Innoviz Technologies Ltd 20-F for FY2021
Innoviz Technologies Ltd. (INVZ)
20-F
2022-03-30
For: 2021-12-31
View Original
Added on
April 07, 2026
About this 20-F
Innoviz Technologies Ltd filed this 20-F on March 30, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.47M
- compared with -$9.36M a year earlier
- Net loss
- $153.56M
- compared with a net loss of $81.51M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31 , 2021
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report
Commission file number 001-40310
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
State of Israel
(Jurisdiction of incorporation or organization)
Innoviz Technologies Ltd.
Rosh HaAin 4809202 , Israel
(Address of principal executive offices)
Chief Financial Officer
Innoviz Technologies Ltd.
Rosh HaAin 4809202 , Israel
+972 -74-700-3692
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The
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The
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Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report. As of December 31, 2021, the issuer had 0 ordinary shares outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☐ Large accelerated filer
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☐ Accelerated filer
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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☐ International Financial Reporting Standards as issued by the International Accounting Standards Board
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☐ Other
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If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
CONTENTS
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A. Selected Financial Data
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B. Capitalization and Indebtedness
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C. Reasons for the Offer and Use of Proceeds
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D. Risk Factors
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A. History and Development of the Company
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B. Business Overview
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C. Organizational Structure
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D. Property, Plant and Equipment
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A. Operating Results
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B. Liquidity and Capital Resources
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C. Research and Development, Patents and Licenses, etc.
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D. Trend Information
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E. Off-Balance Sheet Arrangements
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A. Directors and Senior Management
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B. Compensation
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C. Board Practices
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D. Employees
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E. Share Ownership
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A. Major Shareholders
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B. Related Party Transactions
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C. Interests of Experts and Counsel
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A. Consolidated Statements and Other Financial Information
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B. Significant Changes
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A. Offer and Listing Details
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B. Plan of Distribution
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C. Markets
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D. Selling Shareholders
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E. Dilution
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F. Expenses of the Issue
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A. Share Capital
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B. Memorandum and Articles of Association
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C. Material Contracts
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D. Exchange Controls
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E. Taxation
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F. Dividends and Paying Agents
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G. Statement by Experts
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H. Documents on Display
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I. Subsidiary Information
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F-1 |
- ii
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ABOUT THIS ANNUAL REPORT
Except where the context otherwise requires or where otherwise indicated in this annual
report (this “Annual Report”), the terms “Innoviz,” the “Company,” “we,” “us,”
“our,” “our company” and “our business” refer to Innoviz Technologies Ltd., together with its consolidated
subsidiaries as a consolidated entity.
All references in this Annual Report to “Israeli currency” and “NIS”
refer to New Israeli Shekels, the terms “dollar,” “USD” or “$” refer to U.S. dollars and the terms
“€” or “euro” refer to the currency introduced at the start of the third stage of European economic and
monetary union pursuant to the treaty establishing the European Community, as amended.
All references in this Annual Report to “Business Combination” refer to
the transactions effected under the Business Combination Agreement, dated as of December 10, 2020 (the “Business Combination
Agreement”), by and among Collective Growth Corporation, a Delaware corporation (“Collective Growth”), Innoviz, Hatzata
Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Innoviz (“Merger Sub”), solely for purposes of Sections
2.2(d), 2.3(a), 2.8, 2.9, 5.2, 5.5, 7.2 and Article VIII thereto, Perception Capital Partners LLC, a Delaware limited liability company
(“Perception”), and solely for purposes of Sections 5.2, 5.5, 5.7 and Article VIII thereto, Antara Capital LP, a Delaware
limited partnership and investment manager acting on behalf of certain funds it manages and/or designees (“Antara Capital”).
Pursuant to the Business Combination Agreement, Merger Sub merged with and into Collective Growth, with Collective Growth surviving the
merger. Upon consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement on
April 5, 2021, Collective Growth became a wholly owned subsidiary of Innoviz.
INDUSTRY AND MARKET DATA
Unless otherwise indicated, information contained in this Annual Report concerning
Innoviz’s industry and the regions in which it operates, including Innoviz’s general expectations and market position, market
opportunity, market share and other management estimates, is based on information obtained from various independent publicly available
sources and other industry publications, surveys and forecasts. Innoviz has not independently verified the accuracy or completeness of
any third-party information. Similarly, internal surveys, industry forecasts and market research, which Innoviz believes to be reliable
based upon its management’s knowledge of the industry, have not been independently verified.
TRADEMARKS, TRADE NAMES
AND SERVICE MARKS
This document contains references to trademarks, trade names and service marks belonging
to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this Annual Statement may appear without
the ® or TM symbols, but such references
are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its
rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service
marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report may constitute “forward-looking statements”
for purposes of the federal securities laws. In some cases, these forward-looking statements can be identified by words or phrases such
as “may,” “might,” “will,” “could,” “would,” “should,” “expect,”
“plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,”
“predict,” “potential,” “continue,” “contemplate,” “possible” or similar words.
Statements regarding our future results of operations and financial position, growth strategy and plans and objectives of management for
future operations, including, among others, expansion in new and existing markets, are forward-looking statements.
Our forward-looking statements are mainly based on our current expectations and estimates
of future events and trends which affect or may affect our business, operations and industry. Although we believe that these estimates
and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties, including
without limitation those described under the sections in this Annual Report entitled Item 3.D. “Key
Information—Risk Factors” and Item 5. “Operating and Financial Review and Prospects”
and elsewhere in this Annual Report.
Forward-looking statements may be influenced by factors including:
| • |
we have a limited operating history with a history of losses and we expect losses in future periods may
be significant; |
| • |
our limited operating history and evolving business model makes evaluating our business and future prospects difficult and may increase
the risk of your investment; |
| • |
we are creating innovative technologies by designing and developing unique components and the high price of or low yield in these
components may affect our ability to sell at competitive prices, or may lead to losses; |
| • |
there are significant risks to providing our products as a direct supplier to customers; |
| • |
we expect to invest substantially in research and development for the purpose of developing and commercializing new products, and
these investments could significantly reduce our profitability or increase our losses and may not generate revenue for our company;
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| • |
we may experience significant delays in the design, production and launch of our LiDAR products for autonomous driving systems, which
could harm our business, prospects, financial condition and operating results; |
| • |
we are substantially dependent on our design win with BMW and our relationship with Magna, and our business could be materially and
adversely affected if the BMW L3 Program would be terminated; |
| • |
the period from a design win to implementation is long and we are subject to the risks of not achieving design wins, cancellations
or postponements of contracts or unsuccessful implementation; |
| • |
we may need to raise additional funds in the future in order to execute our business plan and these funds may not be available to
us when we need them; additionally, if we cannot raise additional funds when we need them, our business, prospects, financial condition
and operating results could be negatively affected; |
| • |
if market adoption of LiDAR for autonomous vehicles does not continue to develop, or develops more slowly than we expect, our business
will be adversely affected; |
| • |
we target many customers that are large companies with substantial negotiating power, exacting product standards and potentially
competitive internal solutions. If we are unable to sell our products to these customers, our prospects and results of operations will
be adversely affected; |
| • |
we continue to implement strategic initiatives designed to grow our business as these initiatives may prove more costly than we currently
anticipate and we may not succeed in increasing our revenues by an amount sufficient to offset the costs of these initiatives and to achieve
and maintain profitability; |
| • |
the markets in which we compete are characterized by rapid technological change, which require us to continue to develop new products
and product innovations, and could adversely affect market adoption of our products; |
| • |
certain of our strategic, development and supply arrangements could be terminated or may not materialize into long-term contract
partnership arrangements; |
| • |
we may experience difficulties in managing our growth and expanding our operations; |
| • |
continued pricing pressures, automotive original equipment manufacturers (“OEM”) cost reduction initiatives and the ability
of automotive OEMs to re-source or cancel vehicle or technology programs may result in lower than anticipated margins, or losses,
which may adversely affect our business; and |
| • |
the other matters described in the section entitled Item 3.D. “Key Information—Risk
Factors” beginning on page 5. |
Many important factors, in addition to the factors described above and in other sections
of this Annual Report, could adversely impact our business and financial performance. Moreover, we operate in an evolving environment.
New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties,
nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from estimates or forward-looking statements. We qualify all of our estimates and forward-looking statements
by these cautionary statements.
The estimates and forward-looking statements contained in this Annual Report speak
only as of the date of this Annual Report. Except as required by applicable law, we undertake no obligation to publicly update or revise
any estimates or forward-looking statements whether as a result of new information, future events or otherwise, or to reflect the occurrence
of unanticipated events.
2
PART I
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Item 1. |
Identity of Directors, Senior Management and Advisers |
Not applicable.
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Item 2. |
Offer Statistics and Expected Timetable |
Not applicable.
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Item 3. |
Key Information |
A. Selected Financial Data
Reserved.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider the risks described below before
making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business
operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks.
The trading price and value of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment.
This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below
and elsewhere in this Annual Report.
Summary of Risk Factors
The following is a summary of certain, but not all, of the risks that could adversely
affect our business, operations and financial results. If any of the risks actually occur, our business could be materially impaired,
the trading price of our ordinary shares and warrants could decline, and you could lose all or part of your investment.
| • |
Our limited operating history and evolving business model makes evaluating our business and future prospects difficult and may increase
the risk of your investment. |
| • |
We are creating innovative technologies by designing and developing unique components. The high price of or low yield in these components
may affect our ability to sell at competitive prices, or may lead to losses. |
| • |
There are significant risks to providing our products as a direct supplier to customers. |
| • |
We expect to invest substantially in research and development for the purpose of developing and commercializing new products. These
investments could significantly reduce our profitability or increase our losses and may not generate revenue for us. |
3
| • |
We may experience significant delays in the design, production and launch of our LiDAR products for autonomous driving systems, which
could harm our business, prospects, financial condition and operating results. |
| • |
We are substantially dependent on our design win with BMW and our relationship with Magna, and our business could be materially and
adversely affected if the BMW L3 Program would be terminated. |
| • |
The period of time from a design win to implementation is long and we are subject to the risks of not achieving design wins, cancellations
or postponements of contracts or unsuccessful implementation. |
| • |
We may need to raise additional funds in the future in order to execute our business plan and these funds may not be available to
us when we need them. If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating
results could be negatively affected. |
| • |
if market adoption of LiDAR for autonomous vehicles does not continue to develop, or develops more slowly than we expect, our business
will be adversely affected; |
| • |
We target many customers that are large companies with substantial negotiating power, exacting product standards and potentially
competitive internal solutions. If we are unable to sell our products to these customers, our prospects and results of operations will
be adversely affected; |
| • |
We continue to implement strategic initiatives designed to grow our business as these initiatives may prove more costly than we currently
anticipate, and we may not succeed in increasing our revenues by an amount sufficient to offset the costs of these initiatives and to
achieve and maintain profitability; |
| • |
The markets in which we compete are characterized by rapid technological change, which require us to continue to develop new products
and product innovations, and could adversely affect market adoption of our products; |
| • |
Certain of our strategic, development and supply arrangements could be terminated or may not materialize into long-term contract
partnership arrangements. |
| • |
We may experience difficulties in managing our growth and expanding our operations. |
| • |
Continued pricing pressures, automotive OEM cost reduction initiatives and the ability of automotive OEMs to re-source or cancel
vehicle or technology programs may result in lower than anticipated margins or losses, which may adversely affect our business.
|
| • |
Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.
|
| • |
Adoption of LiDAR for other emerging markets may not occur or may occur much more slowly than we anticipate, which would adversely
affect our business and prospects. |
| • |
The complexity of our products could result in unforeseen delays or expenses from undetected defects, errors or bugs in hardware
or software which could reduce the market adoption of our new products, damage our reputation with current or prospective customers, expose
us to product liability, warranty and other claims and adversely affect our operating costs. |
| • |
We operate in a highly competitive market against a large number of both established competitors and new market entrants, and some
market participants have substantially greater resources than ours. |
| • |
We rely on third-party suppliers and, because some of the key components in our products come from limited or sole sources of supply,
we are susceptible to supply shortages, long lead times for components and supply changes, any of which could disrupt our supply chain
and could delay deliveries of our products to customers. |
| • |
Our sales and operations in international markets expose us to operational, financial and regulatory risks. |
| • |
We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying
or reverse engineering our solutions. Our efforts to protect and enforce our intellectual property rights and prevent third parties from
violating our rights may be costly. |
4
| • |
Our business may be adversely affected by changes in automotive safety regulations or concerns that drive further regulation of the
automobile safety market. |
| • |
Failures, or perceived failures, to comply with privacy, data protection, and information security requirements in the variety of
jurisdictions in which we operate may adversely impact our business, and such legal requirements are evolving, uncertain and may require
improvements in, or changes to, our policies and operations. |
| • |
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not
be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
|
| • |
The market price and trading volume of our ordinary shares and warrants may be volatile and could decline significantly. |
| • |
Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors
due to seasonality and other factors, some of which are beyond our control, resulting in a decline in the price of our ordinary shares
and warrants. |
| • |
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
|
| • |
As we are a “foreign private issuer” and follow certain home country corporate governance practices, our shareholders
may not have the same protections afforded to shareholders of companies that are subject to all corporate governance requirements of Nasdaq.
|
| • |
The tax benefits that are available to us require that we continue to meet various conditions and may be terminated or reduced in
the future, which could increase our costs and taxes. |
| • |
The rights and responsibilities of our shareholders are governed by Israeli law, which may differ in some respects from the rights
and responsibilities of shareholders of U.S. corporations. |
The other matters described in the section titled “Risk
Factors” beginning on page 5.
Risks Related to Our Business
Our limited operating history and evolving
business model makes evaluating our business and future prospects difficult and may increase the risk of your investment.
Our company has been focused on developing LiDAR products for autonomous driving systems
since our inception in 2016. This relatively limited operating history makes it difficult to evaluate our future prospects and the risks
and challenges we may encounter. Further, because we have limited historical financial data and we operate in a rapidly evolving market,
any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or
operated in a more predictable market. In addition our business model may evolve, which could render our historical operating history
and financial data less useful in assessing our prospects. For example, rather than our traditional model of selling LiDAR systems directly
to customers, we are currently selling a chipset containing components to Magna, which then assembles the LiDAR system for one of our
customers.
If we fail to address the risks and difficulties that we face, including those described
elsewhere in this “Risk Factors” section, our business, financial condition and results
of operations could be adversely affected. We have encountered in the past, and we will encounter in the future, risks and uncertainties
frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding
these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks
successfully, our results of operations could differ materially from our expectations and our business, financial condition and results
of operations could be adversely affected.
We are creating innovative technologies by
designing and developing unique components. The high price of or low yield in these components may affect our ability to sell at competitive
prices, or may lead to losses.
Part of our technological approach to providing cost-efficient LiDAR-based autonomous
driving solutions featuring superior performance involves using a multi-disciplinary approach to design some of our components. Many of
these components are complex and contain multiple sophisticated elements. Volume production of these elements may require extreme precision
and present challenges to their manufacturers. This can lead to increased costs of production of the components which the manufacturers
may pass on to us or a production run may yield fewer usable components than desired or anticipated. Any such increased components cost
or suboptimal yield in the production of our components may significantly increase our production costs and thereby decrease our margins
and potentially cause us losses.
5
There are significant risks to providing our
products as a direct supplier to customers.
We recently started leveraging our in-house knowledge developed via our engagement
and development history to approach customers directly. This new approach means entering into direct agreement with customers and not
having a Tier-1 “middleman” to take on some of the risks involved in such long-term engagements. Additional risks include
the responsibilities associated interacting directly with customers on complex tasks such as full design validation, direct customer support
and car integration. In addition, we may take on additional liability and indemnification responsibilities that we did face previously
when using a Tier-1 “middleman.”
We expect to invest substantially in research
and development for the purpose of developing and commercializing new products. These investments could significantly reduce our profitability
or increase our losses and may not generate revenue for our company.
Our future growth depends on maintaining our technological leadership in order to
introduce new products that penetrate new markets and achieve market acceptance. We therefore plan to incur substantial research and development
costs as part of our efforts to design, develop, manufacture, and commercialize new products and enhance existing products. Our research
and development expenses were approximately $93.3 million, $57.0 million and $59.4 million during the years ended December 31,
2021, 2020 and 2019, respectively, and are likely to grow in the future. Future research and development expenses will adversely affect
the future results of our operations. In addition, our research and development program may not produce successful results, and even if
it does successfully produce new products, those products may not achieve market acceptance, create additional revenue or become profitable.
We may experience significant delays in the
design, production and launch of our LiDAR products for autonomous driving systems, which could harm our business, prospects, financial
condition and operating results.
Our recently announced products, InnovizTwo and Innoviz360, are still in the development
phase. Any delay in the design, production and launch of InnovizTwo or Innoviz360, or of any other future products, could materially damage
our brand, business, prospects, financial condition and operating results. There are often delays in the design, production and commercial
release of new products. To the extent we delay the launch of InnovizTwo or Innoviz360, or any future product, our growth prospects could
be adversely affected as we may fail to increase our market share.
We are substantially dependent on our design
win with BMW and our relationship with Magna, and our business could be materially and adversely affected if the BMW L3 Program is terminated.
Our business is substantially dependent on our design win with BMW. We are the supplier
of LiDAR to the BMW Level 3 program (“BMW L3 Program”), through our Tier-1 partner, Magna Electronics Inc.
(“Magna”). For the years ended December 31, 2021, December 31, 2020 and December 31, 2019, sales to Magna accounted
for approximately $4.5 million, $2.8 million (excluding negative revenues due to the issuance of shares of Series C-1 Convertible
Redeemable Preferred Stock of no-par value (“Preferred C-1 Shares”) to Magna in the amount of $14.8 million) and $1.0 million,
respectively, representing 82%, 52%, and 64% of our total revenues, during each respective period. There can be no assurance that
we will be able to maintain our relationship with BMW or Magna and secure orders from Magna for BMW’s program. If BMW terminates
or significantly alters or delays our BMW L3 Program and/or alters its relationship with us in a manner that is adverse to our company,
our business would be materially adversely affected. Similarly, if we are unable to maintain our relationship with Magna, or if our arrangement
with Magna is modified so that the economic terms become less favorable to us, then our business would be materially adversely affected.
The period from a design win to implementation
is long and we are subject to the risks of not achieving design wins, cancellations or postponements of contracts or unsuccessful implementation.
Prospective customers, including those in the automotive industry, generally must
make significant commitments of resources to test and validate our products and confirm that they can integrate with other technologies
before including them in any particular system, product or model. The development cycles of our products with new customers varies widely
depending on the application, market, customer and the complexity of the product. In the automotive market, for example, this development
cycle can be five to seven years. As a result of these lengthy development cycles, we spend significant time and resources to have our
products selected by automotive OEMs and their suppliers for use in a particular vehicle model, which is known as a design win. If we
do not achieve a design win with respect to a particular vehicle model, we may not have an opportunity to supply our products to the automotive
OEM for that vehicle model for a period of many years. If our products are not selected by an automotive OEM or its suppliers for one
vehicle model or if our products are not successful in that vehicle model, it is unlikely that our products will be deployed in other
vehicle models of that automotive OEM. Further, we are subject to the risk that customers might cancel or postpone implementation of our
technology, as well as the risk that we will not be able to integrate our hardware and software technologies successfully into a larger
system with other sensing modalities. If we fail to win a significant number of vehicle model programs from one or more of automotive
OEMs or their suppliers, or our customers cancel or postpone implementation, our business, results of operations and financial condition
may be materially and adversely affected.
6
We may need to raise additional funds in the
future in order to execute our business plan and these funds may not be available to us when we need them. If we cannot raise additional
funds when we need them, our business, prospects, financial condition and operating results could be negatively affected.
We may require additional capital in the future in order to fund our growth strategy
or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges,
acquisitions or unforeseen circumstances. We may also determine to raise equity or debt financing for other reasons. For example, in order
to further enhance business relationships with current or potential customers or partners, we may issue equity or equity-linked securities
to such current or potential customers or partners.
We may not be able to timely secure additional debt or equity financing on favorable
terms, or at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our
existing shareholders could experience significant dilution. In addition, any debt financing obtained by us in the future, whether in
the form of a credit facility or otherwise, could involve restrictive covenants relating to our capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including
potential acquisitions. 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 addition,
because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot
predict or estimate the amount, timing, nature or success of our future capital raising efforts.
If market adoption of LiDAR for autonomous
vehicles does not continue to develop, or develops more slowly than we expect, our business will be adversely affected.
While our LiDAR-based solutions can be applied to different use cases across end markets,
we have been and expect to continue to be significantly focused on automotive applications. Despite the fact that the automotive industry
has engaged in considerable effort to research and test LiDAR products for advanced driver assistance systems (“ADAS”) and
autonomous driving applications, there is no guarantee that the automotive industry will introduce LiDAR products in commercially available
vehicles in the near future, if at all. LiDAR products are still relatively new in the market and it is possible that other sensor technologies
and devices, based on new or existing technology or a combination of technologies, will achieve acceptance or leadership in the ADAS and
autonomous driving industries. Even if LiDAR products are used in initial generations of autonomous driving or ADAS technology, we cannot
guarantee that LiDAR products will be designed into or included in subsequent generations of such commercialized technology. In addition,
we expect that initial generations of autonomous vehicles will be focused on limited applications, such as robotaxis, and that mass market
adoption of autonomous technology in consumer vehicles may lag behind these initial applications significantly. The speed of market growth
for ADAS or autonomous vehicles is difficult if not impossible to predict, and it is more difficult to predict this market’s future
growth in light of the economic consequences of the COVID-19 pandemic. In addition, to the extent that the market for autonomous
vehicles develops successfully, we expect that there will be increasing competition from providers of sensing technology based on LiDAR
and other modalities. If commercialization of LiDAR products is not successful, or not as successful as we or the market expect, or if
other sensing modalities is preferred over our LiDAR product by developers of autonomous driving systems or ADAS, automotive OEMs, regulators
and safety organizations or other market participants by the time autonomous vehicle technology achieves mass market adoption, our business,
results of operations and financial condition will be materially and adversely affected.
We target many customers that are large companies
with substantial negotiating power, exacting product standards and potentially competitive internal solutions. If we are unable to sell
our products to these customers, our prospects and results of operations will be adversely affected.
