, 2022, we recorded a gain of $5.4 million
for the fair value change of the private placement warrant liability. During the
comparable period in the prior year, we recorded a loss of $10.7 million for the
fair value change of the private placement warrant liability.

Income Taxes



We were subject to income taxes in the United States, California, and
miscellaneous foreign jurisdictions for the three months ended June 30, 2022 and
2021. Our income tax expense for three months ended June 30, 2022 and 2021 was
not material to our condensed consolidated financial statements.

Comparison of the Six Months Ended June 30, 2022 and 2021



Revenue

                                                   Six Months Ended June 30,               Change               Change
                                                    2022                 2021                $                    %
                                                                         (dollars in thousands)

Product revenue                               $      18,887          $  13,971          $   4,916                     35  %

Revenue by geographic location:
United States                                 $       5,840          $   4,426          $   1,414                     32  %
North and South America, excluding United               663                528                135                     26

States


Asia and Pacific                                      4,932              2,947              1,985                     67
Europe, Middle East and Africa                        7,452              6,070              1,382                     23
Total                                         $      18,887          $  13,971          $   4,916                     35  %


Product Revenue

Product revenue increased by $4.9 million, or 35%, to $18.9 million for the six
months ended June 30, 2022 from $14.0 million for the comparable period in the
prior year. The increase in product revenue was driven by an increase in volume
of 46%, which we attribute primarily to the global expansion of our sales team
and the increase of high volume, long-term deals as some of our customers begin
to move into a production stage with their autonomous products. Our average
selling price declined by 8% when compared to the comparable period in the prior
year. As our volumes increase we expect further reductions in our costs per
unit.


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Geographic Locations

Revenue increased across the geographic regions of the United States; North and
South America, excluding the United States; Asia and Pacific; and Europe, Middle
East and Africa by $1.4 million, $0.1 million, $2.0 million, and $1.4 million,
respectively, as compared to the comparable period in the prior year. The
revenue increases in those geographic regions were a result of our continued
focus and investment in our global sales team and an expansion in the demand of
our customers as only 16% of our revenue was from new customers during the six
months ended June 30, 2022.

Cost of Product Revenue and Gross Margin



                                Six Months Ended June 30,            Change       Change
                                    2022                 2021           $           %
                                              (dollars in thousands)

Cost of product revenue   $      13,514               $ 10,333      $ 3,181         31  %


Cost of product revenue increased by $3.2 million, or 31%, to $13.5 million for
the six months ended June 30, 2022 from $10.3 million for the comparable period
in the prior year. The increase in cost of product revenue was primarily due to
an increase of $2.0 million in purchase price variance due to the supply chain
shortage, increases related to volume of $1.8 million in material costs, $0.2
million in freight costs and $1.6 million in manufacturing overhead costs. The
increases were partially offset by a decrease of $2.4 million in per unit costs
of materials, labor and overhead and other costs related to product revenue.

Product gross margin increased from 26% for the six months ended June 30, 2021
to 28% for the six months ended June 30, 2022. The increase in product gross
margin was primarily due to the 11% decrease in cost per unit partially offset
by the 8% decrease in average selling price.

Operating Expenses

                                   Six Months Ended June 30,             Change       Change
                                       2022                 2021           $            %
                                                  (dollars in thousands)
Operating expenses:
Research and development     $      31,799               $ 11,186      $ 20,613        184  %
Sales and marketing                 14,653                  8,040         6,613         82
General and administrative          26,298                 22,104         4,194         19
Total operating expenses:    $      72,750               $ 41,330      $ 31,420         76  %


Research and Development

Research and development expenses increased by $20.6 million, or 184%, to $31.8
million for the six months ended June 30, 2022 from $11.2 million for the
comparable period in the prior year. The increase was primarily attributable to
an increase of $8.9 million in payroll and benefits related costs, $5.1 million
in stock-based compensation expense, $4.1 million in contractor, prototype, and
equipment costs related to product development, $1.3 million in depreciation and
amortization expense, and $1.3 million in other materials and supplies,
facilities, professional fees and other miscellaneous costs attributable to
research and development functions. The increase in employee-related costs was
mainly due to the higher headcount associated with the Sense Photonics, Inc.
acquisition.

