EX-99.4 6 tm216275d1_ex99-4.htm EXHIBIT 99.4

 

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.

 

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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.

 

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(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.

 

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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 

 

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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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