Many of our customers and potential customers are large, multinational companies with
substantial negotiating power relative to us and, in some instances, may have internal solutions that are competitive to our products.
These large, multinational companies also have significant resources, which may allow them to acquire or develop competitive technologies
either independently or in partnership with others. Accordingly, even after investing significant resources to develop a product, we may
not secure a design win or may not be able to commercialize a product on profitable terms. If our products are not selected by these companies
or if these companies develop or acquire competitive technology or negotiate terms that are disadvantageous to us, it will have an adverse
effect on our business.
7
We continue to implement strategic initiatives
designed to grow our business. These initiatives may prove more costly than we currently anticipate, and we may not succeed in increasing
our revenues by an amount sufficient to offset the costs of these initiatives and to achieve and maintain profitability.
We continue to make investments and implement initiatives designed to grow our business,
including:
| • |
investing in research and development; |
| • |
expanding our sales and marketing efforts to attract new customers across industries and geographies; |
| • |
investing in new applications and markets for our products; |
| • |
further enhancing our manufacturing processes and partnerships; and |
| • |
investing in legal, accounting and other administrative functions necessary to support our operations as a public company.
|
These initiatives may prove more expensive than we currently anticipate, and we may
not succeed in increasing our revenue, if at all, in an amount sufficient to offset these higher expenses and to achieve and maintain
profitability. The market opportunities we are pursuing are at an early stage of development, and it may be many years before the end
markets we expect to serve generate significant demand for our products, if at all.
In addition, our revenue may be adversely affected for a number of reasons, including
the development and/or market acceptance of new technology that competes with our LiDAR products, changes by OEMs or other market participants
to their autonomous vehicle technology, failure of our customers to commercialize autonomous systems that include our LiDAR solutions,
our inability to effectively manage our inventory or manufacture products at scale, our failure to enter new markets or to attract new
customers or expand orders from existing customers or due to increasing competition. Furthermore, it is difficult to predict the size
and growth rate of our target markets, customer demand for our products, commercialization timelines, developments in autonomous sensing
and related technology, the success of existing competitive products and services, or the entry of new competitive companies and
products. Accordingly, we do not expect to achieve profitability over the near term. If our revenue does not grow over the long term,
our ability to achieve and maintain profitability may be adversely affected, and the value of our business may significantly decrease.
The markets in which we compete are characterized
by rapid technological change, which requires us to continue to develop new products and product innovations, and could adversely affect
market adoption of our products.
While we intend to invest substantial resources in research and development, continuing
technological changes in sensing technology, as well as changes in the ADAS and autonomous driving industries, could adversely affect
adoption of LiDAR and/or our products. Our future success will depend on our ability to develop and introduce a variety of new capabilities
and innovations to our existing product offerings, as well as to introduce a variety of new product offerings to address the changing
needs of the markets in which we offer our products. For example, we are currently working on our InnovizTwo product, as well as several
other new LiDAR products. We cannot guarantee that our new products will be released in a timely manner, or at all, or achieve market
acceptance. Delays in delivering new products that meet customer requirements could damage our relationships with customers and lead them
to seek alternative sources of supply.
If we are unable to devote adequate resources to develop products or cannot otherwise
successfully develop products or system configurations that meet customer requirements, including pricing, on a timely basis or that remain
competitive with other technological alternatives, our products could lose market share, our revenue will decline, we may experience operating
losses and our business and prospects will be adversely affected.
Certain of our strategic, development and supply
arrangements could be terminated or may not materialize into long-term contract partnership arrangements.
We have arrangements with strategic, development and supply partners and collaborators.
Some of these arrangements are evidenced by memorandums of understandings, early-stage agreements that are used for design and development
purposes that will require renegotiation at later stages of development or replacement by production or master agreements under separately
negotiated statements of work, each of which could be terminated or may not materialize into next-stage contracts or long-term contract
partnership arrangements. If these arrangements are terminated or if we are unable to enter into next-stage contracts or long-term operational
contracts, our business, prospects, financial condition and operating results may be materially adversely affected.
8
We may experience difficulties in managing
our growth and expanding our operations.
We expect to experience significant growth in the scope and nature of our operations.
Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management
controls, compliance programs and reporting systems. We are currently in the process of strengthening our compliance programs, including
our compliance programs related to export controls, privacy and cybersecurity and anti-corruption. We may not be able to implement improvements
in an efficient or timely manner and may discover deficiencies in existing controls, programs, systems and procedures, which could have
an adverse effect on our business, reputation and financial results.
Continued pricing pressures, automotive OEM
cost reduction initiatives and the ability of automotive OEMs to re-source or cancel vehicle or technology programs may result in lower
than anticipated margins or losses, which may adversely affect our business.
Cost-cutting initiatives adopted by our customers often result in increased downward
pressure on pricing. We expect that our agreements with automotive OEMs may require step-downs in pricing over the term of the agreements
or, if commercialized, over the periods of production. In addition, our automotive OEM customers often reserve the right to terminate
their supply contracts for convenience, which enhances their ability to obtain price reductions. Automotive OEMs possess significant leverage
over their suppliers, including us, because the automotive component supply industry is highly competitive, serves a limited number of
customers and has a high fixed cost base. Accordingly, we expect to be subject to substantial continuing pressure from automotive OEMs
and Tier-1 suppliers to reduce the price of our products. It is possible that pricing pressures beyond our expectations could
intensify as automotive OEMs pursue restructuring, consolidation and cost-cutting initiatives. If we are unable to generate sufficient
production cost savings in the future to offset price reductions, our gross margin and profitability would be adversely affected.
Adverse conditions in the automotive industry
or the global economy more generally could have adverse effects on our results of operations.
Our business is directly affected by and significantly dependent on business cycles
and other factors affecting the global automotive industry and global economy in general. Automotive production and sales are highly cyclical
and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rates and
credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives, regulatory requirements
and political volatility, especially in energy-producing countries and growth markets. In addition, automotive production and sales can
be affected by our automotive OEM customers’ ability to continue operating in response to challenging economic conditions and in
response to regulatory requirements and other factors. The volume of automotive production in North America, Europe and the rest of the
world has fluctuated, sometimes significantly, from year to year, and we expect any such fluctuations to give rise to fluctuations in
the demand for our products. Any significant adverse change in any of these factors may result in a reduction in automotive sales and
production by our automotive OEM customers and could have a material adverse effect on our business, results of operations and financial
condition.
Adoption of LiDAR for other emerging markets
may not occur or may occur much more slowly than we anticipate, which would adversely affect our business and prospects.
We are investing in and pursuing market opportunities outside of the automotive markets,
including in industrial, delivery, surveillance and security robots, mapping applications for topography and smart city initiatives. We
believe that our future revenue growth, if any, will depend in part on our ability to expand within new markets such as these and to enter
new markets as they emerge. Each of these markets presents distinct risks and, in many cases, requires us to address the particular requirements
of that market.
Addressing these requirements can be time-consuming and costly. The market for LiDAR
technology outside of automotive applications is relatively new, rapidly developing and unproven in many markets or industries. Many of
the participants in the markets for LiDAR technology outside of the automotive industry are still in testing and developing their technologies
and products and may not succeed in commercialization of products or systems with LiDAR products or at all. We cannot be certain that
LiDAR will be sold into these markets, or any market outside of automotive market, at scale. Adoption of LiDAR products, including our
products, outside of the automotive industry will depend on numerous factors, including: whether the technological capabilities of LiDAR
and LiDAR-based products meet users’ current or anticipated needs, whether the benefits of designing LiDAR into larger sensing systems
outweigh the costs, complexity and time needed to deploy such technology or replace or modify existing systems that may have used other
modalities such as cameras and/or radar, whether users in other applications can move beyond the testing and development phases and proceed
to commercializing systems supported by LiDAR technology and whether LiDAR developers such as us can keep pace with rapid technological
change in certain developing markets and the global response to the COVID-19 pandemic and the length of any associated work
stoppages. If LiDAR technology does not achieve commercial success outside of the automotive industry, or if the market develops at a
pace slower than we expect, our business, results of operation and financial condition may be materially and adversely affected.
9
As part of growing our business, we may make
acquisitions. If we fail to successfully select, execute or integrate our acquisitions, then our business, results of operations and financial
condition could be materially adversely affected and the price of our ordinary shares and warrants could decline.
From time to time, we may undertake acquisitions to add new products and technologies,
acquire talent, gain new sales channels or enter into new markets or sales territories. Acquisitions involve numerous risks and challenges,
including relating to the successful integration of the acquired business and its key personnel, entering into new territories or markets
with which we have limited or no prior experience, establishing or maintaining business relationships with new customers, channel partners,
vendors and suppliers, as well as unexpected liabilities and potential post-closing disputes.
To date, we have no experience with acquisitions and the integration of acquired technology
and personnel. Further, the ability to successfully identify an acquisition candidate, negotiate and close an acquisition and then integrate
the acquired company may be made more difficult by travel limitations and difficulties resulting from the COVID-19 pandemic.
Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial
condition and results of operations and could cause the price of our ordinary shares and warrants to decline.
The complexity of our products could result
in unforeseen delays or expenses from undetected defects, errors or bugs in hardware or software which could reduce the market adoption
of our new products, damage our reputation with current or prospective customers, expose us to product liability, warranty and other claims
and adversely affect our operating costs.
Our products are technologically complex and require high standards to manufacture.
We have experienced in the past and will likely also experience in the future defects, errors or bugs at various stages of development
and manufacturing. We may be unable to timely release new products, manufacture existing products, correct problems that have arisen or
correct such problems to our customers’ satisfaction. Additionally, undetected errors or defects, especially as new products are
introduced or as new versions are released, could result in serious injury, including fatalities, to the end users of technology incorporating
our products, or those in the surrounding area, our customers never being able to commercialize technology incorporating our products,
litigation against us, negative publicity, and other consequences. These risks are particularly prevalent in the highly competitive autonomous
driving and ADAS markets. Some errors or defects in our products may only be discovered after they have been tested, commercialized and
deployed by customers. In accordance with customary practice in the automotive industry, we provide our customer with a time-limited warranty
to our products. If such errors or defects occur within the respective warranty period, we may incur significant additional development
costs, repair or replacement costs. Such problems may also result in claims against us by our customers or by third parties and in some
cases, may even lead to product recall and the costs associated with such processes. Our reputation or brand may be damaged as a result
of these problems and customers may be reluctant to buy our products, which could adversely affect our ability to retain existing customers
and attract new customers, and could adversely affect our financial results.
In addition, we could face material legal claims for breach of contract, product liability,
tort or breach of warranty as a result of these problems. Defending a lawsuit, regardless of its merit, could be costly and may divert
management’s attention and adversely affect the market’s perception of us and our products. In addition, our business liability
insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all.
These product-related issues could result in claims against us and our business could be adversely affected.
Moreover, legislation and regulations may be adopted or changed over time to increase
our liability associated with the use of our products, which may make our liability insurance coverage inadequate to fully mitigate such
risks or rather make it significantly more costly, which could adversely affect our operating results and financial condition.
We operate in a highly competitive market against
a large number of both established competitors and new market entrants, and some market participants have substantially greater resources
than ours.
The markets for sensing technology applicable to autonomous solutions across numerous
industries are highly competitive. Our future success will depend on our ability to maintain our lead by continuing to develop and protect
from infringement advanced LiDAR technology in a timely manner and to stay ahead of existing and new competitors. Our competitors are
numerous and they compete with us directly by offering LiDAR products and indirectly by attempting to solve some of the same challenges
with different technology. We face competition from camera and radar companies, other developers of LiDAR products, Tier-1 suppliers
and other technology and automotive supply companies, some of which have significantly greater resources than we do. Some examples of
our competitors include Hesai, Ibeo Automotive Systems, Velodyne, Luminar, Valeo SA, Bosch and Continental. In the automotive market,
some of our competitors have commercialized non-LiDAR-based ADAS technology which has achieved market adoption, strong brand recognition
and may continue to improve these and additional technologies, further enhancing their brand recognition and standing. Other competitors
are working towards commercializing autonomous driving technology and either by themselves, or with a publicly announced partner, have
substantial financial, marketing, research and development and other resources. Some of our customers in the autonomous vehicle and ADAS
markets have announced development efforts or made acquisitions directed at creating their own LiDAR-based or other sensing technologies,
which would compete with our solutions. We do not know how close these competitors are to commercializing autonomous driving systems or
novel ADAS applications. In markets outside of the automotive industry, our competitors, such as Velodyne or Ouster, seek to develop new
sensing applications across industries. Even in these emerging markets, we face substantial competition from numerous competitors seeking
to prove the value of their technology. Additionally, increased competition may result in pricing pressure and reduced margins and may
impede our ability to increase the sales of our products or may cause us to lose market share, either of which will adversely affect our
business, results of operations and financial condition.
10
We expect our results of operations to fluctuate
on a quarterly and annual basis, which could cause the price of our ordinary shares and warrants to fluctuate or decline.
Our quarterly and annual results of operations have fluctuated in the past and may
vary significantly in the future. As such, historical comparisons of our operating results may not be meaningful. In particular, because
our sales to date have primarily been to customers making purchases for research and development projects, sales in any given quarter
can fluctuate based on the timing and success of our customers’ development projects. Accordingly, the results of any one quarter
should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety
of factors, many of which are outside of our control and may not fully reflect the underlying performance of our business. These fluctuations
could adversely affect our ability to meet our expectations or those of securities analysts or investors. If we do not meet these expectations
for any period, the value of our business and our securities could decline significantly. Factors that may cause these quarterly fluctuations
include, without limitation, those listed below:
| • |
the timing and magnitude of orders and shipments of our products in any quarter; |
| • |
pricing changes we may adopt to drive market adoption or in response to competitive pressure; |
| • |
our ability to attract and retain talent to develop, support, and promote our business across different functions and geographies;
|
| • |
our ability to retain our existing customers and attract new customers; |
| • |
our ability to develop, introduce, manufacture and ship in a timely manner products that meet customer requirements; |
| • |
disruptions in our sales channels or termination of our relationship with important channel partners; |
| • |
delays in customers’ purchasing cycles or deferments of customers’ purchases in anticipation of new products or updates
from us or our competitors; |
| • |
fluctuations in demand pressures for our products; |
| • |
the mix of products sold in any quarter; |
| • |
the duration of the global COVID-19 pandemic and the time it takes for economic recovery; |
| • |
the timing and rate of broader market adoption of autonomous systems utilizing our solutions across the automotive and other market
sectors; |
| • |
market acceptance of LiDAR and further technological advancements by our competitors and other market participants; |
| • |
the ability of our customers to commercialize systems that incorporate our products; |
| • |
any change in the competitive dynamics of our markets, including consolidation of competitors, regulatory developments and new market
entrants; |
| • |
our ability to effectively manage our inventory; |
| • |
changes in the source, cost, availability of and regulations pertaining to materials we use; |
| • |
adverse litigation, judgments, settlements or other litigation-related costs, or claims that may give rise to such costs; and
|
| • |
general economic, industry and market conditions, including trade disputes. |
11
Changes in tax laws or exposure to additional income tax liabilities
could affect our future profitability.
Factors that could materially affect our future effective tax rates include but are
not limited to:
| • |
changes in tax laws or the regulatory environment; |
| • |
changes in accounting and tax standards or practices; |
| • |
changes in the composition of operating income by tax jurisdiction; and |
| • |
our operating results before taxes. |
Because we do not have a long history of operating at our present scale and we have
significant expansion plans, our effective tax rate may fluctuate in the future. Future effective tax rates could be affected by operating
losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in the composition of earnings in countries
with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.
Changes in our product mix may impact our financial
performance.
Our financial performance can be affected by the mix of products we sell during a
given period. If our sales include more of our lower gross margin products , our results of operations and financial condition may be
adversely affected. There can be no guarantees that we will be able to successfully alter our product mix. If actual results vary from
this projected product mix of sales, our results of operations and financial condition could be adversely affected.
We are dependent on the services of Omer Keialf,
our Co-Founder and Chief Executive Officer.
Our success depends to a significant degree upon the continued contributions of Omer
Keilaf, our Co-Founder and Chief Executive Officer. Mr. Keilaf has been our Chief Executive Officer since the founding of the Company
in 2016, remains deeply involved in all aspects of our business and is the name and face that customers, suppliers and investors associate
with Innoviz. The loss of Mr. Keilaf would adversely affect our business, since his loss could make it more difficult to, among other
things, compete with other market participants and retain existing customers or cultivate new ones. Further, such a loss could be negatively
perceived in the marketplace.
Our management team has limited experience
managing a public company.
Our management team has limited experience managing a publicly-traded company, interacting
with public company investors and complying with the increasingly-complex laws pertaining to public companies. Our management team may
not successfully or efficiently manage their new roles and responsibilities, our transition to being a public company subject to significant
regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and
investors. The challenges of transitioning to a public company may be exacerbated because we became public in a transaction with a special
purpose acquisition company and such transactions are subject to heightened SEC scrutiny given their novelty and complexity. These new
obligations and constituents will require significant attention from our senior management and could divert their attention away from
the day-to-day management of our business, which could adversely affect our business, financial condition and operating results.
Our business depends on our ability to attract
and retain highly skilled personnel and senior management. In addition, we are highly dependent on our skilled personnel to manage and
meet deadlines for our products and programs.
We compete in a market marked by rapidly changing technologies and an evolving competitive
landscape. In order for us to successfully compete and grow, we must attract, recruit, retain and develop personnel with requisite qualifications
to provide expertise across the entire spectrum of our intellectual capital and business needs.
Our primary research and development activities as well as significant elements of
our general and administrative activities are conducted at our headquarters in Israel, and we face significant competition for suitably
skilled employees in Israel. While there has been intense competition for qualified employees in the Israeli high-tech industry historically,
the industry experienced record growth and activity in 2021, both at the earlier stages of venture capital and growth equity financings,
and at the exit stage of initial public offerings and mergers and acquisitions. This flurry of growth and activity has caused a sharp
increase in demand for skilled employees in both Israeli high-tech companies and Israeli research and development centers of foreign companies,
and an intensification of competition between these employers to attract qualified employees in Israel. As a result, the high-tech industry
in Israel has experienced significant levels of employee attrition and is currently facing a severe shortage of skilled employees, including
engineering, research and development, sales and customer support personnel. Many of the companies with which we compete for qualified
personnel have greater resources than we do, and we may not succeed in recruiting additional experienced or professional personnel, retaining
personnel or effectively replacing current personnel who may depart with qualified or effective successors.
12
In addition, because of the intense competition for qualified employees, the Israeli
high-tech market has also experienced, and may continue to experience, significant wage inflation. Accordingly, our efforts to attract,
retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. Furthermore,
in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the equity they
are to receive in connection with their employment. Employees may be more likely to leave us if the shares they own or the shares underlying
their equity incentive awards have significantly appreciated or significantly decreased in value. Many of our employees may receive significant
proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us and could heighten
the risk of employee attrition.
While we utilize non-competition agreements with our employees as a means of improving
our employee retention, those agreements may not help us retain employees. These agreements prohibit our employees, if they cease working
for us, from competing directly with us or working for our competitors for a limited period. We may be unable to enforce these agreements
under Israeli law, and it may be difficult for us to restrict our competitors from benefiting from the expertise our former employees
developed while working for us.
In addition, we rely on our skilled personnel, including our engineers, to meet deadlines
associated with our numerous products and programs. As we continue to invest in new products, such as Innoviz360, and new programs, such
as our shuttle project, we will rely more and more on our skilled personnel to ensure that we are meeting the development and commercialization
targets we set internally and with our partners. As we invest in new products and programs, our skilled personnel may not be able to give
the same level of attention to each product and program, and it may become more difficult for us to continue to meet the internal and
external deadlines associated with such products and programs.
Considering the foregoing, there can be no assurance that qualified employees will
remain in our employ or that we will be able to attract and retain highly skilled personnel and senior management in the future. Failure
to retain or attract highly skilled personnel and senior management could have a material adverse effect on our business, financial condition
and results of operations. Human resource changes could affect our internal knowledge and expertise, strategic relationships and future
growth prospects.
We rely on third-party suppliers and, because
some of the key components in our products come from limited or sole sources of supply, we are susceptible to supply shortages, long lead
times for components and supply changes, any of which could disrupt our supply chain and could delay deliveries of our products to customers.
Some of the components that go into the manufacture of our solutions are sourced from
third-party suppliers. Some of the key components used to manufacture our products come from limited or single source suppliers. We are
therefore subject to the risk of shortages and long lead times in the supply of these components and the risks that our suppliers discontinue
or modify components used in our products. These risks may be amplified by the effects of the COVID-19 pandemic and other health
epidemics and outbreaks due to, among other things, work stoppages or interruptions. For example, our products depend on external semi-conductor
foundries. Any disruptions to those foundries could materially and adversely affect our ability to manufacture our solutions. In addition,
the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. We have
in the past experienced and may in the future experience component shortages and price fluctuations of certain key components and materials,
and the predictability of the availability and pricing of these components may be limited. In the event of a component shortage, supply
interruption or material pricing change from suppliers of these components, we may not be able to develop alternate sources in a timely
manner or at all in the case of sole or limited sources. Any interruption or delay in the supply of any of these parts or components,
or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time,
could adversely affect our relationships with our customers and could cause delays in shipment of our products and adversely affect our
operating results. In addition, increased component costs could result in lower gross margins. Even where we are able to pass increased
component costs along to our customers, there may be a lapse of time before we are able to do so such that we must absorb the increased
cost. If we are unable to buy these components in quantities sufficient to meet our requirements on a timely basis, we will not be able
to deliver products to our customers, which may result in such customers using competitors’ products instead of ours.
Currency exchange rate fluctuations affect
our results of operations, as reported in our financial statements.