Sales and Marketing

Sales and marketing expenses increased by $6.6 million, or 82%, to $14.7 million
for the six months ended June 30, 2022 from $8.0 million for the comparable
period in the prior year. The increase was primarily attributable to an increase
of $4.0 million in payroll and personnel-related costs, $2.4 million in
stock-based compensation expense driven by the addition of sales personnel in
all our global regions, as well as a $0.3 million increase in other expenses
associated with our marketing and business development programs.
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General and Administrative



General and administrative expenses increased by $4.2 million, or 19%, to $26.3
million for the six months ended June 30, 2022 from $22.1 million for the
comparable period in the prior year. The increase was primarily due to an
increase of $2.6 million in payroll and personnel-related costs, $1.2 million in
insurance premiums, $1.1 million in depreciation expenses, $0.1 million in
professional services fees, and $1.6 million in office, facility and other
expenses, partially offset by a decrease of $2.4 million in stock-based
compensation expenses.

Interest Income, Interest Expense and Other Income (Expense), Net



                                        Six Months Ended June 30,               Change       Change
                                           2022                    2021            $           %
                                                      (dollars in thousands)
Interest income               $         498                     $     140      $   358        256  %
Interest expense                       (444)                         (504)          60        (12)
Other income (expense), net           7,010                       (14,912)      21,922       (147)


Interest income was $0.5 million for the six months ended June 30, 2022 compared
to $0.1 million for the comparable period in the prior year. This increase in
interest income was primarily related to an increase in our cash and cash
equivalent balances after the Merger closed on March 11, 2021.

Interest expense was $0.4 million for the six months ended June 30, 2022
compared to $0.5 million for the comparable period in the prior year. We
recorded interest expense on our debt and amortization of debt issuance costs
and discount in six months ended June 30, 2022 relating to term loan borrowings
and amortization of debt issuance costs and discount under our loan and security
agreement with Hercules Capital, Inc. Interest expense recorded in 2021
primarily consisted of interest and amortization of debt issuance cost and
discount on the loan and security agreement with Runway Growth Credit and Fund
Inc., which was terminated on March 26, 2021.

Other income (expense), net was $7.0 million income for the six months ended
June 30, 2022 compared to $(14.9) million in expense for the comparable period
in the prior year. During the six months ended June 30, 2022, we recorded a gain
of $7.1 million for the fair value change of private placement warrant
liability. During the six months ended June 30, 2021, we recorded a loss of $8.8
million for the fair value change of redeemable convertible preferred stock
warrant liability and a loss of $6.1 million for the fair value change of
private placement warrant liability.

Income Taxes



We were subject to income taxes in the United States, California, and
miscellaneous foreign jurisdictions for the six months ended June 30, 2022 and
2021. Our income tax expense for six months ended June 30, 2022 and 2021 was not
material to the Company's condensed consolidated financial statements.

Liquidity and Capital Resources



Our principal sources of liquidity are expected to be our cash and cash
equivalents, cash generated from product revenues, sales of common stock under
our at-the market equity offering program and our loan and security agreement
with Hercules Capital, Inc.

Our primary requirements for liquidity and capital are working capital,
inventory management, capital expenditures, public company costs and general
corporate needs. We expect these needs to continue as we develop and grow our
business. Prior to the Merger, we primarily funded our operations from the net
proceeds from sales of our preferred convertible stock and convertible notes,
borrowing under our loan and security agreement with Runway Growth Credit Fund,
Inc. and product revenue. Upon closing of the Merger, we received gross proceeds
of $299.9 million from the Merger and private offering, offset by $8.5 million
of pre-merger costs relating to CLA and transactions cost of $26.6 million.