We report our financial results in U.S. dollars. We collect our revenue primarily
in U.S. dollars. A portion of the cost of revenue, research and development, sales and marketing and general and administrative expenses
of our Israeli operations are incurred in NIS. As a result, we are exposed to exchange rate risks that may materially and adversely affect
our financial results. If NIS appreciates against the U.S. dollar or if the value of NIS declines against the U.S. dollar at a time when
the rate of inflation in the cost of Israeli goods and services exceeds the rate of decline in the relative value of NIS, then the U.S.
dollar cost of our operations in Israel would increase and our results of operations could be materially and adversely affected. Although
we enter into hedging transactions from time to time, our Israeli operations also could be materially and adversely affected if we are
unable to effectively hedge against currency fluctuations in the future. We cannot predict any future trends in the rate of inflation
in Israel or the rate of appreciation (if any) of NIS against the U.S. dollar. The Israeli annual rate of inflation amounted to 2.8%,
negative 0.7%, and 0.6% for the years ended December 31, 2021, 2020 and 2019, respectively. The appreciation of the NIS in relation to
the U.S. dollar amounted to 6.6%, 7.0% and 7.8% for the years ended December 31, 2021, 2020 and 2019, respectively.
13
Our sales and operations in international markets
expose us to operational, financial and regulatory risks.
International sales comprise a significant amount of our overall revenue. Sales to
international customers accounted for approximately 99%, 97% and 93% of our revenue in the years ended December 31, 2021, 2020 and
2019, respectively. We are committed to growing our international sales and, while we have committed resources to expanding our international
operations and sales channels, these efforts may not be successful. International operations are subject to a number of other risks, including:
| • |
exchange rate fluctuations; |
| • |
political and economic instability, international terrorism and anti-Israeli sentiment; |
| • |
global or regional health crises, such as the COVID-19 pandemic; |
| • |
potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud; |
| • |
preference for locally branded products, and laws and business practices favoring local competition; |
| • |
potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to
additional expense and complexity in doing business there; |
| • |
potential complexities of operating in China with increased data collection and government-mandates which are subject to change per
unprecedented regulation; |
| • |
increased difficulty in managing inventory; |
| • |
delayed revenue recognition; |
| • |
less effective protection of intellectual property; |
| • |
stringent regulation of the autonomous or other systems or products using our products and stringent consumer protection and product
compliance regulations, including but not limited to General Data Protection Regulation in the European Union (the “EU”),
European competition law, the Restriction of Hazardous Substances directive, the Waste Electrical and Electronic Equipment directive and
the European Ecodesign directive that are costly to comply with and may vary from country to country; |
| • |
difficulties and costs of staffing and managing foreign operations; |
| • |
import and export laws and the impact of tariffs; and |
| • |
changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws. |
The occurrence of any of these risks could negatively affect our international business
and consequently our business, operating results and financial condition.
Unforeseen eye safety issues could result in
injuries to people which could result in adverse effects on our business and reputation.
Our LiDAR utilizes lasers for performing 3D sensing. While our LiDAR products are
classified as Class 1 laser products, which are safe to use, and we have developed system components designed to prevent our LiDAR lasers
from harming human eyes, in the event that an unforeseen issue arises that results in serious injury, our reputation or brand may be damaged
and we could face material legal claims for breach of contract, product liability, tort or breach of warranty as a result of these problems.
Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s
perception of us and our products. In addition, our business liability insurance coverage could prove inadequate with respect to a claim
and future coverage may be unavailable on acceptable terms or at all.
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Our business is subject to the risks of earthquakes,
fire, floods and other natural catastrophic events, global pandemics, and interruptions by man-made problems, such as network security
breaches, computer viruses, terrorism and war. Material disruptions of our business or information systems resulting from these events
could adversely affect our operating results.
A significant natural disaster, such as an earthquake, fire, flood or significant
power outage or other similar events, such as infectious disease outbreaks or pandemic events, including the COVID-19 pandemic,
could have an adverse effect on our business and operating results. The COVID-19 pandemic has produced meaningful operational challenges
and we expect to continue to experience disruptions in our business during 2022. COVID-19 has heightened many of the other risks described
herein, such as our ability to meet existing and potential customers to generate and accelerate demand for our products, manufacturing
capacity across our global supply chain, our ability to achieve or maintain profitability and our ability to raise additional capital
in the future. Despite the implementation of network security measures, our networks and LiDAR products also may be vulnerable to computer
viruses, break-ins and similar disruptions from unauthorized tampering with our solutions. In addition, natural disasters, acts
of terrorism or war, such as the military conflict between Ukraine and Russia, could cause disruptions in our remaining manufacturing
operations, our, our customers’, suppliers’ or channel partners’ businesses, or the economy as a whole. We also rely
on information technology systems to communicate among our workforce and with third parties. Any disruption to our communications, whether
caused by a natural disaster or by manmade problems, such as power disruptions, could adversely affect our business. We do not have a
formal disaster recovery plan or policy in place and does not currently require that our suppliers’ partners have such plans or
policies in place. To the extent that any such disruptions result in delays or cancellations of orders or impede our suppliers’
ability to timely deliver product components, or the deployment of our products, our business, operating results and financial condition
would be adversely affected.
We have been, and may in the future be, adversely
affected by the global COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict,
which may significantly harm our business, prospects, financial condition and operating results.
The ongoing COVID-19 pandemic as well as other possible health epidemics
and outbreaks could result in a material adverse impact on us or our customers’ business operations including reduction or suspension
of operations in the U.S. or certain parts of the world. Our engineering and manufacturing operations, among others, cannot all be conducted
in a remote working structure and often require on-site access to materials and equipment. We have customers with international
operations in varying industries. We also depend on suppliers and manufacturers worldwide. We have experienced delays in obtaining materials
and components from our suppliers located in different parts of the world and may continue to experience such delays. These suppliers
delays have, in some instances, led to delays in the delivery of our products and have increased the time needed to build our equipment.
Depending upon the duration of the ongoing COVID-19 pandemic and the associated
business interruptions, our customers, suppliers, manufacturers and partners may suspend or delay their engagement with us, which could
result in a material adverse effect on our financial condition. In addition, we may face increased costs related to delays in production
due to supplier and manufacturer delays. Our response to the ongoing COVID-19 pandemic may prove to be inadequate and we may
be unable to continue our operations in the manner we had prior to the outbreak, and may endure interruptions, reputational harm, delays
in our product development and shipments, all of which could have an adverse effect on our business, operating results, and financial
condition. In addition, when the pandemic subsides, we cannot guarantee the timing of any economic recovery, which could continue to have
a material adverse effect on our target markets and our business.
Risks Related to Our Intellectual Property
We may not be able to adequately protect or
enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our solutions. Our efforts
to protect and enforce our intellectual property rights and prevent third parties from violating our rights may be costly.
The success of our products and our business depends in part on our ability to obtain
patents and other intellectual property rights and maintain adequate legal protection for our products in the United States and other
international jurisdictions. We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as
confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited
protection. We cannot assure you that any patents will be issued with respect to our currently pending patent applications or that any
trademarks will be registered with respect to our currently pending applications in a manner that gives us adequate defensive protection
or competitive advantages, if at all, or that any patents issued to us or any trademarks registered by it will not be challenged, invalidated
or circumvented. We have filed for patents and trademarks in the United States and in certain international jurisdictions, but such protections
may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights, or may be difficult
to enforce in practice. our currently issued patents and trademarks and any patents and trademarks that may be issued or registered, as
applicable, in the future with respect to pending or future applications may not provide sufficiently broad protection or may not prove
to be enforceable in actions against alleged infringers. We cannot be certain that the steps we have taken will prevent unauthorized use
of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive
to ours or infringe our intellectual property.
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Protecting against the unauthorized use of our intellectual property, products and
other proprietary rights is expensive and difficult, particularly internationally. We believe that our patents are foundational
and we intend to enforce the intellectual property portfolio we have built. Unauthorized parties may attempt to copy or reverse engineer
our solutions or certain aspects of our solutions that we consider proprietary. Litigation may be necessary in the future to enforce or
defend our intellectual property rights, to prevent unauthorized parties from copying or reverse engineering our solutions, to determine
the validity and scope of the proprietary rights of others or to block the importation of infringing products from one patent jurisdiction
into another jurisdiction.
Effective patent, trademark, service mark, copyright and trade secret protection may
not be available in every country in which our products are available and competitors based in other countries may sell infringing products
in one or more markets. An inability to adequately protect and enforce our intellectual property and other proprietary rights or an inability
to prevent authorized parties from copying or reverse engineering our smart vision solutions or certain aspects of our solutions that
we consider proprietary could seriously adversely affect our business, operating results, financial condition and prospects.
In addition to patented technology, we rely
on our unpatented proprietary technology, processes and know-how.
We rely on proprietary information (such as know-how and confidential information)
to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection,
or that we believe is best protected by means that do not require public disclosure.
We generally seek to protect this proprietary information by entering into confidentiality
agreements or consulting, services or employment agreements that contain non-disclosure and non-use provisions with
our employees, consultants, contractors and third parties. However, we may fail to enter into the necessary agreements, and even if entered
into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of our
proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure
or use of proprietary information. In addition, our proprietary information may otherwise become known or be independently developed by
our competitors or other third parties. To the extent that our employees, consultants, contractors, advisors and other third parties use
intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and
inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and
failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position.
We also rely on physical and electronic security measures to protect our proprietary
information, but we cannot provide assurance that these security measures will not be breached or provide adequate protection for our
property. There is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage.
We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual
property rights.
Third-party claims that we are infringing intellectual
property, whether successful or not, could result in costly and time-consuming litigation or expensive licenses, and our business could
be adversely affected.
Although we hold patents related to our products, a number of companies, both within
and outside of the LiDAR industry, hold other patents covering aspects of LiDAR products. In addition to these patents, participants in
this industry typically also protect their technology, especially embedded software, through copyrights and trade secrets. As a result,
there is frequent litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights.
We may receive in the future inquiries from other intellectual property holders and may become subject to claims that we infringed their
intellectual property rights, particularly as we expand our presence in the market. In addition, parties may claim that the names and
branding of our products infringe their trademark rights in certain countries or territories. If such a claim were to prevail, we may
have to change the names and branding of our products in the affected territories and it could incur other costs.
We currently have a number of agreements in effect pursuant to which we have agreed
to defend, indemnify and hold harmless our customers, suppliers and partners from damages and costs which may arise from the infringement
by our products of third-party patents or other intellectual property rights. The scope of these indemnity obligations varies, but may,
in some instances, include indemnification for damages and expenses, including attorneys’ fees. Our insurance may not cover all
intellectual property infringement claims. A claim that our products infringe a third party’s intellectual property rights, even
if untrue, could adversely affect our relationships with our customers, may deter future customers from purchasing our products and could
expose us to costly litigation and settlement expenses. Even if we are not a party to any litigation between a customer and a third party
relating to infringement by our products, an adverse outcome in any such litigation could make it more difficult for us to defend our
products against intellectual property infringement claims in any subsequent litigation in which we are a named party. Any of these results
could adversely affect our brand and operating results.
16
Our defense of intellectual property rights claims brought against us or our customers,
suppliers and channel partners, with or without merit, could be time-consuming, expensive to litigate or settle, divert management resources
and attention and force us to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments
and may not be available on acceptable terms or at all. Further, a party making such a claim, if successful, could secure a judgment that
requires us to pay substantial damages or obtain an injunction. An adverse determination also could invalidate our intellectual property
rights and adversely affect our ability to offer our products to our customers and may require that we procure or develop substitute products
that do not infringe, which could require significant effort and expense. Any of these events could adversely affect our business, operating
results, financial condition and prospects.
Legal and Regulatory Risks Related to Our Business
We are subject to, and must remain in compliance
with, numerous laws and governmental regulations concerning the manufacturing, use, distribution and sale of our products. Some of our
customers also require that we comply with their own unique requirements relating to these matters.
We manufacture and sell products that contain electronic components, and such components
may contain materials that are subject to government regulation in both the locations where we manufacture and assemble our products,
as well as the locations where we sell our products. For example, in the United States, laser-emitting products, including our LiDAR systems,
are subject to regulation by the U.S. Food and Drug Administration (the “FDA”), under the Electronic Product Radiation Control
Provisions of the Federal Food, Drug, and Cosmetic Act and its implementing regulations. Among other things, these laws and regulations
require the submission of annual reports to the FDA certifying that such products comply with applicable performance standards, the maintenance
of manufacturing, testing, and distribution records, and the reporting of certain product defects to the FDA and/or consumers. If our
products fail to comply with applicable FDA regulations, we and/or our products could be subjected to a variety of enforcement actions
or sanctions, such as product recalls, repairs or replacements, warning letters, untitled letters, safety alerts, injunctions, import
alerts, administrative product detentions or seizures or civil penalties. The occurrence of any of the foregoing could harm our business,
results of operations and financial condition.
Since we operate on a global basis, we must continually monitor applicable laws and
regulations, and engage in an ongoing compliance process to ensure that we and our suppliers are in compliance with all existing laws
and regulations. If there is an unanticipated or onerous new legislation or regulation that significantly impacts our use of various components
or requires more expensive components, such legislation or regulation could materially adversely affect our business, results of operations
and financial condition.
Our products are also used for autonomous driving and ADAS applications, which are
subject to complicated and rapidly evolving laws and regulatory schemes that vary from jurisdiction to jurisdiction at the state, federal
and international levels, including requirements related to safety, data privacy and security, and product liability, among other areas.
These are rapidly evolving areas in which new or changed requirements could impose limitations on the use of LiDAR generally or our products
specifically. If we fail to adhere to these new laws and regulations or fail to continually monitor emerging developments, we may be subject
to litigation, loss of customers or negative publicity and our business, and our results of operations and financial condition will be
adversely affected.
Concerns over environmental pollution and climate change have produced significant
legislative and regulatory efforts on a global basis, and we believe this will continue both in scope and in the number of countries participating.
These changes could directly increase the cost of energy, which may have an effect on the way we manufacture products or utilizes energy
to produce our products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or
key components we use in our products. Environmental regulations require us to reduce product energy usage, monitor and exclude an expanding
list of restricted substances and to participate in required recovery and recycling of its products. We are unable to predict how any
future changes will impact us and if such impacts will be material to our business.
Our business may be adversely affected by changes
in automotive safety regulations or concerns that drive further regulation of the automobile safety market.
Government vehicle safety regulations are an important factor for our business. Historically,
these regulations have imposed ever-more stringent safety regulations for vehicles. These safety regulations often require, or customers
demand that, vehicles have more safety features per vehicle and more advanced safety products.
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While we believe increasing automotive safety standards will present a market opportunity
for our products, however, government safety regulations are subject to change based on a number of factors that are not within our control:
including new scientific or technological data, adverse publicity regarding industry recalls and safety risks of autonomous driving and
ADAS, accidents, domestic and foreign political developments or considerations, and litigation relating to our products and our competitors’
products. Changes in government regulations, as well as changes or evolution in court doctrines in interpreting those regulations, especially
in the autonomous driving and ADAS industries could adversely affect our business. If government priorities shift and we are unable to
adapt to changing regulations or to court interpretations of those regulations, our business may be materially and adversely affected.
Federal and local regulators impose more stringent compliance and reporting requirements
in response to product recalls and safety issues in the automotive industry. As the cars that carry our sensors go into production, we
are subject to existing stringent requirements under the National Traffic and Motor Vehicle Safety Act of 1966, or the Vehicle Safety
Act, including a duty to report, subject to strict timing requirements, safety defects with our products. The Vehicle Safety Act imposes
potentially significant civil penalties for violations including the failure to comply with such reporting actions. We are also subject
to the existing U.S. Transportation Recall Enhancement, Accountability and Documentation Act (“TREAD”), which requires equipment
manufacturers, such as our company, to comply with “Early Warning” requirements by reporting certain information to the National
Highway Traffic Safety Administration (“NHTSA”), such as information related to defects or reports of injury related to our
products. TREAD imposes criminal liability for violating such requirements if a defect subsequently causes death or bodily injury. In
addition, the National Traffic and Motor Vehicle Safety Act authorizes NHTSA to require a manufacturer to recall and repair vehicles that
contain safety defects or fail to comply with U.S. federal motor vehicle safety standards. Sales into foreign countries may be subject
to similar regulations. If we cannot rapidly address any safety concerns or defects with our products, our business, results of operations
and financial condition may be adversely affected.
The U.S. Department of Transportation has issued regulations that require manufacturers
of certain autonomous vehicles to provide documentation covering specific topics to regulators, such as how automated systems detect objects
on the road, how information is displayed to drivers, what cybersecurity measures are in place and the methods used to test the design
and validation of autonomous driving systems. As cars that carry our sensors go into production, the obligations of complying with safety
regulations could increase and it could require increased resources and adversely affect our business.
Failures, or perceived failures, to comply
with privacy, data protection, and information security requirements in the variety of jurisdictions in which we operate may adversely
impact our business, and such legal requirements are evolving, uncertain and may require improvements in, or changes to, our policies
and operations.
Our current and potential future operations and sales subject us to laws and regulations
addressing privacy and the collection, use, storage, disclosure, transfer and protection of a variety of types of data. For example, the
European Commission has adopted the General Data Protection Regulation and California recently enacted the California Consumer Privacy
Act of 2018, both of which provide for potentially material penalties for non-compliance. These regimes may, among other things,
impose data security requirements, disclosure requirements, and restrictions on data collection, uses, and sharing that may impact our
operations and the development of our business. While, generally, we do not have access to, neither do we collect, store, process, or
share information collected by our solutions unless our customers choose to proactively provide such information to us, our products may
evolve both to address potential customer requirements or to add new features and functionality. Therefore, the full impact of these privacy
regimes on our business is rapidly evolving across jurisdictions and remains uncertain at this time.
We may also be affected by cyber-attacks and other means of gaining unauthorized access
to our products, systems, and data. For instance, cyber criminals or insiders may target us or third-parties with which we have business
relationships in an effort to obtain data, or in a manner that disrupts our operations or compromises our products or the systems into
which our products are integrated. Cyber criminals could also target accessing our systems in a manner which could impact our sensor data.
We are assessing the continually evolving privacy and data security regimes and measures
we believe are appropriate in response. Since these data security regimes are evolving, uncertain and complex, especially for a global
business like ours, we may need to update or enhance our compliance measures as our products, markets and customer demands further develop
and these updates or enhancements may require implementation costs. The compliance measures we do adopt may prove ineffective. Any failure,
or perceived failure, by us to comply with current and future regulatory or customer-driven privacy, data protection, and information
security requirements, or to prevent or mitigate security breaches, cyber-attacks, or improper access to, use of, or disclosure of data,
or any security issues or cyber-attacks affecting us, could result in significant liability, costs (including the costs of mitigation
and recovery), and a material loss of revenue resulting from the adverse impact on our reputation and brand, loss of proprietary information
and data, disruption to our business and relationships, and diminished ability to retain or attract customers and business partners. Such
events may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity,
and could cause customers and business partners to lose trust in us, which could have an adverse effect on our reputation and business.
18
We may be exposed to liabilities under the
U.S. Foreign Corrupt Practices Act and other U.S. and foreign anti-corruption anti-money laundering, export control, sanctions, and other
trade laws and regulations, and any determination that we violated these laws could have a material adverse effect on our business.
We are subject to export control and import laws and regulations, including the U.S.
Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the
U.S. Treasury Department’s Office of Foreign Assets Control. We are also subject to the U.S. Foreign Corrupt Practices Act of 1977,
as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA
PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, and possibly other anti-bribery and anti-money laundering
laws in countries outside of the United States in which we conduct our activities. Compliance with these laws has been the subject of
increasing focus and activity by regulatory authorities, both in the United States and elsewhere, in recent years. Anti-corruption laws
are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering,
providing, soliciting, or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public
or private sector. Our activities outside the United States may create the risk of unauthorized payments or offers of payments by employees,
consultants, sales agents or distributors, even though they may not always be subject to our control. It is our policy to implement safeguards
to discourage these practices by our employees, consultants, sales agents and distributors. However, our existing safeguards and any future
improvements may prove to be less than effective, and our employees, consultants, sales agents, or distributors may engage in conduct
for which we might be held responsible, even if it does not explicitly authorize such activities.
Noncompliance with anti-corruption, anti-money laundering, export control, sanctions,
and other trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement
actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment
from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences.
If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible
civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. Responding to any
action will likely result in a materially significant diversion of management’s attention and resources and significant defense
and compliance costs and other professional fees. In addition, the U.S. government may seek to hold us liable for successor liability
for FCPA violations committed by companies in which it invests or that it acquires. As a general matter, enforcement actions and sanctions
could harm our business, results of operations, and financial condition.
Regulations related to conflict minerals may
cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of
our products.
We are subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, or the Dodd-Frank Act, that will require it to determine, disclose and report whether our products contain conflict
minerals. The implementation of these requirements could adversely affect the sourcing, availability and pricing of the materials used
in the manufacture of components used in our products. In addition, we will incur additional costs to comply with the disclosure requirements,
including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in or necessary
to the production of our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of
such verification activities. It is also possible that our reputation may be adversely affected if we determine that certain of our products
contain minerals not determined to be conflict-free or if we are unable to alter our products, processes or sources of supply to avoid
use of such materials.
A market for our securities may not be sustained,
which would adversely affect the liquidity and price of our securities.
An active trading market for our securities may not be sustained. In addition, the
price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our
financial reports. Additionally, if our securities become delisted from Nasdaq and are quoted on the OTC Bulletin Board (an inter-dealer
automated quotation system for equity securities that is not a national securities exchange), the liquidity and price of our securities
may be more limited than if we were quoted or listed on the NYSE, Nasdaq or another national securities exchange. You may be unable to
sell your securities unless a market can be established or sustained.
19
Our internal controls over financial reporting
may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which
could have a significant and adverse effect on our business and reputation.
Our business is subject to the reporting requirements of the Securities Act, the Exchange
Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. We expect that the requirements of these rules and regulations will
continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly,
and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure
controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls,
internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by
us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in
SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to
our principal executive and financial officers.
Our current controls and any new controls that we develop may become inadequate because
of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to
develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect
our operating results or cause it to fail to meet our reporting obligations and may result in a restatement of our financial statements
for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic
management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our
internal control over financial reporting that it is required to include in our periodic reports we will file with the SEC under Section 404
of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause
investors to lose confidence in our reported financial and other information.
In order to maintain and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting, we have expended and anticipates that we will continue to expend significant
resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of our
internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs
and could materially and adversely affect our ability to operate our business. In the event that our internal controls are perceived as
inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results
and the price of our ordinary shares and warrants could decline. In addition, if we are unable to continue to meet these requirements,
we may not be able to maintain our listing on Nasdaq.
Our independent registered public accounting firm is not required to formally attest
to the effectiveness of our internal control over financial reporting until after we are no longer an emerging growth company. At such
time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level
at which our controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control
over financial reporting could have a material and adverse effect on our business and operating results.
Risks Related to Ownership of Our Ordinary Shares and Warrants
Our Articles and Israeli law could prevent
a takeover that shareholders consider favorable and could also reduce the market price of our ordinary shares and warrants.
Certain provisions of Israeli law and our Articles could have the effect of delaying
or preventing a change in control and may make it more difficult for a third party to acquire us or for our shareholders to elect different
individuals to our board of directors, even if doing so would be beneficial to our shareholders and warrantholders, and may limit the
price that investors may be willing to pay in the future for the our ordinary shares and warrants. For example, Israeli corporate law
regulates mergers, requires that a tender offer be effected when certain thresholds of percentage ownership of voting power in a company
are exceeded (subject to certain conditions) and establishes a high ownership threshold to squeeze out minority shareholders in a full
tender offer. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose
country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. See the section
titled “Material Israeli Tax Considerations—Taxation of our shareholders.”
20
Our private placement warrants are accounted
for as liabilities, and the changes in value of our private placement warrants could impact our financial results.
On April 12, 2021, the Staff of the SEC issued a statement regarding the accounting
and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting
and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC
Statement”).
The SEC Statement focused on certain settlement terms and provisions related to certain
tender offers following a business combination. The terms described in the SEC Statement are common in SPACs and are similar to the terms
contained in the Warrant Agreement governing our warrants, which were originally issued by Collective Growth. Following the SEC Statement,
we examined the accounting treatment of our public warrants and private placement warrants, and determined to classify the private placement
warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings, while the public
warrants are classified as equity.
As a result, included on our balance sheet as of December 31, 2021 contained elsewhere
in this Annual report are derivative liabilities related to embedded features contained within our private placement warrants. Accounting
Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the re-measurement of the fair value of such
derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized
in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results
of operations may fluctuate quarterly based on factors which are outside of our control. Due to the recurring fair value measurement,
we expect that we will recognize non-cash gains or losses on our private placement warrants each reporting period and that the amount
of such gains or losses could be material.
We do not intend to pay dividends in the foreseeable
future.
We have never declared or paid any cash dividends on our ordinary shares and we currently
intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any
dividends on our ordinary shares in the foreseeable future. Consequently, you may be unable to realize a gain on your investment except
by selling sell such ordinary shares after price appreciation, which may never occur.
Our board of directors has sole discretion whether to pay dividends. If our board
of directors decides to pay dividends, the form, frequency, and amount will depend upon our future, operations and earnings, capital requirements
and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Israeli
Companies Law, 5759-1999 (the “Companies Law”) imposes restrictions on our ability to declare and pay dividends. See the section
titled “Description of our Ordinary Shares—Dividend and Liquidation Rights”
for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See the section titled “Material
Israeli Tax Considerations” for additional information.
Our ordinary shares and warrants may not continue
to be listed on a national securities exchange, which could limit investors’ ability to make transactions in such securities and
subject us to additional trading restrictions.
We may be unable to maintain the listing of our ordinary shares and warrants on Nasdaq
in the future. If we fail to meet the listing requirements and Nasdaq does not list our ordinary shares and warrants we could face significant
material adverse consequences, including:
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a limited availability of market quotations for our ordinary shares and warrants; |
| • |
a reduced level of trading activity in the secondary trading market for our ordinary shares and warrants; |
| • |
a limited amount of news and analyst coverage for us; |
| • |
a decreased ability to issue additional securities or obtain additional financing in the future; and |
| • |
our securities would not be “covered securities” under the National Securities Markets Improvement Act of 1996, which
is a federal statute that prevents or pre-empts the states from regulating the sale of certain securities, including securities
listed on Nasdaq, in which case our securities would be subject to regulation in each state where we offer and sells securities.
|
21
The market price and trading volume of our
ordinary shares and warrants may be volatile and could decline significantly.
The stock markets, including Nasdaq, on which our ordinary shares and warrants are
listed under the symbol “INVZ,” and “INVZW,” respectively, have from time to time experienced significant price
and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for our ordinary shares and warrants,
the market price of our ordinary shares and warrants may be volatile and could decline significantly. In addition, the trading volume
in our ordinary shares and warrants may fluctuate and cause significant price variations to occur. We cannot assure you that the market
price of our ordinary shares and warrants will not fluctuate widely or decline significantly in the future in response to a number of
factors, including, among others, the following:
| • |
the realization of any of the risk factors presented in this Annual Report; |
| • |
actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, Adjusted EBITDA, results of
operations, level of indebtedness, liquidity or financial condition; |
| • |
additions and departures of key personnel; |
| • |
failure to comply with the requirements of Nasdaq; |
| • |
failure to comply with the Sarbanes-Oxley Act or other laws or regulations; |
| • |
future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases, of our securities including
due to the expiration of contractual lock-up agreements; |
| • |
publication of research reports about us; |
| • |
the performance and market valuations of other similar companies; |
| • |
failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities
analysts who follow us or our failure to meet these estimates or the expectations of investors; |
| • |
new laws, regulations, subsidies, or credits or new interpretations of existing laws applicable to us; |
| • |
commencement of, or involvement in, litigation involving us; |
| • |
broad disruptions in the financial markets, including sudden disruptions in the credit markets; |
| • |
speculation in the press or investment community; |
| • |
actual, potential or perceived control, accounting or reporting problems; |
| • |
changes in accounting principles, policies and guidelines; and |
| • |
other events or factors, including those resulting from infectious diseases, health epidemics and pandemics (including the ongoing COVID-19 public
health emergency), natural disasters, war, acts of terrorism or responses to these events. |
In the past, securities class-action litigation has often been instituted against
companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs
and divert our management’s attention and resources, which could have a material adverse effect on us.
Our quarterly operating results may fluctuate
significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of
which are beyond our control, resulting in a decline in the price of our ordinary shares and warrants.
Our quarterly operating results may fluctuate significantly because of several factors,
including:
| • |
labor availability and costs for hourly and management personnel; |
| • |
profitability of our products, especially in new markets and due to seasonal fluctuations; |
| • |
changes in interest rates; |
22
| • |
impairment of long-lived assets; |
| • |
macroeconomic conditions, both nationally and locally; |
| • |
changes in consumer preferences and competitive conditions; |
| • |
expansion to new markets; and |
| • |
fluctuations in component prices. |
If securities or industry analysts do not publish
or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our ordinary
shares and warrants adversely, then the price and trading volume of our ordinary shares and warrants could decline.
The trading market for our ordinary shares and warrants is influenced by the research
and reports that industry or financial analysts publish about us or our business. We do not control these analysts, or the content and
opinions included in their reports. As a new public company, we may be slow to attract research coverage and the analysts who publish
information about the our ordinary shares will have had relatively little experience with us, which could affect their ability to accurately
forecast our results and make it more likely that we fail to meet our estimates. In the event we obtain industry or financial analyst
coverage, if any of the analysts who cover our issues an inaccurate or unfavorable opinion regarding it, the price of our ordinary shares
and warrants would likely decline. In addition, the share prices of many companies in the technology industry have declined significantly
after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the
expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of
analysts or public investors, analysts could downgrade our ordinary shares and warrants or publish unfavorable research about us and our
securities. If one or more of these analysts cease coverage of us or fail to publish reports on it regularly, our visibility in the financial
markets could decrease, which in turn could cause the price of our ordinary shares and warrants or trading volume to decline.
Our failure to meet the continued listing requirements
of Nasdaq could result in a delisting of our Securities.
If we fail to satisfy the continued listing requirements of Nasdaq such as the corporate
governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our securities. Such a delisting
would likely have a negative effect on the price of our ordinary shares and warrants and would impair our shareholders’ ability
to sell or purchase our ordinary shares and warrants when they wish to do so. In the event of a delisting, we can provide no assurance
that any action taken by us to restore compliance with listing requirements would allow our ordinary shares and warrants to become listed
again, stabilize the market price or improve the liquidity of our ordinary shares and warrants, prevent our ordinary shares and warrants
from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
We qualify as an emerging growth company within
the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth
companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with
other public companies.
We are eligible to be treated as an emerging growth company, as defined in Section 2(a)
of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act,
emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to
private companies. We intend to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial
accounting standards.
For as long as we continue to be an emerging growth company, we may also take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies,
including presenting only limited selected financial data and not being required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem
important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier,
including if our total annual gross revenue exceeds $1.07 billion, if we issue more than $1.0 billion in non-convertible debt
securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws.
We cannot predict if investors will find our ordinary shares and warrants less attractive
because we may rely on these exemptions. If some investors find our ordinary shares and warrants less attractive as a result, there may
be a less active trading market for our ordinary shares and warrants and the price for our ordinary shares and warrants may be more volatile.
Further, there is no guarantee that the exemptions available to us under the JOBS Act will result in significant savings. To the extent
that we choose not to use exemptions from various reporting requirements under the JOBS Act, we will incur additional compliance costs,
which may impact our financial condition.
23
We are a foreign private issuer and, as a result,
we are not be subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient
and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private
issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange
Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation
of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange
Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from
trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports
on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and
regulations with regard to notice of shareholder meetings and intends to furnish comparable financial quarterly information and its proxy
statements on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until
120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual
report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated
filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign
private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material
information. As a result of all of the above, our shareholders may not have the same protections afforded to shareholders of a company
that is not a foreign private issuer.
We may lose our foreign private issuer status
in the future, which could result in significant additional costs and expenses.
We are a foreign private issuer, and therefore we are not required to comply with
all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status
is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next
determination will be made with respect to us on June 30, 2022. In the future, we would lose our foreign private issuer status if
(1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive
officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer
status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements
on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We would also
have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject
to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability
to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company
that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we will not incur
as a foreign private issuer.
As we are a “foreign private issuer”
and follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders
of companies that are subject to all Nasdaq corporate governance requirements.
As a foreign private issuer, we have the option to follow certain home country corporate
governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following and describe the home
country practice we are following. We rely on this “foreign private issuer exemption” with respect to the Nasdaq rules for
shareholder meeting quorums and Nasdaq rules requiring shareholder approval. We may in the future elect to follow home country practices
with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that
are subject to all Nasdaq corporate governance requirements.
Risks Related to Our Incorporation and Location in Israel
Conditions in Israel could materially and adversely
affect our business.
Many of our employees, including certain management members operate from our offices
that are located in Rosh HaAin, Israel. In addition, most of our officers and directors are residents of Israel. Accordingly,
political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations.
In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the
Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed
military forces in Syria. In addition, Iran has threatened to attack Israel and
may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian
targets in various parts of Israel, including areas in which our employees are located, and negatively affected business conditions in
Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and our trading
partners could adversely affect our operations and results of operations.
24
Our commercial insurance does not cover losses that may occur as a result of events
associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are
caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently
cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts
or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Further, in the past, the State of Israel and Israeli companies have been
subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies.
These restrictive laws and policies may have an adverse impact on our results of operations, financial condition or the expansion of our
business. A campaign of boycotts, divestment, and sanctions has been undertaken against Israel, which could also adversely affect our
business. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually
or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations, and prospects.
In addition, many Israeli citizens are obligated to perform several weeks of annual
military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain
occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there
have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the
future. Our operations could be disrupted by such call-ups, which may include the call-up of members
of our management. Such disruption could materially adversely affect our business, prospects, financial condition, and results of operations.
We may become subject to claims for remuneration
or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
A significant portion of our intellectual property has been developed by our employees
in the course of their employment by us. Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived
by an employee in the course and as a result of his or her employment with a company are regarded as “service inventions,”
which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties
Committee (the “Committee”), a body constituted under the Patent Law, shall determine whether the employee is entitled to
remuneration for his or her inventions. Case law clarifies that the right to receive consideration for “service inventions”
can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will
examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general
Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating this remuneration, but rather
uses the criteria specified in the Patent Law. Although we generally enter into assignment-of-invention agreements with our
employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement
with us, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could
be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims,
which could negatively affect our business.
The tax benefits that are available to us require
that we continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.
We may be eligible for certain tax benefits provided to “Preferred Technology
Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”). In order
to remain eligible for the tax benefits for “Preferred Technology Enterprises” we must continue to meet certain conditions
stipulated in the Investment Law and our regulations, as amended. If these tax benefits are reduced, cancelled or discontinued, our Israeli
taxable income from the approved enterprise would be subject to regular Israeli corporate tax rates. The standard corporate tax rate for
Israeli companies in 2016 was 25% of their taxable income and was reduced to 24% in 2017 and 23% in 2018 and thereafter. Additionally,
if we increase our activities outside of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion
in future Israeli tax benefit programs. See “Material Israeli Tax Considerations.”
25
It may be difficult to enforce a U.S. judgment
against us, our officers and directors and the Israeli experts named in this Annual Report in Israel or the United States, or to assert
U.S. securities laws claims in Israel or serve process on our officers and directors and these experts.
Most of our directors or officers are not residents of the United States and most
of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors
and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive
officers may be difficult to obtain within the United States. It may be difficult to assert claims under U.S. securities laws in original
actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts
may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because
Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may
determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable
U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed
by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments
rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and
directors. In addition, there is no bilateral treaty between Israel and the United States for the enforcement of civil judgments.
Moreover, among other reasons, including but not limited to, fraud or absence of due
process, or the existence of a judgment which is at variance with another judgment that was given in the same matter or if a suit in the
same matter between the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a non-Israeli judgment
if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases)
or if our enforcement is likely to prejudice the sovereignty or security of the State of Israel. For more information, see “Enforceability
of Civil Liabilities.”
The rights and responsibilities of our shareholders
are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
We are incorporated under Israeli law. The rights and responsibilities of holders
of our ordinary shares are governed by our Articles and the Companies Law. These rights and responsibilities differ in some respects from
the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder
of an Israeli company has to act in good faith in exercising his or her rights and fulfilling his or her obligations toward the company
and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general
meeting of shareholders and class meetings, on amendments to a company’s articles of association, increases in a company’s
authorized share capital, mergers, and transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling
shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote
or who has the power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company
has a duty of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is limited
case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
U.S. holders of our ordinary shares and/or
warrants may suffer adverse tax consequences if we are treated as a passive foreign investment company.
A non-U.S. corporation generally will be treated as a “passive foreign
investment company” (“PFIC”) for U.S. federal income tax purposes, in any taxable year if either (1) at least 75%
of its gross income for such year is passive income (such as interest income) or (2) at least 50% of the value of its assets (based
on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production
of passive income. We believe we were not a PFIC for our taxable year ending December 31, 2021. However, as discussed below, whether we
were a PFIC for any given taxable year is based on a complex and factual determination and there is no assurance that the Internal Revenue
Service (“IRS”) will agree with our determination. Based on the current and anticipated composition of the income, assets
and operations of our company and our subsidiaries, we cannot be sure as to whether we will be a PFIC for U.S. federal income tax purposes
for our taxable year ending December 31, 2022 or in future taxable years. This is a factual determination that depends on, among other
things, the composition of our income and assets, and the market value of our shares and assets, including the composition of income and
assets and the market value of shares and assets of our subsidiaries, from time to time, and thus a determination can only be made annually
after the close of each taxable year. If we are a PFIC for any taxable year, a U.S. Holder of our ordinary shares may be subject to adverse
tax consequences and may incur certain information reporting obligations. Under the PFIC rules, unless such U.S. Holder makes an election
available under the Internal Revenue Code of 1986, as amended (the “Code”) (which election could itself have adverse consequences
for such U.S. Holder), such U.S. Holder may be subject to U.S. federal income tax at the then prevailing maximum rates on ordinary income
and possibly an “interest” charge, in respect of “excess distributions” and upon any gain from the disposition
of our ordinary shares, as if the excess distribution or gain had been recognized ratably over such U.S. Holder’s holding period
of our ordinary shares. Certain elections (including a qualified electing fund or a mark-to-market election) available to U.S.
Holders of our ordinary shares to mitigate some of the adverse tax consequences resulting from PFIC treatment, however, are not available
with respect to the our warrants. For a further discussion, see “Taxation—United States federal
income taxation—Passive Foreign Investment Company considerations.” U.S. Holders of our ordinary shares and warrants
are strongly encouraged to consult their own advisors regarding the potential application of these rules to us and the ownership of our
ordinary shares and/or our warrants.
26
If a United States person is treated as owning
at least 10% of our shares, such person may be subject to adverse U.S. federal income tax consequences.
If a United States person is treated as owning (directly, indirectly or constructively)
at least 10% of the value or voting power of Our shares, such person may be treated as a “United States shareholder” with
respect to each of our company and any of our direct and indirect foreign affiliates (“Innoviz Group”) that is a “controlled
foreign corporation.” If the Innoviz Group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could
be treated as controlled foreign corporations regardless of whether we are treated as a controlled foreign corporation (although there
are recently issued final and currently proposed Treasury Regulations that may limit the application of these rules in certain circumstances).
A United States shareholder of a controlled foreign corporation may be required to
report annually and include in its U.S. taxable income its pro rata share of the controlled foreign corporation’s “Subpart
F income” and, in computing its “global intangible low-taxed income,” “tested income”
and a pro rata share of the amount of U.S. property (including certain stock in U.S. corporations and certain tangible assets located
in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation makes any distributions.
The amount includable by a United States shareholder under these rules is based on a number of factors, including potentially, but not
limited to, the controlled foreign corporation’s current earnings and profits (if any), tax basis in the controlled foreign corporation’s
assets, and foreign taxes paid by the controlled foreign corporation on its underlying income. Failure to comply with these reporting
obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may
prevent the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year
for which reporting (or payment of tax) was due from starting. An individual that is a United States shareholder with respect to a controlled
foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States
shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist holders in determining whether any of our non-U.S. subsidiaries are
treated as a controlled foreign corporation or whether any holder is treated as a United States shareholder with respect to any of such
controlled foreign corporations or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations.
|
Item 4. |
Information on the Company. |
A. History and Development of the Company
We were incorporated in Israel on January 18, 2016 under the Companies Law, and
our principal executive office is located at 2 Amal St., Afek Industrial Park, Rosh HaAin 4809202, Israel. Our legal and commercial name
is Innoviz Technologies Ltd. We are registered with the Israeli Registrar of Companies. Our registration number is 51-538242-2. Our
website address is www.innoviz.tech, and our telephone number is +972-74-700-3692. Information contained on, or that can be accessed through,
our website does not constitute a part of this Annual Report and is not incorporated by reference herein. We have included our website
address in this Annual Report solely for informational purposes. The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers, such as we, that file electronically, with the SEC at www.sec.gov. Our agent for
service of process in the United States is Cogency Global Inc., 122 East 42nd Street, 18th Floor, New York, NY 10168.
On December 10, 2020, we entered into the Business Combination Agreement with
Collective Growth, Perception, Antara Capital and Merger Sub. Pursuant to the Business Combination Agreement, Merger Sub merged with and
into Collective Growth, with Collective Growth surviving the merger. Upon consummation of the Business Combination and the other transactions
contemplated by the Business Combination Agreement on April 5, 2021, Collective Growth became a wholly owned subsidiary of us.
For a description of our principal capital expenditures and divestitures for the three
years ended December 31, 2021, see Item 5. “Operating and Financial Review and Prospects.”
27
B. Business Overview
Company Overview
We are a leading provider of high-performance, solid-state LiDAR and perception solutions
that bring enhanced vision and superior performance to enable safe autonomous driving at a mass scale. We believe that we provide a complete
and comprehensive solution for OEMs and Tier-1 partners that are developing and marketing autonomous driving vehicles to the passenger
car and other relevant markets, such as robotaxis, shuttles, delivery vehicles, buses and trucking, as well as other industries that require
3-dimensional high resolution sensors. Our unique LiDAR and perception solutions feature technological breakthroughs across core components.
In addition, our solutions can enable safe autonomy for other industries, including logistics, drones, robotics, construction and other
industrial applications, agriculture, smart city, smart infrastructures, security, and mapping.
We were founded in 2016 by veterans of Unit 81, the elite technology unit of Israel’s
Intelligence Corps, one of the most prestigious multidisciplinary technological units in the Israeli Defense Forces. From our founding,
our culture drew from Unit 81’s core values of solving sophisticated technological problems through creativity and agile thinking.
We have relied on these values to address the needs of autonomous vehicles in a manner that strikes the desired balance between performance
and cost. We created a new type of LiDAR sensor from the chip-level up, including a suite of powerful and sophisticated software applications
for high-performance computer vision to allow superior perception. Our multidisciplinary team developed an operational MEMS-based (Micro-Electro-Mechanical
System) LiDAR prototype in less than a year, which attracted the attention of leading Tier-1 companies such as Magna and Aptiv
as early as 2017. This was followed by a further intensive development and qualification stage, which culminated with our company achieving
a design win with BMW in 2018 to power BMW’s Level 3 autonomous platform. BMW is a leader and a pioneer in deploying new technologies
into the automotive industry and we believe that our close cooperation with BMW, together with Magna (our Tier-1 partner for this program),
uniquely positions us to make Level 3 autonomous driving a commercial reality.
The sustained cooperation with BMW provides our engineers and other research and development
(“R&D”) personnel with a valuable competitive edge. These engineers and other R&D personnel have been meticulously
trained to design, operate and verify our many groundbreaking innovations in accordance and in compliance with the rigorous ISO26262 standard
for Functional Safety in the automotive industry. Compliance with this and other standards has been enforced by regular ongoing audits
of Innoviz and our key suppliers, by both Magna and BMW as well as prospective customers that constantly test the performance of various
elements of our operations. As a result, our products have been constructed from the bottom up with hardware and software technology that
meets the most stringent automotive safety, quality, environmental, manufacturing, and other standards.
Our innovation has produced LiDAR solutions that deliver market leading performance
and that meet the demanding safety requirements for Level 2+ through Level 5 autonomous vehicles at price points suitable for
mass produced passenger vehicles. Our integrated custom design of advanced hardware and software components, which leverage the multidisciplinary
expertise and experience of our team, enable us to provide turn-key autonomous solutions to accelerate widespread adoption across
automakers at serial production scale.