On April 29, 2022, we entered into an open market sale agreement with B. Riley
Securities, Inc., Cantor Fitzgerald & Co. and Oppenheimer & Co. Inc. (the "ATM
Agreement"), pursuant to which we may offer and sell shares of our common stock
with an aggregate offering price of up to $150.0 million under an "at the
market" offering program. Subject to the terms and conditions of the agreement,
we may sell the shares in amounts and at times to be determined by us but we are
under no obligation to sell any of the shares. Actual sales, if any, will depend
on a variety of factors to be determined by us from time to
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time, including, among other things, market conditions, the trading price of our
common stock, capital needs and determinations by us of the appropriate sources
of its funding. During the three months ended June 30, 2022, we sold 6,749,344
shares of common stock for net proceeds of $14.0 million under the ATM
Agreement. We currently intend to use the net proceeds from any sale of shares
pursuant to the ATM Agreement for working capital and general corporate
purposes.

On April 29, 2022, we entered into a loan and security agreement (the "Loan
Agreement") with Hercules Capital, Inc. ("Hercules"). The Loan Agreement
provides us with the term loan of up to $50.0 million, subject to terms and
conditions. $20.0 million has been drawn to date under the Loan Agreement, and
can be used for general working capital purposes. For additional information,
see "Debt Arrangements" below.

As of June 30, 2022, we had an accumulated deficit of $363.8 million and cash
and cash equivalents of $159.7 million. We have experienced recurring losses
from operations, and negative cash flows from operations, and we expect to
continue operating at a loss and to have negative cash flows from operations for
the foreseeable future. We believe our cash and cash equivalents on hand,
together with cash we expect to generate from future operations, will be
sufficient to meet our working capital and capital expenditure requirements for
a period of at least twelve months from the date of this Quarterly Report on
Form 10-Q. However, because we are in the growth stage of our business and
operate in an emerging field of technology, we expect to continue to invest in
research and development and expand our sales and marketing teams worldwide. We
are likely to require additional capital to respond to technological
advancements, competitive dynamics or technologies, customer demands, business
opportunities, challenges, acquisitions or unforeseen circumstances and in
either the short-term or long-term may determine to engage in equity or debt
financings or enter into credit facilities for other reasons. If we are unable
to obtain adequate financing or financing on terms satisfactory to us, when we
require it, our ability to continue to grow or support our business and to
respond to business challenges could be significantly limited. In particular,
the widespread COVID-19 pandemic, including variants, has resulted in, and may
continue to result in, significant disruption of global financial markets,
reducing our ability to access capital. If we are unable to raise additional
funds when or on the terms desired, our business, financial condition and
results of operations could be adversely affected.

Debt Arrangements



As described above, on April 29, 2022, we entered into the Loan Agreement with
Hercules, which provides us with a term loan facility of up to $50.0 million,
subject to terms and conditions (the "Term Loan Facility"). As of June 30, 2022,
$20.0 million has been drawn to date under the Loan Agreement, and can be used
for general working capital purposes subject to certain terms and conditions. We
may borrow an additional $20.0 million on or before March 15, 2023, subject
satisfying certain conditions. An additional $10.0 million may be drawn on or
before June 15, 2023, subject to satisfying certain conditions relating to the
achievement of trailing twelve-month revenue and profit milestones.

For additional information regarding the terms of the Loan Agreement, see Note 5, Debt.



Material Cash Requirements

We are a party to many contractual obligations involving commitments to make
payments to third parties. These obligations impact our short-term and long-term
liquidity and capital resource needs. Certain contractual obligations are
reflected on the condensed consolidated balance sheet as of June 30, 2022, while
others are considered future commitments. Our contractual obligations primarily
consist of non-cancelable purchase commitments with various parties to purchase
goods or services, primarily inventory, entered into in the normal course of
business, operating leases and obligations related to Loan Agreement with
Hercules. For information regarding our other contractual obligations, refer to
Note 7, Commitments and Contingencies and our Annual Report on Form 10-K as
filed with the SEC on February 28, 2022.

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