Our robust software suite enables our ~905nm wavelength laser-based LiDAR architecture
to be easily leveraged to provide compelling solutions for Level 2+ through Level 5, without the need for any new significant
hardware components. This means that we are positioned to penetrate the current market, which is currently characterized mainly by Level 2+
production, and to continue to capture and extend our market share through a software-based upgrade of our products to Level 3 and
above, as the market continues to mature.
We are currently expanding our third-party manufacturing capacity through contract
manufacturers and partnerships with global Tier-1 suppliers to meet an anticipated increase in customer demand for our
products, while also further developing a next generation high-performance automotive-grade LiDAR sensor, the InnovizTwo, that is expected
to provide further cost efficiencies while still enabling performance solutions for Level 2+ and above vehicles. We believe that
our unique technology, together with our ability to meet automotive industry standards and our partnerships with various major Tier-1 automotive
suppliers, place us at the forefront of Tier-2 automotive suppliers.
Geographically, the substantial majority of our revenue is generated from customers
in Europe and North America. As we continue to grow, we expect to generate additional revenue from existing and other geographic areas
and the geographic mix of our revenue could therefore change over time.
Market Outlook
The automotive industry is increasingly harnessing sophisticated technologies in its
push to develop and introduce autonomous driving vehicles. Significant investment and rapid growth in this industry are being driven by
the need to assure human safety and in parallel, the potential recapture of drivers’ time for work, rest and relaxation while the
vehicle drives itself. Given the stakes involved in commercializing autonomous driving vehicles, the technologies and products needed
for autonomous driving require long development and validation cycles and must ensure safety prior to commercial deployment.
28
Recognizing the different levels of innovation and autonomy and the need to standardize
the approaches across the spectrum of possibilities for the sake of safety, the Society of Automotive Engineers has developed and defined
six levels of automation for autonomous vehicles: Level 0 through Level 5. These levels have been adopted by the U.S. Department
of Transportation.
Levels of Autonomous Driving
Level 0: The driver is fully responsible
for all driving functions at all times, even when the driver’s feet are off the pedals or if there is no steering. The driver must
constantly supervise his or her environment, steer the vehicle and brake or accelerate as needed to maintain safety. In Level 0,
the driver assistance features are limited to providing warnings or momentary driving assistance, such as forward collision warning, blind
spot warning and lane departure warning.
Level 1: Includes driver assistance features
such as Automated Emergency Braking Systems, steering or brake/acceleration, lane keep assist or lane centering, or adaptive cruise control.
Level 2: Includes partially automated
driver assistance features that provide steering and brake/acceleration support to the driver, such as lane centering and adaptive cruise
control at the same time. The term L2+ or Level 2+ is used for higher capability systems that will allow the driver to remove their
hands from the wheel for certain periods of time, but the driver’s eyes must remain on the road. Level 2 represents the highest
level in which the driver is still fully responsible for all driving functions at all times.
Level 3: In this level, the vehicle
can still be operated in normal driving mode. However, when the automated driving function is engaged, the human is no longer responsible
for the driving function, even when seated in the driver’s seat. The vehicle drives in conditional automation mode, and when the
vehicle stops the automated driving, the driver must take back complete control, and resume driving. The vehicle will drive in automated
mode only under limited conditions and will not operate unless all the required conditions are met – for example, driving on specific
roads, under favorable weather conditions or below a specific driving speed.
Level 4: Assures the vehicle will continue
to function without any human driver intervention, even if in a degraded state, and the driver may have the option to control the vehicle.
Pedals and/or steering wheel may or may not be installed.
Level 5: Full automation. The vehicle
is capable of performing all driving functions under all conditions without human intervention or even occupants.
In addition to these six levels, certain industry participants have also identified
a gap between Level 2 and Level 3, which it calls Level 2+. The move from Level 2 to Level 3 is essentially the
crossover from driver-assist to some level of autonomy. In the jump between these two levels, it is expected that liability
will shift from the driver to the system, meaning that responsibility and liability for driving is shifted from the driver to the OEM.
This gap can be partially bridged by systems that offer more than Level 2 but less than Level 3, or an enhanced ADAS offering,
which has created the industry terminology of “Level 2+”.
Currently, ADAS, which are not considered “autonomous driving” but have
important active safety features, have been successfully commercialized. ADAS-equipped vehicles are not fully autonomous as, although
the vehicle can control both steering and acceleration/deceleration, a human sits in the driver’s seat and needs to monitor the
driving at all times (i.e., have “eyes on the road”). Therefore, the advancement from vehicles with ADAS (Levels 1 through
2+) to autonomous driving systems (Levels 3 through 5) requires “environmental detection” capabilities, or the capability
to detect the environment in which the vehicle is operating, including speed, weather, high definition maps, a highway or urban setting,
density of traffic and every other condition that affects driving decisions, and the ability for the system to make informed decisions
independently, without the need for human supervision.
Accordingly, the ADAS+/ Level 2+ segment of the consumer automotive market is
expected to grow significantly over the short to medium term. ADAS+/Level 2+ systems are still technically in the driver-assist realm,
but incorporate a whole new layer of functionality on top of the traditional ADAS features. For instance, in Level 2+ vehicles, map
data may enable lane-centering functions to remain effective even in areas where sensing-only lane centering systems may face difficulties,
such as in areas without visible lane marks or low-quality lane markings, ramps with sharp turns, junctions, roundabouts, newly
paved roads or urban settings. Level 2+ also supports automatic lane changes by providing information such as lane-marking types
and adjusting the drive speed according to road speed/curvature.
In Level 3 through Level 5 autonomous vehicles, the system is expected to
take on the full task of driving, either in defined-use cases (Level 3 and Level 4) or all use cases (Level 5). Accordingly,
the OEM is defined as the legal driver, retains full responsibility and the autonomous vehicle system must comply with the highest level
of functional safety (ISO26262 ASIL D). This is to guarantee a failure probability low enough that automakers, consumers and regulators
will be able to agree that the vehicle can handle driving without any supervision by a human driver in given areas and at given times.
Level 3 through Level 5 systems accordingly require a robust sensing suite, which necessitates the use of high performance LiDAR
sensors. However, to date, high performance LiDAR sensors have been too expensive for mass market applications. Therefore, until the introduction
of cost-effective and high performance LiDAR sensors that enable cost-effective Level 3 through Level 5 system production, growth
in this industry segment is likely to remain limited. Our products feature reliability, automotive-grade assurance, low cost and distributed
sensing advantages and, we believe our products are well-positioned to achieve widespread deployment in this segment.
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Beyond the autonomous driving industry, there exist numerous other applications in
which a high-performance automotive-grade LiDAR with wide operating range and high reliability can add significant value. For example,
numerous off-highway driving applications could significantly benefit from the safety features available with use of LiDAR solutions.
These include the mining and construction industries, ports and airports, and material handling in factories, all of which deploy vehicles
and machines in restricted environments, at low speeds, and which require autonomous driving not only for cost saving, but also to prevent
costly accidents caused by distracted drivers. The major applications currently relevant to our company beyond autonomous driving are:
Our LiDAR Applications in Shuttles and Robotaxis
The automated shuttle business model is reliant on full autonomy. Shuttles drive repetitively
over the same, well mapped (“geo-fenced”) routes, with the possibility of software orchestration for specific difficulties,
such as a high-traffic intersection.
Similarly, the robotaxi business model is also reliant on full autonomy. However,
similar to human-driven taxis, robotaxis travel on constantly changing routes with dynamic pick-up and drop-off locations
for passengers that order the robotaxi service. This more complex and dynamic driving environment makes the autonomy challenge for robotaxis
harder to solve compared to that of shuttles. Nevertheless, the use-case is compelling as it will drive costs for passengers down to a
small part of the current taxi price, when taking into account the elimination of drivers, increased safety, reduced insurance costs,
and other savings.
In both shuttles and robotaxis, autonomy calls for a comprehensive sensor suite that
has 360-degree surround-perception in the most trying circumstances, including busy city streets with pedestrians, dogs, bicycles, erratic
traffic behavior, construction sites and others. Sensors need to be precise in regards to location and timing, see all around the vehicle
and detect obstacles at all heights with minimal delay. In addition, localization is needed to locate the shuttle or robotaxi precisely,
to leverage high definition maps.
Spinning LiDARs (“Spinners”) have 360-degrees capability, but they need
to be roof-mounted to leverage their surround view advantage. Placing a 360-degree sensor at the center of the roof causes blind spots
in all the areas immediately surrounding the vehicle, calling for an additional suite of short-range LiDARs close to the ground to eliminate
such blind spots. Because the existing long-range high resolution mechanical 360-degree sensors are expensive, typically ranging between
$10,000 to $100,000 per sensor, and because additional sensors are needed to cover the blind spots, the sensor suite is expensive and
a complex and costly integration of multiple LiDAR types is required.
Furthermore, a single long-range Spinner at the center of the vehicle is inherently
prone to occlusion. For instance, in the event of a left turn at an intersection where there are two left-turn lanes, and a large truck
is at the adjacent lane to the left of the autonomous vehicle, the Spinner on the roof will be occluded until the truck clears the intersection.
This situation would be exacerbated if the truck is late to move on green. The autonomous vehicle would be left standing at a green light,
delaying human drivers behind it.
Our solid-state LiDAR is uniquely suited to the shuttle and robotaxi applications.
By deploying LiDARs around the perimeter of the vehicle, shuttle and robotaxi designers can avoid both occlusion and blind spots. Just
as a human driver would cautiously move forward to peek around the truck, software can creep, allowing a corner mounted LiDAR to see over
the intersection and decide to go around the truck when traffic is clear.
The total cost per vehicle is lower when multiple Innoviz LiDARs are deployed around
the perimeter of the vehicle compared to a combination of expensive Spinners and short-range LiDARs.
Our LiDAR Applications in Trucks
Fully autonomous trucks may weigh 20-tons or more and have a stopping distance
of several hundred meters. Full autonomy in this space is not only dependent on long-range sensors, but also on advanced and validated
software that has to be proved to work at highway speed. This is further complicated by traffic diversions, construction on the freeway,
accident sites, traffic cones and other common highway occurrences.
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Development of fully autonomous trucks is supported by our current LiDARs. In addition
to long-range sensing needed for the forward-facing highway scenario, trucks need LiDARs for side and rear sensing. We believe that the
high resolution and large field of view of our LiDAR sensors, together with our cost, performance and automotive grade quality, make us
an excellent fit for this application.
In addition to the application of a fully autonomous truck driving alone, LiDAR sensors
can enable a platoon of leader-follower trucks, where the lead vehicle has a human driver. The follower vehicles are autonomous and form
a peloton formation. For this application, LiDAR sensors are critical in maintaining distance between leader and follower. A gap will
allow other vehicles to cut-in, disturbing the truck platoon formation. The 3 cm precision our LiDARs bring to range sensing
allows a tight platoon to drive at highway speed with safety.
Drones and Security Applications
LiDAR solutions are also highly relevant for collision avoidance, landing assist and
surveillance functions in autonomous flying machines, or drones. We believe that the weight, size, power consumption and cost of our products
make them particularly suitable for airborne deployment.
Finally, LiDAR with the ability to classify objects and count and track people can
enable a range of surveillance and security related static applications both on city streets and in sensitive areas such as airports or
stadiums. With respect to these applications, LiDAR features the ability to provide 3D imaging and to track and survey without identifying
the particular individual in the image, abating privacy concerns and providing LiDAR with clear advantages over cameras.
Our Technological Differentiation
Industry Approaches and Their Limitations
The first level of automation that requires sensors beyond radars or cameras is Level 2.
Level 2 autonomous vehicles use cameras and radars as the sensors for making actuation decisions for the vehicle (changes in car
speed and trajectory). However, the driver is essential to meet functional safety targets. The driver is used as a second observer to
the camera, and is expected to keep his or her eyes on the road so that he or she can take over in case the car’s driving decision-making
system makes an error.
A system which complies with the highest level of functional safety (ISO26262 ASIL
D) requires the “smart” redundancy of critical elements. The sensor suite is defined as a critical part of the autonomous
driving system, as it is not possible to make correct driving decisions without an accurate understanding of the vehicle’s surroundings.
“Smart” redundancy means not just multiplying the same sensors to deal with sensor malfunction, but rather adding different
types of sensors to ensure that, in any given situation where conditions are challenging for certain types of sensors, other sensors will
perform well and enable correct driving decision-making. Ideally, sensors should complement each other.
Cameras and radars are ubiquitous today. Both have advantages for use in ADAS and
autonomous driving applications, and both are relatively mature technologies with price points that are accessible for almost all new
cars. Nevertheless, cameras and radars have known disadvantages that make them inadequate for use in Level 3 through Level 5
systems without a LiDAR. In addition, even Level 2 ADAS systems, which are not considered “autonomous driving” but have
important active safety features, can greatly benefit from the addition of LiDARs for detecting and classifying objects and making emergency
decisions to avoid accidents. This is especially true of Level 2+ systems offering enhanced ADAS that can empower pseudo-autonomy,
such as hands-free highway driving where the driver still retains primary responsibility. This trend will likely be driven by lower cost
LiDAR systems.
Camera-based ADAS systems rely heavily on perception software, as the sensor itself
provides 2D data that requires perception algorithms in order to translate the data into a 3D perception model of the road. The ability
of cameras to detect range is limited since 2D information does not include a measurement of range. Although range can be deduced from
a 2D picture using perception algorithms, that process has limited accuracy. Furthermore, camera performance is limited under low-lighting situations
especially at night, and during sudden exposure to extreme light.
Radar, on the other hand, is limited by its low angular resolution compared to other
sensors such as camera or LiDAR. For example, radar may have difficulty differentiating between reflections from a car that is 50 meters
away, the road below it, the fence next to it or a parked car along the way. It may also have issues distinguishing objects that are close
together, determining object size and shape and detecting lateral motion, such as a person walking laterally in front of a car.
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Real life road conditions may present autonomous vehicles with objects, or a combination
of objects, that the vehicles’ perception algorithms are not able to classify, as every perception algorithm is only designed to
support a limited set of object classes. The value of having a LiDAR as part of the vehicle’s sensing suite in this situation is
that the LiDAR provides a physical measurement in a high resolution 3D representation of the driving scene. The perception software layer
can then use this 3D representation to determine the existence of an object in the driving path of the vehicle, without the need to classify
the type of object. Therefore, safe driving can be maintained.
Most LiDAR lasers work at either around ~905nm or ~1550nm wavelengths. The choice
of wavelength impacts, among other things, the type of laser and optical detector used in the system, which are two of the main components
that influence performance, cost and power consumption of the LiDAR. ~1550nm wavelength LiDAR lasers can potentially send stronger light
pulses than ~905nm wavelength LiDAR lasers while still maintaining eye-safety limitations and therefore provide longer range
measurements than ~905nm lasers, but certain factors prevent them from being as cost or energy efficient as ~905nm wavelength based systems.
Specifically, ~1550nm based systems may use fiber-coupled lasers that are significantly more expensive than the diode lasers used with
~905nm wavelength based systems. Furthermore, deploying the higher peak optical power used in ~1550nm systems may consume more electrical
power than that used by ~905nm systems. This is a critical physical limitation. Since electrical-to-optical power conversion
efficiency is similar at both wavelengths, ~1550nm systems generally require more electrical power than ~905nm systems. The increased
power consumption may also lead to a greater burden on the car’s electric power supply (which is an important factor, especially
for electric vehicles) and to size and form factor issues, as it takes a larger mechanical design to manage heat dissipation. Larger components
are also harder to fit on the outside of the car from a design perspective. In addition, as silicon detectors cannot detect ~1550nm light
efficiently, the detectors for a ~1550nm LiDAR often include compounds such as indium gallium arsenide which are more expensive to source
and manufacture relative to silicon, which is ubiquitous in ~905nm detectors.
Our Technological Approach
Recognizing the limitations on the use of ~1550nm lasers in the automotive industry,
we have, from our inception, focused on the development of a commercially viable LiDAR solution that utilized an eye-safe ~905nm-based
laser designed to outperform more expensive ~1550nm based LiDARs.
In order to minimize the performance limitations resulting from the stricter eye-safety limitations
of ~905nm wavelength lasers compared to ~1550nm wavelength lasers, we have used a multidisciplinary approach to design the key system
components from the ground up, including:
| • |
unique scanning mechanisms for improved scanner size and better collection of received light; |
| • |
silicon detectors for improved optical–electrical conversion of the received signal; |
| • |
the signal processing application-specific integrated circuit (“ASIC”) (the chip that processes the signal coming from
the detectors and controls the system functions) in order to improve the optical link budget of the system, while also getting the best
possible detection capabilities for a given optical link budget. We have achieved industry leading point-cloud quality by developing and
using custom signal processing algorithms implemented in a proprietary ASIC. |
The integration of MEMS-based and other unique scanning mechanisms in the LiDAR reduces
form-factor and improves robustness. The reduced form-factor allows our LiDAR to be deployed around the perimeter of the autonomous vehicle,
thereby reducing blind spots and improving efficacy of perception in a manner that is consistent with higher levels of autonomy.
The resulting product, InnovizOne, featuring a form factor of 0.5 liters and weight
of 0.5 kilograms, is capable of beaming laser signals off obstacles as far as 250 meters away. The signals are then collected in a high
sensitivity detector, and processed by advanced analog and digital circuits in an ASIC. Each of these is custom designed by us. Each reflection
represents a point, or reflection of an individual laser beam. A scanner deflects the laser to scan the field of view (“FOV”).
The time-of-flight of each reflection, or point, is measured to yield distance and reflectivity information. The accumulation
of all the points in the FOV results in a point-cloud that is transmitted from the LiDAR. Based on the speed of light, the time-of-flight measurement
provides an accurate 3D representation of all objects and obstacles in the FOV.
InnovizTwo and Innoviz360 have a unique technology that is distinct from InnovizOne.
The primary target market for InnovizTwo is automotive customers but its unique price for performance enables other non-automotive applications
(including logistics, smart cities, industrial, mapping amongst other verticals). Moreover, Innoviz360, while still in the earlier stages
of development, is based on an architecture that is similar to InnovizTwo but further enables scaling across non-automotive applications
while also featuring Level 4 and Level 5 autonomy capabilities that are advantageous with LiDARs with a large FOV. All of these portfolio
products provide scalability and expansion to offer LiDAR capabilities across different segments while building on lessons learned and
synergistic advantages which Innoviz has gained through its historical creation of productions, including InnovizOne.
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Perception Software and Point Cloud Objects
Competitive Strengths
We believe that the following strengths differentiate Innoviz, and will enable us
to successfully compete in our target markets to maintain our leadership position.
Cost and energy efficient high performance LiDAR
solutions. Tier-1 manufacturers and automakers are extremely sensitive to the cost of any component in the vehicle, and
especially to relatively high price individual components such as LiDAR sensors. They demand competitive prices and put significant weight
on this parameter when deciding on vendors. Because we identified these requirements in the development of our original solution architecture,
we chose to use ~905nm wavelength lasers, which work with diode lasers. These are much more affordable than the lasers required by ~1550nm
wavelength LiDAR lasers that often include compounds such as indium gallium arsenide, which is more expensive to source and manufacture
than the silicon used in ~905nm wavelength lasers. ~905nm wavelength lasers also use less power than ~1550nm lasers. Autonomous vehicles
benefit from this lower power consumption because it increases vehicle driving range (primarily in electric vehicles). In addition, ~1550nm
lasers generate more heat than ~905nm lasers, which requires a larger size to allow for more heat dissipation. A larger form factor presents
design challenges to automakers as consumer vehicles have limited mounting space with good visibility of the vehicle’s surroundings.
Accordingly, our ~905nm wavelength laser-based LiDAR solution offers a compelling price point, lower power consumption and a smaller form
factor than other market participants without sacrifice in performance.
Automotive grade development and production.
Vehicle components, particularly parts of the autonomous vehicle driving technology system, are required to have a high functional safety
grade. Achieving compliance with functional safety standards, such as ISO26262, is a time consuming and labor-intensive process that requires
significant cooperation with automotive grade industry participants, such as Tier-1 suppliers and automobile manufacturers.
Starting in 2017, we have worked closely with leading Tier-1 suppliers such as Magna and its automaker partner, BMW, to develop
a LiDAR solution that meets these stringent requirements. This process has included continuous and extensive product-safety auditing by
BMW and Magna over the past three years, as well as additional review by other leading participants in the industry. As a result of our
close work with these partners, we have developed rigorous safety and quality expertise. This gives us a significant advantage over competitors
that have focused on technology development without having design wins with major automotive customers such as BMW or partnerships with
major automotive Tier-1 suppliers early in their development process. These competitors will be required by consumer automotive
OEMs and/or Tier-1 suppliers to undergo automotive-grade certifications that can take up to a few years to achieve, prior to
entering the market.
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Multiple Tier-1 partners enabling market
penetration. OEMs design their future models and vehicles several years in advance and often then freeze the design to produce
and deliver the vehicles on time. Therefore, designs for mass-production Level 3 and Level 4 consumer car programs expected
in 2025-2026 are being decided in 2022-2023. LiDAR solutions that will be candidates for inclusion in these programs must go through the
process of automotive-grade manufacturing and audit by the OEMs and Tier-1 suppliers. We are the only LiDAR company with multiple
(four) Tier-1 partnerships. Our leadership position, together with our Tier-1 tested and OEM-certified technology,
significantly increases our chances of both winning upcoming OEM Request for Quotes (“RFQs”), and being invited to RFQs given
that companies without these market credentials and certifications will not be eligible for inclusion in RFQ tenders.
Flexible Tier-1 / Tier-2 engagement model.
We recently began leveraging our in-house knowledge developed through our engagement and development history to approach customers directly.
This has enabled us to offer additional customization and more direct OEM positioning and engagement, which in turn has allowed us to
offer customers better commercial terms, commitments and end-customer support and collaboration. The multi-faceted customer engagement
approach (via Tier-1s as a Tier-2 and direct as a Tier-1) allows us to cover a wide range of customers and partners to further increase
our market reach.
Comprehensive intellectual property portfolio and
multidisciplinary R&D organization. Our architecture has focused on developing a full LiDAR autonomous driving solution that
utilizes a ~905nm wavelength laser. In order to break through the performance limitations resulting from lower peak optical power, we
have used a multi-disciplinary approach to design all of the system components from scratch: the scanner, silicon detectors and the signal
processing ASIC, in order to improve the optical link budget of the system, while getting the best possible detection capabilities for
a given optical link budget. This approach has yielded a broad range of intellectual property that we believe gives us a significant competitive
advantage, as it will make it difficult for other market participants to successfully develop and commercialize cost and energy efficient
LiDAR solutions utilizing ~905nm wavelength lasers. We currently hold a number of key patents, including a LiDAR patent related to surround
view LiDAR design, which we believe is fundamental. In addition to our ~905nm wavelength laser-based LiDAR architecture, we also have
a powerful standalone software suite that gives us industry-leading perception capabilities. We believe that the ability of our R&D
organization to innovate in many disciplines, across hardware, software, optics and others, provides us with a strong standing for future
competition.
Layered Patent Structure Protects Innoviz Unique IP From Chip to System Levels
Market leading perception capabilities. Since
our founding, we have adopted a holistic approach to the production of a LiDAR system, including the development of a proprietary standalone
software suite. The system features uniform high resolution of 0.1°x0.1° across the FOV at all frame rates as opposed to some
competing systems, in which resolution is always qualified by operating conditions such as frame rate and a limited FOV. Flexible, software-controlled
features such as the Region of Interest (ROI), Pixel Summation (PSM), variable vertical field of view and software selectable frame rate
further enhance the performance of the point-cloud. This high-performance time-of-flight point-cloud output is augmented by
vision processing algorithms to create a comprehensive LiDAR perception system.
Agile system configuration. Our system design
allows dynamic configuration of its various system functions, such as laser power, scanning pattern and frame rate. This flexibility allows
us to offer different product configurations based on the same hardware with only software modification. This allows us to address multiple
market needs and niches without needing to develop several hardware configurations, a process that would be costly due to the need for
additional design, production, validation and support. The ability of the car computer to optimize our LiDAR to its real time surroundings
is another unique advantage made possible by this system design. For example, when driving on a highway, a forward-focused configuration
with narrow FOV and an extended range is desired, while in an urban scenario, a uniform, wide FOV is desired and nominal range is acceptable
in order to lower power dissipation.
Growth Strategy
Drive increased adoption through lower cost products.
Our entire approach and solution architecture focuses on using ~905nm wavelength lasers, which allow for significantly more affordable
solutions than ~1550nm wavelength laser-based LiDARs. We intend to continue to focus on refining our architecture and component engineering
in order to produce LiDAR solutions that feature even more attractive pricing than our initial product, the InnovizOne. Our recently announced
and demoed InnovizTwo features pricing that is significantly lower than InnovizOne. We believe that high-performance, cost-efficient solutions
will drive increased market adoption of our products.
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Penetrate lower levels of autonomy (e.g. Level 2+
ADAS) and leverage our software suite to position for seamless upgrade to Level 3 autonomous driving. We believe that the
recently announced and demoed InnovizTwo provides a compelling solution for Level 2+ systems, from both a cost and performance perspectives.
At the same time, our LiDAR solution can be upgraded from Level 2+ to Level 3 through a vehicle software update without changes
to the hardware components or the need for new hardware. Therefore, we believe that our solution is uniquely positioned to provide Level 3
functionality given the ease with which this upgrade can be effected. Accordingly, we will further refine, develop and integrate our software
offering in order to better position ourselves for capturing market share in the Level 2+ and Level 3 through Level 5 vehicle
markets on the basis of software-based transitions from the Level 2+ market.
Expand Tier-1 and OEM partnerships.
We believe that our design win with BMW and partnership with Magna were enabled by our unique automotive grade product design. We also
believe that the discipline and adherence to industry leading safety and manufacturing standards required of us as a BMW supplier and a
Tier-1 partner, can be leveraged to penetrate and partner with other OEM customers and Tier-1 suppliers. We believe that
our existing partnerships with multiple leading Tier-1 suppliers including Magna, Aptiv, Harman and Hirain provide evidence
to potential partners and customers of the maturity, robustness and automotive grade nature of our products. Accordingly, we intend to
pursue partnerships with additional OEMs and Tier-1 suppliers in order to grow our customer base.
Continue to invest in a strong software suite.
Our advanced perception software turns the InnovizOne LiDAR’s raw point cloud data into perception outputs. The outputs can serve
as a standalone, functionally safe perception software, or can be integrated into the vehicle’s existing perception stack at different
levels to support various sensor fusion architectures. In addition, our software leverages the rich data derived from InnovizLiDARs, coupled
with proprietary state-of-the-art artificial intelligence-based algorithms, to provide superior scene perception and deliver
an automotive-grade ASIL B(D) solution. We intend to continue to develop and refine our perception software in order to further complement
our hardware offerings with advanced AI and machine learning-based classification, detection and tracking features.
Develop additional products to better address other
LiDAR markets. The main drivers for our revenue growth are our automotive applications for LiDARs in passenger cars, the Level 3
and Level 2+ applications, which are expected to show significant growth in the 2024-30 vehicle model years. However, the
products developed for the passenger car segment have equal appeal in multi-LiDAR perimeter sensing uses, such as in robotaxis, shuttles,
trucks and delivery robot vehicles. We believe these applications will show a significant rise in sensor consumption because they require
multiple units to complete the surround sensing requirements of the completely automated driving machine. As Level 4 platforms such
as robotaxis, shuttles, trucks and delivery robots complete development and move to commercial deployment, we believe our LiDARs are well-positioned
to capture market share from less robust technologies. The size, look, feel and ease of integration of our products, together with automotive
grade robustness for environmental performance quality as well as and the backing of leading Tier-1s, make our products especially appealing
to the Level 4 segment.
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Products
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Innoviz One
|
Innoviz Two
|
|
Innoviz360
|
| * |
Product size may differ according to specifications |
Our products provide a good understanding of the location of the vehicle in a broad
range of driving environments and allow for confident detection and planning at varying vehicle speeds. Our product portfolio encompasses
sensor hardware and perception and decision-making software that improve existing vehicle features and enable new levels of vehicle automation
for passenger car and commercial applications.
Our product offerings include:
| • |
InnovizOne —a solid-state LiDAR sensor specifically designed for automakers and robotaxis, shuttles, trucks and delivery companies
requiring an automotive-grade, mass-producible solution to achieve autonomy. The automotive-grade sensor is purpose-built to be rugged,
affordable, reliable, low-power consuming, lightweight, high-performing and seamlessly integrable into Level 3 through
5 autonomous vehicles to ensure the safety of passengers and pedestrians alike. InnovizOne was classified as a laser class 1 product under
European standard IEC 60825-1 Rev 3 Class 1 on September 24, 2019. |
| • |
InnovizTwo —announced in the fourth quarter of 2020, InnovizTwo is a next generation high-performance automotive-grade LiDAR
sensor that is currently in development and engineering samples have been produced for demo. InnovizTwo will offer a fully featured solution
for all levels of autonomous driving. Featuring a major cost reduction compared to InnovizOne, InnovizTwo will also include improved lasers
and detectors that increase range performance at a lower system cost, which is expected to provide a significant performance improvement
over InnovizOne. InnovizTwo will also offer the option to integrate the Perception Application (see below) in the LiDAR sensor itself.
|
| • |
Innoviz360 —announced in late 2021, Innoviz360, which is currently in development, builds on the automotive grade standards
and quality learned from InnovizOne and InnovizTwo and, once in the market, will apply Innoviz’s innovative technology to a 360-coverage
form factor. The small form factor, seamless design and configuration of the Innoviz360, as well as its price point, would allow for both
automotive and non-automotive applications. Innoviz360 is designed to significantly increase the lines per frame to upwards of 1280 configurable
scanning lines. |
| • |
Perception Application —software application that turns raw point cloud data from Innoviz LiDAR products into perception outputs.
The outputs can serve as a standalone, functionally safe perception software, or can be integrated into the vehicle’s existing perception
stack at different levels to support various sensor fusion architectures. In addition, our software leverages the rich data derived from
our LiDAR products, coupled with proprietary state-of-the-art artificial intelligence-based algorithms, to provide superior
scene perception and deliver an automotive-grade ASIL B(D) solution. |
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Commercial Traction
The early start with BMW’s Level 3 series production program resulted in
our team becoming deeply engaged in ISO26262 compliance and functional safety adherence. With active participation, including a resident
team, in the BMW program at Unterschleißheim in Germany, our team delivered InnovizOne LiDARs to the integration teams at Magna and
BMW and learned a lot from the extensive validation testing that is needed in order to conform to applicable standards.
Recognizing the long path to volume ramp in the automotive industry, with additional
complexity due to demanding safety standards for autonomous vehicles, such as ISO26262-ASIL-B, we have taken a broad-based approach
to potential LiDAR market opportunities. Instead of treating adjacent markets in an opportunistic manner, we have placed considerable
focus on discovering applications and cultivating customers and resellers in these markets. Accordingly, we focus our business development
activity on both the consumer automotive market and on other markets:
Automotive: high focus, with significant
management attention, on a number of automotive opportunities, where the LiDAR and perception offering are tailored to the OEMs’
needs, with a view to acquiring high volume series production programs, similar to the BMW L3 Program. This approach has our business
and R&D teams working together both directly with OEMs as well as (in some instances) with Tier-1 partners to respond to
OEM RFQs with customized offerings. Our collaborative relationships allow us to work with the Tier-1 and OEM engineering and
procurement teams with complete transparency, bringing innovation, manufacturing knowhow and value to the program.
We are working closely with leading OEMs in Europe, Japan, China, Korea, and North
America to define and adopt InnovizTwo to Level 2+ and Level 3 programs, and thereby bring significant additional value to the
ADAS+ and autonomous applications.
Other Segments: leveraging our products
InnovizOne and InnovizTwo to win business in all other segments where volumes are lower at present, but where opportunities of scale are
likely in the near term. This approach requires a broad presence in the global marketplace, with our business teams participating in direct
and channel relationships with potential customers in all segments.
We are in discussions with a number of robotaxi, shuttle, truck and delivery robots
customers to incorporate InnovizOne and InnovizTwo into their upcoming builds. The form factor, field-of-view and range of these
products is well suited to sensing applications on the perimeter of these Level 4 platforms.
In addition, LiDARs applications are also applicable to the industrial space, in manufacturing,
logistics, mapping, delivery, construction, agriculture, marine, flight and a myriad of other applications. We are focused on such applications
in all major geographies.
Sales and Marketing
We currently market and sell our LiDAR solutions through a direct sales organization
and with our marketing partners. Our technology and product focus since inception has been on the automotive OEM opportunity for high
performance LiDAR solutions in the autonomous driving industry. This focus has also informed and guided our sales and marketing activities,
which led to early contact with OEMs and Tier-1 suppliers, and also led to our sales team acting as a bridge between our research
and development team and these partners. Our sales and marketing team continues to focus on expanding our relationships with OEMs and Tier-1 suppliers
and seeks to leverage our existing relationships to expand our market to other industries.
Research and Development
We have invested a significant amount of time and expense into R&D of LiDAR-based
technologies. Over 20% of our employees are veterans of Unit 81, the elite technology unit of Israel’s Intelligence Corps, one of
the most prestigious multidisciplinary technological units in the Israeli Defense Forces. Our R&D team is the largest department in
the company and, as of December 31, 2021, was comprised of 283 employees. Our ability to maintain a leadership position in the industry
depends to a great degree on our ongoing R&D activities. Our R&D team includes engineers and researchers with a diverse range
of expertise and diverse levels of experience and academic backgrounds, including holders of B.Sc., M.Sc. and PhD degrees from leading
academic institutions. Our research and development activities are largely conducted at our headquarters in Rosh HaAin, Israel and at
our German subsidiary’s offices in the vicinity of Munich, Germany.
Creating a solid-state, eye-safe and cost efficient ~905nm wavelength LiDAR
solution and the accompanying perception software required the efforts of a multi-disciplinary team with expertise spanning optics, lasers,
mechanical engineering, micro-electronics, chip design, MEMS design, complex IC packaging, algorithms, neural networks, systems engineering
and software architecture and engineering.
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Intellectual Property
Our success and competitive advantage depend in part upon our ability to develop and
protect our core technology and intellectual property. We own a portfolio of intellectual property, including patents and registered trademarks,
confidential technical information, and expertise in the development of LiDAR technology and software for autonomous vehicles.
We have filed patent and trademark applications in order to further secure these rights
and strengthen our ability to defend against third parties who may infringe on our rights. We also rely on design and manufacturing know-how, continuing
technological innovations, and licensing and exclusivity opportunities to maintain and improve our competitive position. Additionally,
we protect our proprietary rights through agreements with our commercial partners, supply-chain vendors, employees, and consultants, as
well as close monitoring of the developments and products in the industry.
As of December 31, 2021, we owned 19 allowed and issued patents and have 77 pending
patent applications, including U.S. and foreign. Of the 77 pending applications, 41 are published, and 36 are unpublished. The portfolio
includes U.S. and foreign patent applications filed in Europe, China, Japan, and Korea. In addition, our company has three registered
U.S. trademarks and 20 registered foreign trademarks (three of which are Israeli registrations). Our patents and patent applications cover
a broad range of system level and component level aspects of our key technology including, among other things, LiDAR systems, laser, scanner,
receiver and perception technology.
Competition
The market for competitive automotive sensing solutions that enable autonomous driving
is an emerging one with many potential applications in the development stage. As a result, we face competition from a range of companies
seeking to have their products incorporated into these developing applications and it may take a period of time for our primary competitors
to emerge.
Our competitors are also working to advance technology, reliability, and innovation
in their development of new and improved solutions. Although we believe that we have market leading technology, we continue to face competition
from existing competitors and new companies emerging in the LiDAR, camera and radar industries. Within the LiDAR segment of the industry,
where competition is based significantly on performance and cost and energy efficiency, we face competition from companies utilizing a
variety of laser wavelengths such as ~905nm and ~1550nm lasers, as well as a variety of steering mechanisms, such as MEMS, mechanical,
Optical Phased Array, and non-scanning LiDARs (Flash). We believe that it may take new, smaller companies a substantial period
of time to gain the recognition and trust of top-tier automotive OEMs and Tier-1 suppliers, as well as customers and
partners in other non-automotive industries.
Many of our competitors offer more limited solutions for niche applications. Some
competitors are currently selling solutions that offer lower levels of performance in ADAS and new autonomous driving markets. In the
passenger car ADAS market, a number of competitors have already achieved substantial market share using camera and radar-based perception
sensing solutions.
We entered the passenger car market with a higher performance LiDAR product than those
used for ADAS today. Our LiDAR product empowers higher performance ADAS at price points that we believe we can displace current solutions.
Our early engagement with a premium OEM and with Tier-1 partners also differentiate us from other LiDAR makers.
While LiDAR competitors will continue to emerge and recede, we believe that our high-performance
LiDARs, strong intellectual property portfolio, software products, design win with BMW and close working relationships with our Tier-1 partners,
have established barriers to those who follow. We expect that our technology and continuing innovation, as well as our longstanding cooperation
with leading OEMs and Tier-1 companies, will support our position as a leader in advancing LiDAR technology in the market based
on several market differentiators.
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Manufacturing
Our proprietary LiDAR architecture focuses on developing a full LiDAR autonomous driving
solution that utilizes a ~905nm wavelength laser. In order to break through the performance limitations resulting from optical peak power
limitations, we have used a multi-disciplinary approach to design the key system components, such as our unique scanning systems, including
the MEMS module, silicon detectors and the signal processing ASIC, in order to improve the optical link budget of the system while acquiring
the best possible detection capabilities for a given optical link budget. Designing critical components in-house rather than
using off-the-shelf commodity components provides for protectable and sustainable technology differentiation from LiDAR competitors
or alternative technologies. We believe one of the significant barriers to entry for automotive LiDAR is the processes and know-how to
manufacture a compact and intricate sensing product in high volumes.
At the same time, we have focused on operating in accordance with the rigorous manufacturing
standards of the automotive industry from the company’s earliest days. Therefore, we have utilized an automotive-level contract
manufacturer and vendors to manufacture our products and sub-components from an early stage. Working with such an experienced
contract manufacturer and vendors added to our manufacturing knowhow and instilled discipline and quality in our development process.
Currently, the InnovizOne product is manufactured for most customers on a mid-volume line
at a contract manufacturer in Germany. We have also begun manufacturing InnovizOne at Magna’s automotive grade facility in Holly,
Michigan to meet increasing demand for our LiDAR product. In this context, please see reference herein to the Magna MOU (as defined herein).
Although manufacturing of our products and sub-components is outsourced, our
operations and quality assurance teams manage the sourcing of specialized equipment required for assembly, calibration and testing of
our LiDAR systems. These teams also manage our quality control and assurance operations and work with our suppliers to monitor quality
and improve yield.
We source our components from a variety of third-party manufacturers throughout Europe.
The prices and availability of our components may be impacted by changes in supply and demand, as well as market uncertainty and other
factors. Historically, we have been able to source our components at prices satisfactory to our company; however, we may be unable to
do so in the future.
Environmental, Social and Governance (ESG) Practices
Innoviz is a global company that is focused
on creating social impact by promoting the future of mobility and increasing road-traffic safety and welfare, through the values of excellence,
education, creation and innovation. As such, we recognize the importance of creating shared values for all our different stakeholders
and translating those values into measurable goals to guide our long-term business success. Therefore, we plan to develop an ESG program,
with the hope to enable effective implementation of shared values into our day-to-day business activities, while continuing to grow our
business. The ESG program is expected to be developed in two phases. The first is the development of an ESG strategy which will guide
our long term ESG-related efforts, taking into consideration the expectations of our stakeholders as well as our business needs and goals.
To this end, at the beginning of 2022, we have engaged an independent ESG consulting firm that is known to be an expert in this field
and we are in the middle of the process of forming our ESG strategy for the Company. The general outlines of our ESG strategy are expected
to be communicated to our stakeholders later this year. The second phase of developing our comprehensive ESG program is the development
and adoption of a long-term implementation plan for the strategy which shall include measurable long-term ESG goals. We aim to publish
our first ESG report, disclosing our approach and performance to all stakeholders, during 2023.
Regulation
Autonomous vehicles (“AVs”) are subject to emerging regulatory frameworks
in the United States at the federal and state levels that are in a rapid state of change. In general, at both the federal and state level,
the United States has provided a positive and relatively permissive legal environment to allow the safe testing and development of autonomous
functionality. We do not anticipate any near-term federal standards that would impede the foreseeable deployments of our LiDAR technology.
Some states, however, particularly California and New York, still enforce certain operational or registration requirements for certain
autonomous functions. We believe such hurdles will be removed as state regulators gain better experience with the technology. U.S. federal
regulations, however, remain largely permissive of deployments of higher levels of safe and responsible autonomous functionality.
Foreign markets such as the China and the EU also continue to develop their respective
standards to define deployment requirements for higher levels of autonomy. In China, for example, the government has undertaken numerous
efforts to promote AV development, including its February 2020 release of the Strategies for Innovation and Development of Autonomous
Vehicles by China’s National Development and Reform Commission and ten other agencies. This initiative sets forth an ambitious plan
to create a systematic framework for technical innovation, industrial ecology, infrastructure, regulations and standards, product regulation
and network security in the AV market by 2025, and from 2035 to 2050, to fully establish an ecosystem for AVs. Much of the emerging regulatory
and legislative activity around AVs in the EU has been focused on data privacy and security, given the volume and types of data collected,
stored and transmitted by AVs. A key part of Europe’s emerging AV strategy is the creation of a common European mobility data space,
to be further developed in the EU’s “Smart and Sustainable Transport Strategy.” Given the intense work in these areas,
we expect a workable path forward in the near-term in these markets.
As vehicles equipped with our sensors are deployed on public roads in the United States,
we will increasingly be subject to the legal and regulatory authority of various federal agencies, including the NHTSA, which is part
of the U.S. Department of Transportation (“DOT”). To date, NHTSA’s guidance to industry generally has been broad and
non-compulsory, and NHTSA is actively reviewing unintended regulatory barriers to AV development as it proceeds to promulgate new regulations.
It plans to update the Federal Motor Vehicle Safety Standards to accurately reflect new AV technology. Currently, the obligations of motor
vehicle equipment manufacturers include regular reporting under the Transportation Recall Enhancement, Accountability and Documentation
Act process, as well as strict recall and reporting requirements for any defects related to highway safety or any non-compliance with
a Federal Motor Vehicle Safety Standard. Similar reporting and recall requirements exist in foreign markets.
39
More generally, the U.S. DOT has established six automation principles that will be
applied to its oversight of AV development: (1) prioritizing safety; (2) remaining technology neutral; (3) modernizing
regulations; (4) encouraging consistent federal and state regulatory environments; (5) providing guidance, research and best
practices to government and industry partners; and (6) protecting consumers’ ability to choose conventional and autonomous
vehicles.
Many more formal regulatory actions that apply to AVs have been initiated at the state
level. At least 29 states and the District of Columbia have enacted some type of AV legislation and a number of state governors have issued
executive orders. Many of these efforts focus on safety and the regulation of commercial activity.
Overall, the AV regulatory landscape is still evolving rapidly. As the development
of federal, state and foreign legal frameworks around autonomous vehicles continue to develop and change, we may become subject to additional
regulatory schemes and requirements.
As a LiDAR technology company, we also are subject to the Electronic Product Radiation
Control Provisions of the Federal Food, Drug, and Cosmetic Act. These requirements are enforced by the FDA, and include regulations governing
the manufacture and distribution of laser-emitting products. Regulations governing these products are intended to protect the public from
hazardous or unnecessary exposure to laser radiation. Among other things, manufacturers of laser-emitting products are required to certify
in product labeling and reports to the FDA that their products comply with applicable performance standards, to maintain manufacturing,
testing, and distribution records for their products, and to report certain product defects to the FDA and/or consumers. Manufacturers
may also be required to affix warnings on laser-emitting products, depending on the relative power output of the product. Failure to comply
with applicable FDA regulations may result a variety of sanctions or consequences, including product recalls or replacements, warning
letters, untitled letters, safety alerts, injunctions, import alerts, administrative product detentions or seizures, or civil penalties.
LiDAR technologies also may need to comply with certain state law requirements regarding applications of particular LiDAR and laser technologies.
Similarly, as a global company deploying cutting-edge technology, we are also subject
to trade, export controls, customs product classification and sourcing regulations. Our operations also are subject to various federal,
state and local laws and regulations governing the occupational health and safety of our employees and wage regulations. We are subject
to the requirements of the federal Occupational Safety and Health Act, as amended, and comparable state laws that protect and regulate
employee health and safety.
Like all companies operating in similar industries, we are subject to environmental
regulation, including water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation
and disposal of hazardous materials; and the remediation of environmental contamination. Compliance with these rules may include the need
to obtain permits and licenses and to allow inspections of our facilities and products.
Legal Proceedings
From time to time, we may become involved in actions, claims, suits, and other legal
proceedings arising in the ordinary course of our business, including assertions by third parties relating to intellectual property infringement,
breaches of contract or warranties or employment-related matters. We are not currently a party to any actions, claims, suits or other
legal proceedings the outcome of which, if determined adversely to it, would individually or in the aggregate have a material adverse
effect on our business, financial condition, and results of operations.
C. Organizational Structure
The legal name of our company is Innoviz Technologies Ltd. and we are organized under
the laws of the State of Israel. We have five wholly-owned subsidiaries: Innoviz Technologies Inc. and Collective Growth Corporation,
each of which is incorporated in the United States, Innoviz Technologies GmbH, which is incorporated under the laws of Germany, Innoviz
Technologies BY LLC, which is incorporated under the laws of Belarus, and Innoviz Software Centre Bucharest S.R.L, which is incorporated
under the laws of Romania.
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D. Property, Plant and Equipment
Our corporate headquarters are located in Rosh HaAin, Israel, where we currently lease
an office with 72,600 square feet pursuant to lease agreements that are in effect until August 15, 2022. This facility contains engineering,
research and development, testing, product, sales and administrative functions. In addition, we also lease a garage space for performing
certain tests located in Petah Tikva, Israel, with 32,300 square feet pursuant to a lease agreement that expired on February 28,
2022. We replaced this facility with the Premises discussed below. We also lease 3,200 square feet of office space in Santa Clara, California
pursuant to a lease agreement that is in effect until June 30, 2024, 912 square meters of office space in a facility in Unterschleißheim,
Germany pursuant to a lease agreement that is in effect and terminable at will upon 30-days prior notice, and 250 square meters of labs
in a facility in Minsk, Belarus pursuant to a lease agreement that is in effect until April 30, 2022.
On November 1, 2021, we entered into a lease agreement (the “New Lease Agreement”)
for an office building located in Rosh HaAin, Israel (“Premises”). The New Lease Agreement includes a right for us to use
office spaces and related facilities. The lease term is for 67 months, beginning on July 1, 2022; however, we were given access to the
Premises beginning in November 2021 in order to allow us to construct leasehold improvements. We have an option to renew the lease for
additional 60 months, which will be exercised automatically unless the Company informs the lessor in advance.
Unless otherwise stated, all our facilities are fully utilized. We believe that our
offices and facilities (as currently conducted and in accordance with future plans) are adequate for our current needs and that suitable
additional or substitute space will be available when needed.
|
Item 4A. |
Unresolved Staff Comments |
None.
|
Item 5. |
Operating and Financial Review and Prospects |
You should read the following discussion and analysis of our financial
condition and results of operations together with the “Selected Financial Data” and the historical audited annual consolidated
financial statements and the related notes included elsewhere in this Annual Report. Some of the information contained in this discussion
and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business
and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including
those factors set forth in the section entitled Item 3.D. “Risk Factors” of this Annual Report, our actual results could differ
materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Company Overview
We are a leading provider of high-performance, solid-state LiDAR and perception solutions
that bring enhanced vision and superior performance to enable safe autonomous driving at a mass scale. We believe that we provide a complete
and comprehensive solution for OEMs and Tier-1 partners that are developing and marketing autonomous driving vehicles to the passenger
car and other relevant markets, such as robotaxis, shuttles, delivery vehicles, buses and trucking, as well as other industries that require
3-dimensional high resolution sensors. Our unique LiDAR and perception solutions, feature technological breakthroughs across core components.
In addition, our solutions can enable safe autonomy for other industries, including drones, robotics, construction and other industrial
applications, agriculture, smart city, smart infrastructures, security and mapping.
We were founded in 2016 by veterans of Unit 81, the elite technology unit of Israel’s
Intelligence Corps, one of the most prestigious multidisciplinary technological units in the Israeli Defense Forces. From our founding,
our culture drew from Unit 81’s core values of solving sophisticated technological problems through creativity and agile thinking.
We have relied on these values to address the needs of autonomous vehicles in a manner that strikes the desired balance between performance
and cost. We created a new type of LiDAR sensor from the chip-level up, including a suite of powerful and sophisticated software applications
for high-performance computer vision to allow superior perception. Our multidisciplinary team developed an operational MEMS-based (Micro-Electro-Mechanical
System) LiDAR prototype in less than a year, which attracted the attention of leading Tier-1 companies such as Magna and Aptiv
as early as 2017. This was followed by a further intensive development and qualification stage, which culminated with our company achieving
a design win with BMW in 2018 to power BMW’s Level 3 autonomous platform. BMW is a leader and a pioneer in deploying new technologies
into the automotive industry and we believe that our close cooperation with BMW, together with Magna (our Tier-1 partner for this program),
uniquely positions us to make Level 3 autonomous driving a commercial reality.
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The sustained cooperation with BMW provides our engineers and other research and development
(“R&D”) personnel with a valuable competitive edge. These engineers and other R&D personnel have been meticulously
trained to design, operate and verify our many groundbreaking innovations in accordance and in compliance with the rigorous ISO26262 standard
for Functional Safety in the automotive industry. Compliance with this and other standards has been enforced by regular ongoing audits
of Innoviz and our key suppliers, by both Magna and BMW as well as prospective customers that constantly test the performance of various
elements of our operations. As a result, our products have been constructed from the bottom up with hardware and software technology that
meets the most stringent automotive safety, quality, environmental, manufacturing, and other standards.
Our innovation has produced LiDAR solutions that deliver market leading performance
and that meet the demanding safety requirements for Level 2+ through Level 5 autonomous vehicles at price points suitable for
mass produced passenger vehicles. Our integrated custom design of advanced hardware and software components, which leverage the multidisciplinary
expertise and experience of our team, enable us to provide turn-key autonomous solutions to accelerate widespread adoption across
automakers at serial production scale.
Our robust software suite enables our ~905nm wavelength laser-based LiDAR architecture
to be easily leveraged to provide compelling solutions for Level 2+ through Level 5, without the need for any new significant
hardware components. This means that we are positioned to penetrate the current market, which is currently characterized mainly by Level 2+
production, and to continue to capture and extend our market share through a software-based upgrade of our products to Level 3 and
above, as the market continues to mature.
We are currently expanding our third-party manufacturing capacity through contract
manufacturers and partnerships with global Tier-1 suppliers to meet an anticipated increase in customer demand for our
products, while also further developing a next generation high-performance automotive-grade LiDAR sensor, the InnovizTwo, that is expected
to provide further cost efficiencies while still enabling performance solutions for Level 2+ and above vehicles. We believe that
our unique technology, together with our ability to meet automotive industry standards and our partnerships with various major Tier-1 automotive
suppliers, place us at the forefront of Tier-2 automotive suppliers.
Business Combination
On December 10, 2020, Innoviz entered into the Business Combination Agreement
with Collective Growth, Perception, Antara Capital and Merger Sub. Pursuant to the Business Combination Agreement, Merger Sub merged with
and into Collective Growth, with Collective Growth surviving the merger. Upon consummation of the Business Combination and the other transactions
contemplated by the Business Combination Agreement on April 5, 2021, Collective Growth became a wholly owned subsidiary of Innoviz.
Key Factors Affecting Innoviz’s Operating Results
Innoviz believes that its future performance and success depends to a substantial
extent on the following factors, each of which is in turn subject to significant risks and challenges, including those discussed below
and in the section of this Annual Report entitled “Risk Factors.”
Market Adoption
We believe that widespread adoption of LiDAR across applications for autonomy is approaching
and that we are well-positioned in both automotive and nonautomotive markets to take advantage of this opportunity. Nevertheless, automotive
OEMs and their suppliers are just beginning to commercialize autonomous systems that rely on LiDAR technology. Accordingly, we expect
the rate of actual adoption and commercialization of LiDAR-based solutions by automotive OEMs and their suppliers to impact our results
of operations, including revenue and gross margins, for the foreseeable future. Given the significance of the jump from Level 2 to
Level 3, the Level 2+ segment of the consumer automotive market is expected to grow significantly over the short to medium term,
and we focus our efforts on this segment, specifically via our InnovizTwo product.
We believe that InnovizTwo will drive significant revenue growth in the near to medium
term. We also believe that market penetration of InnovizTwo will drive revenues in the Level 3 segment of the market. This is because
the architecture of our products, which feature agile configuration of multiple components, allow us to offer different product configurations
based on the same hardware with only software modification. Accordingly, we can address multiple market needs and niches without the need
to develop several hardware configurations. Therefore, our LiDAR solution enables upgrade from Level 2+ to Level 3 through a
vehicle software update without changes to the hardware components or the need of new hardware.
We also intend to target markets such as robotaxis, shuttles and trucking, as well
as other industries, including drones, robotics, logistics, smart cities, agriculture, industrial, construction, security, and mapping.
We believe that LiDAR-based solutions in these emerging markets are still in the pre-commercial development stage and, as a
result, our future success also depends on customers in these industries adopting and bringing these solutions to commercial scale.
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Design Wins
Our solutions are designed to be as a key enabling technology for OEMs in automotive
and other applications. Because our solutions must be integrated into a broader platform by the OEM, it is critical that we achieve design
wins with these customers. The time necessary to achieve design wins varies based on the market and application. The design cycle in the
automotive market tends to be substantially longer and more onerous than in other markets. Even within the automotive market, achieving
a design win with an automotive OEM takes considerably longer than a design cycle for an aftermarket application. We consider design wins
to be critical to our future success, although the revenue generated by each design win and the time necessary to achieve such a win can
vary significantly making it difficult to predict our financial performance.
Product Cost and Margins
Our results of operations will depend on our ability to leverage the fixed costs involved
in production of our current InnovizOne solutions and our ability to improve gross margins on the basis of volume and manufacturing efficiencies.
InnovizTwo is based on an improved design, which is targeted to allow: (i) lower bill
of materials, and (ii) more efficient manufacturing process, which may allow for a significant cost reduction and improved gross margins.
Continued Investment and Innovation
Our unique LiDAR and perception solutions feature technological breakthroughs across
core components allow us to act as a leading supplier in a competitive market. We believe that our financial performance is significantly
dependent on our ability to maintain this position. This in turn will depend on our future R&D investments and our ability to attract
and retain highly qualified and experienced R&D personnel. These are necessary to both continue the work required to bring InnovizOne,
InnovizTwo, Innoviz360 and future products, to full commercialization and also to identify and respond to rapidly evolving customer requirements,
develop and introduce innovative new products and enhance and service existing products. Failure to do this could adversely affect our
market position and our revenue, and our R&D investments would not be recovered.
COVID-19 Impact
We are currently confronting a variety of operational limitations due to the global
outbreak of COVID-19 beginning in early 2020. Our executive offices and R&D and manufacturing locations have been, and may
continue to be, impacted due to national and regional government declarations requiring closures, quarantines and travel restrictions.
The COVID-19 pandemic is also adversely affecting our customers’ business operations. The extent of the impact of the
coronavirus pandemic on our operational and financial performance will depend on various future developments, including the duration and
spread of the COVID-19 outbreak and impact on our customers, suppliers, contract manufacturers and employees, all of which is
uncertain at this time. We expect the COVID-19 pandemic to adversely impact our revenue and results of operations but are unable
to predict at this time the size and duration of this adverse impact.
Components of Results of Operations
Revenues
Our revenues derive primarily from sales of LiDAR sensors and critical components
to customers. Revenue from LiDAR sensors and critical components is recognized at a point in time when the control of the goods is transferred
to the customer, generally upon delivery.
We also provide application engineering services to our customers that are not part
of a long-term production arrangement. Application engineering services revenue is recognized at a point in time or over time depending,
among other considerations, on whether we have an enforceable right to payment for performance completed to date. Services to certain
customers may require substantive customer acceptance due to performance acceptance criteria that is considered more than a formality.
For these services, revenue is recognized upon customer acceptance. We did not recognize revenue related to application engineering services
during the years ended December 31, 2020, 2021 as acceptance criteria were not met.
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Cost of Revenues
Cost of revenues include the manufacturing cost of our LiDAR sensors, which primarily
consists of components costs, sub assembly costs and personnel-related costs directly associated with our operation organization, and
amounts paid to our third-party contract manufacturers and vendors. Cost of revenue also includes depreciation, costs of providing services,
an allocated portion of overhead, warranty costs, excess and obsolete inventory and shipping costs. We expect cost of revenue to increase
in absolute dollars in future periods to the extent revenue increases, however we expect our products’ unit cost to decrease as
sales increase thereby leveraging economies of scale achievable due to our business model and higher production efficiencies.
Operating Expenses
Research and Development
Our R&D efforts are focused on enhancing and developing cost efficient LiDAR
solution and the accompanying perception software.
R&D expenses include:
| • |
personnel-related expenses, including salaries, benefits, and stock-based compensation expense for personnel in research and engineering
functions; |
| • |
expenses related to materials, software licenses, depreciation, supplies and third-party services; |
| • |
prototype expenses; and |
| • |
an allocated portion of facility, IT costs. |
We expense R&D costs as incurred until the point that technological feasibility
is reached, which for our software products is generally shortly before the products are released to production. We expect that our R&D
expenses, excluding a specific one-time share-based compensation, will increase for the foreseeable future as we continue to invest in
R&D activities to achieve our product roadmap.
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Selling and Marketing
Selling and marketing expenses consist primarily of personnel-related costs directly
associated with our selling and marketing activities. These include the cost of sales commissions, marketing programs, trade shows, consulting
services, promotional materials, demonstration equipment, an allocated portion of facility and IT costs. We expect that our selling and
marketing expenses, excluding a one-time share-based compensation expense, will increase in absolute dollars over time as we hire additional
sales and marketing personnel, increase our marketing activities and grow our domestic and international operations. Personnel-related
expenses consist of salaries, benefits, and stock-based compensation.
General and Administrative
General and administrative expenses consist of personnel-related expenses for corporate,
executive, finance and other administrative functions, expenses for outside professional services, including legal, investors relations,
audit and accounting services, as well as expenses for facilities, depreciation and travel. Personnel-related expenses consist of salaries,
benefits, and stock-based compensation.
We expect our general and administrative expenses, excluding a one-time share-based
compensation expense, to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of
the expenses of operating as a public company, including compliance with the rules and regulations of the Securities Exchange Commission,
legal, audit, additional insurance expenses, investor relations activities and other administrative and professional services.
Financial Income, Net
Financial income consists primarily of net income earned from sale of an equity investment
in a privately held company, private placement warrants remeasurement, cash and cash equivalents deposited in our bank account and marketable
securities remeasurement. The deposits will vary based on cash and cash equivalents, and with market rates. Our marketable securities
have an average credit rating of “A” and a maturity of up to three years. We do not intend to invest more than 5% of our investment
portfolio in a single security. In addition, financial income, net includes the fluctuation in value due to foreign exchange differences
between cash and cash equivalent and monetary assets and liabilities denominated in foreign currency, mainly in NIS and EUR.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this Annual
Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of
this Annual Report.
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A. Results of Operations
For a discussion of our results of operations for the year ended December 31, 2019,
including a year-to-year comparison between the years ended December 31, 2020 and December 31, 2019, as well as a discussion of our liquidity
and capital resources for the year ended December 31, 2019, refer to Item 5. “Operating and Financial Review and Prospects”
in our Annual Report on Form 20-F for the year ended December 31, 2020.
The results of operations presented below should be reviewed in conjunction with the
consolidated financial statements and notes included elsewhere in this Annual Report. The following table sets forth our consolidated
results of operations data for the periods presented:
|
|
Year ended
December 31, |
|||||||
|
|
2021
|
2020
|
||||||
|
(in thousands except per share amounts) |
||||||||
|
Revenues (2020 revenues net of issuance of
Preferred C-1 Shares in the amount of $14,800) |
$ |
5,466 |
$ |
(9,364 |
) | |||
|
Cost of revenues
|
(10,488 |
) |
(6,407 |
) | ||||
|
Gross loss
|
(5,022 |
) |
(15,771 |
) | ||||
|
|
||||||||
|
Operating expenses: |
||||||||
|
Research and development
|
93,336 |
57,029 |
||||||
|
Selling and marketing
|
23,735 |
5,430 |
||||||
|
General and administrative
|
35,560 |
3,753 |
||||||
|
Total operating expenses
|
152,631 |
66,212 |
||||||
|
Operating loss
|
(157,653 |
) |
(81,983 |
) | ||||
|
Financial income, net
|
4,378 |
655 |
||||||
|
Loss before taxes on income
|
(153,275 |
) |
(81,328 |
) | ||||
|
Taxes on income
|
(284 |
) |
(183 |
) | ||||
|
Net loss
|
$ |
(153,559 |
) |
$ |
(81,511 |
) | ||
|
Basic and diluted net loss per ordinary share
|
$ |
(1.54 |
) |
$ |
(5.99 |
) | ||
|
Weighted average number of ordinary shares
used in computing basic and diluted net loss per ordinary share |
102,859,891 |
16,514,910 |
||||||
Comparison of the Years Ended December 31, 2020 and 2021
Revenues
|
|
Year Ended December 31,
|
Change
|
Change
|
|||||||||||||
|
|
2021
|
2020
|
$ |
% |
||||||||||||
|
(in thousands) |
||||||||||||||||
|
Revenues excluding reduction of revenues
|
5,466 |
5,436 |
30 |
1 |
% | |||||||||||
|
Reduction of revenues due to issuance of Preferred
C-1 Shares |
- |
(14,800 |
) |
14,800 |
100 |
% | ||||||||||
|
Total Revenues
|
5,466 |
(9,364 |
) |
14,830 |
158 |
% | ||||||||||
Revenues increased by approximately $14.8 million, or 158%,
to approximately $5.5 million for the year ended December 31, 2021, from approximately $(9.4) million for the year ended
December 31, 2020. Excluding reduction of revenues due to issuance of Preferred C-1 Shares in the amount of $14.8 million in
the year ended December 31, 2020, our revenues increased by approximately $0.03 million, or 1%, for the year ended December 31,
2021 as compared to the year ended December 31, 2020. InnovizOne related revenues in 2021 increased by 28% to $4.3 million, compared
to $3.3 million in 2020, while InnovizPro was discontinued, and therefore InnovizPro related revenues in 2021 decreased by 90% to $0.1
million, compared to $0.8 million in 2020.
46
Cost
of Revenues and Gross Margin
|
|
Year Ended December 31,
|
Change
|
Change
|
|||||||||||||
|
|
2021
|
2020
|
$ |
% |
||||||||||||
|
|
(in thousands except percentages) |
|||||||||||||||
|
Cost of revenues (excluding reduction of revenues)
|
$ |
(10,488 |
) |
$ |
(6,407 |
) |
$ |
(4,081 |
) |
64 |
% | |||||
|
Cost of revenues relating to reduction of revenues
due to issuance of Preferred C-1 Shares |
— |
— |
— |
|||||||||||||
|
Cost of revenues (total)
|
$ |
(10,488 |
) |
$ |
(6,407 |
) |
$ |
(4,081 |
) |
64 |
% | |||||
|
Gross margin (excluding reduction of revenues)
|
(92 |
)% |
(18 |
)% |
||||||||||||
|
Gross margin (relating to reduction of revenues
due to issuance of Preferred C-1 Shares) |
- |
(100 |
)% |
|||||||||||||
|
Gross margin (total)
|
(92 |
)% |
(168 |
)% |
||||||||||||
Cost of revenues increased by approximately $4.1 million,
or 64%, to approximately $10.5 million for the year ended December 31, 2021, from approximately $6.4 million for the year
ended December 31, 2020. The increase in cost of revenues was mainly due to inventory write-offs, as a result of low volume production
and low production efficiencies of InnovizOne components and sub-assemblies, since InnovizOne has not reached mass production yet.
Gross margin decreased from (168)% for
the year ended December 31, 2020 to (92)% for the year ended December 31, 2021.
The decrease of gross loss was primarily due to a reduction of revenues due to issuance of Preferred C-1 Shares, partially off-set by
an inventory write-off.
Operating Expenses
|
|
Year Ended
December 31, |
Change
|
Change
|
|||||||||||||
|
|
2021
|
2020
|
$ |
% |
||||||||||||
|
(in thousands) |
||||||||||||||||
|
Research and development |
$ |
93,336 |
$ |
57,029 |
$ |
36,307 |
64 |
% | ||||||||
|
Selling and marketing |
23,735 |
5,430 |
18,305 |
337 |
% | |||||||||||
|
General and administrative |
35,560 |
3,753 |
31,807 |
848 |
% | |||||||||||
|
Total Operating Expenses
|
$ |
152,631 |
$ |
66,212 |
$ |
86,419 |
131 |
% | ||||||||
Research and Development
Research and development expenses increased by approximately
$36.3 million, or 64%, to approximately $93.3 million for the year ended December 31, 2021, from approximately $57.0 million
for the year ended December 31, 2020. The increase was primarily due to stock-based compensation related to the Business Combination
and an increase in headcount.
Selling and Marketing
Selling and marketing expenses increased by approximately $18.3 million,
or 337%, to approximately $23.7 million for the year ended December 31, 2021, from approximately $5.4 million
for the year ended December 31, 2020. The increase was primarily attributable to stock-based compensation related to the Business
Combination.
47
General and Administrative
General and administrative expenses increased by approximately
$31.8 million, or 848%, to approximately $35.6 million for the year ended December 31, 2021, from approximately $3.8 million
for the year ended December 31, 2020. The increase was primarily due to stock-based compensation related to the Business Combination,
transaction costs and an increase in headcount.
Financial Income, net
|
|
Year Ended
December 31, |
Change
|
Change
|
|||||||||||||
|
|
2021
|
2020
|
$ |
% |
||||||||||||
|
Financial Income,
net |
$ |
4,378 |
$ |
655 |
$ |
3,723 |
568 |
% | ||||||||
Financial Income, net was approximately $4.4 million for the
year ended December 31, 2021, compared to approximately $0.7 million in the year ended December 31, 2020. The increase
was primarily related to sale of an investee, warrant liability revaluation and higher cash balance which yielded higher income from interest.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of risks, including foreign currency exchange fluctuations,
changes in interest rates and inflation. We regularly assess currency, interest rate and inflation risks to minimize any adverse effects
on our business as a result of those factors.
Foreign Currency Risk
Our financial results are reported in U.S. dollars (“USD”), and changes
in the exchange rate between USD and local currencies in those countries in which we operate (primarily the Israeli new shekel (“ILS”))
may affect the results of our operations. In 2021, approximately 97% of our revenues were denominated in U.S dollars. The USD cost of
our operations in countries other than the United States may be negatively influenced by revaluation of the USD against other currencies.
During 2021, the value of the USD decreased as compared to the value of the ILS by
approximately 3.3%. Our most significant foreign currency exposures are related to our operations in Israel. The company hedges its anticipated
exposure by exchanging USD in to ILS in amounts sufficient to fund 3-4 months of operations, and monitors foreign currency exchange rates
over time.
Interest Rate Risk
Our investment strategy is to achieve a return that will allow us to preserve capital
and meet our liquidity requirements. We invest in short term cash deposits and marketable securities.
Our cash and cash equivalents
are exposed to market risk related to changes in interest rate sensitivity, which is affected by changes in the general level of the Bank
of Israel interest rates and United States Federal Reserve interest rates.
Due to the short-term nature and the low-risk profile of our interest-bearing accounts, an immediate 10% change in
interest rates would not have a material effect on the fair market value of our cash and cash equivalents and short-term restricted bank
deposits or on our financial position or results of operations.
Our investments in marketable securities are primarily in securities with an average
credit rating of “A” and a maturity of up to three years. By policy, we limit these investments to no more than 5% in a single
security. We also invest in short term deposits, mainly in USD.
Other Market Risks
We do not believe that inflation had a material effect on our business, financial
conditions or results of operations during the years ended December 31, 2021 and 2020.
48
B. Liquidity and Capital Resources
Sources of Liquidity
Prior to 2021, we funded our operations primarily from private placements of our convertible
preferred shares. During 2021, we funded our operations primarily from the proceeds of the Business Combination. As of December 31,
2021, we had approximately $304.0 million in cash, short term deposits, and marketable securities. Cash equivalents and marketable securities
are invested in accordance with our investment policy. To date, our principal sources of liquidity have been the approximately $260.0
million of gross proceeds received through private placements of our convertible preferred shares and over $370.0 million in gross cash
proceeds from the Business Combination. In addition, we have received payments for goods and services.
Cash Flow Summary
The following table summarizes our cash flows for the periods
presented:
|
|
Years Ended
December 31, |
|||||||
|
(in thousands) |
2021
|
2020
|
||||||
|
Net cash used in operating activities
|
$ |
(82,522 |
) |
$ |
(61,941 |
) | ||
|
Net cash provided by (used in) investing activities
|
(281,597 |
) |
29,591 |
|||||
|
Net cash provided by financing activities
|
337,178 |
8,941 |
||||||
|
Effect of exchange rate changes on cash, cash
equivalents and restricted cash |
716 |
748 |
||||||
|
Net decrease in cash and cash equivalents and
short-term restricted bank deposits |
$ |
(26,225 |
) |
$ |
(22,661 |
) | ||
Operating Activities
The primary factors affecting operating cash flows during this
period were the net loss of approximately $153.6 million, impacted by non-cash charges of approximately $67.5 million consisting
of share-based compensation of approximately $64.7 million, depreciation and amortization of approximately $4.0 million, revaluation
of private warrants of approximately $(1.2) million. In addition to a decrease in working capital of approximately $1.7 million.
During the year ended December 31, 2020, operating activities
used approximately $61.9 million. The primary factors affecting operating cash flows during this period were net loss of approximately
$81.5 million, impacted by non-cash charges of approximately $20.7 million consisting of non-cash discount to a customer
of approximately $14.8 million, depreciation and amortization of approximately $2.7 million, and share-based compensation of approximately
$3.2 million, offset by an increase in working capital of approximately $1.1 million.
Investing Activities
During the year ended December 31, 2021, cash used in investing
activities was approximately $(281.6) million, which was primarily from investment in
short-term deposits of approximately $(230.0) million, investment in marketable securities of approximately $(50.0) million
and purchase of property, plant, and equipment of approximately $(3.8) million, which was partially offset by proceeds from sale
of an investee of approximately $2.2 million.
During the year ended December 31, 2020, cash provided by
investing activities was approximately $29.6 million, which was primarily from withdrawals of short-term deposits of approximately
$34.7 million, partially offset by cash used to purchase property, plant, and equipment of approximately $5.1 million.
Financing Activities
During the year ended December 31, 2021, cash provided by
financing activities was approximately $337.2 million, which was primarily from approximately $338.9 million in net proceeds
from the Business Combination, partially offset by repayment of loans of approximately $2.6 million.
During the year ended December 31, 2020, cash provided by
financing activities was approximately $8.9 million, consisting primarily of proceeds from the sale of Preferred C-1 Shares, partially
offset by repayment of loans and proceeds from option exercises.
49
Funding Requirements
We expect our expenses to increase in connection with our ongoing
activities. To the extent and at such time as necessary for our business progress, particularly as we continue research and development
activities, commercialization expenses related to product sales, marketing, manufacturing and distribution, such expenses may increase.
Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, in the event of significant
business progress, we may need to obtain additional funding in connection with our continuing operations. If we are unable to raise capital
when and if needed or on attractive terms, we could be forced to delay, reduce or eliminate some of our research and development programs
or future commercialization efforts.
As of December 31, 2021, we had cash and cash equivalents,
short term deposits and marketable securities of approximately $304.0 million. We expect those funds to be sufficient to continue to execute
Innoviz’s business plan over the next two years.
We also expect our losses, excluding a one-time share-based compensation
expense, to be significantly higher in future periods as we:
| • |
expand production capabilities to produce our LiDAR solutions, and accordingly incur costs associated with outsourcing the production
of our LiDAR solutions; |
| • |
expand our design, development, installation and servicing capabilities; |
| • |
increase our investment in research and development; |
| • |
produce an inventory of our LiDAR solutions; and |
| • |
increase our selling and marketing activities and develop our distribution infrastructure. |
Because we will incur costs and expenses from these efforts before
we receive incremental revenues with respect thereto, losses in future periods will be significant. In addition, we may find that these
efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase
our losses.
Off-Balance Sheet Arrangements
The Company’s remaining performance obligations are comprised of product and
engineering services revenues not yet recognized. As of December 31, 2021, the aggregate amount of the transaction price allocated
to remaining performance obligations was $12.2 million, which we expect to recognize as revenue in future years.
On November 1, 2021, we entered into the New Lease Agreement for an office building
located in Rosh HaAin, Israel. The New Lease Agreement includes a right for us to use office spaces and related facilities. The lease
term is for 67 months, beginning on July 1, 2022; however, we were given access to the Premises beginning in November 2021 in order to
allow us to construct leasehold improvements. We have an option to renew the lease for additional 60 months, which will be exercised automatically
unless the Company informs the lessor in advance. The amount of the monthly lease payments for the Premises are linked to the Israeli
consumer price index.
In February 2016, the FASB issued ASU 2016-02 - Leases,
requiring the recognition of lease assets and liabilities on the balance sheet. The standard: (a) clarifies the definition of a lease;
(b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases
on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12 months.
The standard is effective for public entities for fiscal years beginning after December 15, 2018, and for the Company for fiscal years
beginning after December 15, 2020. In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and
Leases (Topic 842): Effective Dates for Certain Entities, which defers the effective date of ASU 2016-02 for non-public entities to fiscal
years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We intend to adopt
the ASU on January 1, 2022.
We expect adoption of ASU 2016-02 - Leases
to have a material impact on our consolidated balance sheet, which will result in the recognition of right-of-use (“ROU”)
assets and lease liabilities of approximately $33 million each on January 1, 2022. The main impact of ASU
2016-02 - Leases pertains to the recognition of an ROU asset and a lease liability arising from the New Lease Agreement. Further,
we expect our financial income, net to be impacted by foreign exchange gain and losses arising from our non-U.S. dollar-denominated lease
liabilities.
Other than as set forth above, we have not entered into any off-balance sheet
arrangements and do not have any holdings in variable interest entities.
50
C. Research and Development, Patents and Licenses, etc.
Research and Development
We have invested a significant amount of time and expense into R&D of LiDAR-based
technologies. Over 20% of our employees are veterans of Unit 81, the elite technology unit of Israel’s Intelligence Corps, one of
the most prestigious multidisciplinary technological units in the Israeli Defense Forces. Our R&D team is the largest department in
the company and, as of December 31, 2021, was comprised of 276 employees. Our ability to maintain a leadership position in the industry
depends to a great degree on our ongoing R&D activities. Our R&D team includes engineers and researchers with a diverse range
of expertise and diverse levels of experience and academic backgrounds, including holders of B.Sc., M.Sc. and PhD degrees from leading
academic institutions. Our research and development activities are largely conducted at our headquarters in Rosh HaAin, Israel and at
our German subsidiary’s offices in the vicinity of Munich, Germany.
Creating a solid-state, eye-safe and cost efficient ~905nm wavelength LiDAR
solution and the accompanying perception software required the efforts of a multi-disciplinary team with expertise spanning optics, lasers,
mechanical engineering, micro-electronics, chip design, MEMS design, complex IC packaging, algorithms, neural networks, systems engineering
and software architecture and engineering.
Intellectual Property
Our success and competitive advantage depend in part upon our ability to develop and
protect our core technology and intellectual property. We own a portfolio of intellectual property, including patents and registered trademarks,
confidential technical information, and expertise in the development of LiDAR technology and software for autonomous vehicles.
We have filed patent and trademark applications in order to further secure these rights
and strengthen our ability to defend against third parties who may infringe on our rights. We also rely on design and manufacturing know-how, continuing
technological innovations, and licensing and exclusivity opportunities to maintain and improve our competitive position. Additionally,
we protect our proprietary rights through agreements with our commercial partners, supply-chain vendors, employees, and consultants, as
well as close monitoring of developments and products in our industry.
As of December 31, 2021, we owned 19 allowed and issued patents and have 77 pending
patent applications, including U.S. and foreign. Of the 77 pending applications, 41 are published and 36 are unpublished. Our portfolio
includes U.S. and foreign patent applications filed in Europe, China, Japan, and Korea. In addition, our company has three registered
U.S. trademarks and 20 registered foreign trademarks (three of which are Israeli registrations). Our patents and patent applications cover
a broad range of system-level and component-level aspects of our key technology including, among other things, LiDAR systems, laser, scanner,
receiver and perception technology.
D. Trend Information
COVID-19
The COVID-19 pandemic has impacted companies in Israel and around the world, and as
its trajectory remains highly uncertain, we cannot predict the duration and severity of the outbreak and its containment measures. Further,
we cannot predict impacts, trends and uncertainties involving the pandemic’s effects on economic activity, our customers, suppliers,
manufacturers and partners, and the extent to which our revenue, income, profitability, liquidity, or capital resources may be materially
and adversely affected. See also Item 5. “COVID-19 Impact” and Item
3.D. “Risk Factors—We have been, and may in the future be, adversely affected by the global
COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly
harm our business, prospects, financial condition and operating results.”
Supply Chain
The supply chain for certain of our components is currently experiencing significant
strain due to, among other factors, higher-than-expected demand, capacity constraints, consolidation of suppliers within the industry,
and overburdened shippers. As a result, there has been a decrease in availability, increase in price and increase in lead times for certain
of our product components.
We currently have sufficient component inventory in order to meet the demands of our
customers in the near-term. In addition, we are in the process of procuring additional component stock to keep in inventory on a go-forward
basis to minimize the effect of supply chain strain on our business in the future.
51
E. Critical Accounting Policies and Use of Estimates
Innoviz’s management’s discussion and analysis of financial condition
and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation
of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and
expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods.
These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur
in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they
become known. Actual results may differ materially from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes
to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies used
in the preparation of our consolidated financial statements require the most significant judgments and estimates. Please see Note 2 to
our consolidated financial statements appearing elsewhere in this Annual Report for additional information.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are
required to estimate our accrued research and development expenses. This process involves reviewing purchase orders and open contracts,
communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed
and the associated cost incurred for the services when we have not yet been invoiced or otherwise notified of the actual cost. The majority
of our service providers invoice us monthly in arrears for services performed, on a pre-determined schedule or when
contractual milestones are met; however, some require advance payments. We make estimates of accrued expenses as of each balance sheet
date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy
of our estimates with the service providers and makes adjustments if necessary. The significant estimates in our accrued research and
development expenses include costs incurred for services in connection with development activities for which we have not yet been invoiced.
Although we do not expect our estimates to be materially different from amounts actually
incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed
may vary and may result in reporting amounts that are either too high or too low in any particular period. To date, there have not been
any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation
We measure stock options and other share-based awards granted to our employees, consultants
or advisors or affiliates based on their fair value according to the Black-Scholes option pricing model, whereas the fair value of restricted
stock units is based on the closing market value of the underlying shares at the date of grant. The option pricing model requires several
assumptions, of which the most significant are the expected share price volatility and the expected option term. We recognize forfeitures
of equity-based awards as they occur. For graded vesting awards, we recognize compensation expenses based on the straight-line method
over the requisite service period.
Options
Exercise price - Before we became a publicly listed company in
April 2021, in determining the exercise prices for share options granted, the Board of Directors considered the fair value of Ordinary
Shares as of each grant date. The fair value of Ordinary Shares underlying the share options was determined by the Board of Directors
at each award grant date based upon a variety of factors, including the results obtained from independent third-party valuations, our
financial position and historical financial performance, the status of technological developments within our products, the composition
and ability of the current management team, an evaluation or benchmark of our competition, the current business climate in the marketplace,
the illiquid nature of the Ordinary Shares, arm’s length sales of our capital share, the effect of the rights and preferences of
the Preferred Shares, and the prospects of a liquidity event, among others. From the date we became public, the fair value of each Ordinary
Share was based on the closing price of the Company’s publicly traded Ordinary Shares as reported on the date of the grant.
Expected volatility - As we became a publicly listed company in
April 2021, there is not sufficient historical volatility for the expected term of the share options. Therefore, we used an average historical
share price volatility based on an analysis of reported data for a peer group of comparable publicly traded companies which were selected
based upon industry similarities.
52
Expected term (years) – This represents the period that our
options that have been granted are expected to be outstanding. There is not sufficient historical share exercise data to calculate the
expected term of the share options. Therefore, we elected to utilize the simplified method to value option grants. Under this approach,
the weighted-average expected life is presumed to be the average of the shortest vesting term and the contractual term of the option.
Risk-free interest rate – We determined the risk-free interest
rate by using a weighted-average equivalent to the expected term based on the U.S. Treasury yield curve in effect as of the date of grant.
Expected dividend yield - We do not anticipate paying any dividends
in the foreseeable future. Thus, we used 0% as our expected dividend yield.
Earn-out Shares
We estimated the value of our earn-out shares using the Monte Carlo pricing model under
the following assumptions:
| • |
Share price - The share price was based on the closing price of the share on day of grant. |
| • |
Expected volatility - we estimate the volatility of our earn-out shares based on the historical volatility of our share price and
of a selected peer companies that matches the expected remaining life of the earn-out shares. |
| • |
Risk-free interest rate - We determined the risk-free interest rate by using a weighted average equivalent to the expected term based
on the U.S. Treasury yield curve in effect as of the date of grant. |
| • |
Threshold - We determined the earnout share price as part of the Business Combination. |
Private Warrants
As part of the Business Combination, we assumed a derivative warrant liability related
to previously issued private placement warrants in connection with Collective Growth’s initial public offering. The private warrants
were classified as a liability. We utilize a Black-Scholes option pricing model to estimate the fair value of the private placement warrants.
We estimate the volatility of our private warrants based on implied volatility of the publicly traded warrants and the historical volatility
of our share price and of a selected peer companies that matches the expected remaining life of the warrants. The risk-free interest rate
is based on the U.S. Treasury zero-coupon yield curve as of the valuation date for a maturity similar to the expiration of the warrants.
The dividend yield is based on the historical rate, which we anticipate remaining at zero.
Revenue Recognition
We follow the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC
606”), which applies to all contracts with customers. Under Topic 606, revenue is recognized upon transfer of control of promised
products and services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products
and services.
When we enter into a contract, once the contract is determined to be within the scope
of Topic 606, we assess the goods or services promised within the contract and determines those that are performance obligations and assesses
whether each promised good or service is distinct.
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. We evaluate each performance obligation to determine
if it is satisfied at a point in time or over time.
Changes in judgments with respect to these assumptions and estimates could impact
the timing or amount of revenue recognition.
Inventory Valuation
Our inventories are stated at the lower of cost or estimated net realizable value. Cost
of inventories is determined as follows:
| • |
Raw materials and work in process - based on weighted average cost. |
| • |
Finished goods - based on standard cost method. |
We charge 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.
53
|
Item 6. |
Directors, Senior Management and Employees |
A. Directors and Senior Management
Executive Officers and Directors
The following table provides information about our directors and executive officers
as of February 28, 2022. The address for each of the directors and executive officers is 2 Amal Street, Afek Industrial Park, Rosh HaAin,
Israel 4809202.
|
Name
|
Age |
Position(s)
|
|
Omer Keilaf
|
42 |
Chief Executive Officer, Co-Founder and Director |
|
Eldar Cegla
|
52 |
Chief Financial Officer |
|
Oren Rosenzweig
|
41 |
Chief Business Officer, Co-Founder and Director |
|
Oren Buskila
|
38 |
Chief Research & Development Officer and Co-Founder |
|
Udy Gal-On
|
53 |
Chief Operating Officer |
|
Amichai Steimberg
|
59 |
Director |
|
Aharon Aharon
|
67 |
Director |
|
Dan Falk
|
77 |
Director |
|
Ronit Maor
|
51 |
Director |
|
James Sheridan
|
54 |
Director |
|
Orit Stav
|
51 |
Director |
Omer David Keilaf, Chief Executive Officer and Director
Omer Keilaf is the Co-Founder of
our company and has served as our Chief Executive Officer since January 2016. Mr. Keilaf has also served as a member of the board
of directors of our company since January 2016. Mr. Keilaf serves as a member of the board of directors of Perception Capital Corp. II
(Nasdaq: PCCT) since October 2021. Mr. Keilaf held senior leadership roles at companies including Consumer Physics, Inc., STMicroelectronics
N.V. (NYSE: STM) and in an elite technological unit of the Intelligence Corps of the Israel Defense Forces (the “IDF”), where
he served as the System and Product Team Manager, R&D manager, and Project Manager and System Architecture Manager, respectively.
Mr. Keilaf holds a BSc and MSc in Electrical Engineering and an MBA, all from Tel Aviv University, Israel where he has also served
as a lecturer.
Eldar Cegla, Chief Financial Officer
Eldar Cegla has served as the Chief Financial
Officer of our company since June 2017. Prior to joining Innoviz, Mr. Cegla served as the VP Finance of ConsumerPhysics, Inc from
2014 to 2015, as the Chief Financial Officer of Metrolight Ltd. from 2010 to 2014 and as the Chief Operations Officer of Mantis-Vision
Ltd. from 2007 to 2010. Mr. Cegla was a Co-Founder of Browzwear International Ltd. and served as its Chief Financial Officer
from 2000 to 2006. Mr. Cegla holds a BSc in Chemistry from Tel Aviv University, Israel.
Oren Rosenzweig, Chief Business Officer and Director
Oren Rosenzweig is the Co-Founder of
our company and has served as our Chief Business Officer since February 2016. Mr. Rosenzweig has also served as a member of our board
of directors since January 2016. Prior to co-founding our company, from 2014 to 2016, Mr. Rosenzweig was a Consultant at
The Boston Consulting Group (BCG), where he advised Fortune 100 Tech companies on topics such as Strategy, Pricing and Growth and from
2009 to 2011 he served as a Program Manager at Anobit Technologies Ltd. (acquired by Apple Inc., Nasdaq: AAPL), where he led the development
of mobile memory products. Mr. Rosenzweig spent seven years in the elite technological unit of the Intelligence Corps of the IDF,
where he developed cutting-edge communications systems and led several large scale projects. Mr. Rosenzweig holds a BSc in Electrical
Engineering from the Technion—Israel Institute of Technology, and an MBA from the University of Chicago Booth School of Business,
Illinois.
Oren Buskila, Chief R&D Officer
Oren Buskila is the Co-Founder of
our company and has served as our Chief R&D Officer since February 2019, prior to which he served as the VP R&D from 2016. Prior
to co-founding our company, Mr. Buskila served as a System Engineer and Product Manager at ConsumerPhysics Inc. and was
responsible for the company’s HW system design, as well as for managing the company’s launch of its first consumer product
and leading several development and design projects. Mr. Buskila served seven years in the elite technological unit of the Intelligence
Corps of the IDF, where he served as a Project Manager, System Engineer and Hardware Engineer. Mr. Buskila holds a BSc in Physics,
a BSc in Electrical Engineering, an MSc in Electro-optical Engineering and an MBA, all from Tel Aviv University, Israel.
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Udy Gal-On, Chief Operating Officer
Udy Gal-On has served as our Chief Operating
Officer since March 2021. Prior to joining our company, Mr. Gal-On served as the VP Operations and VP Strategic Projects of SolarEdge
Technologies, Inc. from 2012 to 2021, as the VP Engineering of ECI Telecom Ltd. from 2007 to 2012, as the Product Engineering Department
Manager of Marvell Semiconductor, Inc. from 2005 to 2007 and as VP Operations of Mysticom Semiconductor Ltd. from 2002 to 2005. Mr. Gal-On
holds a BSc in Mechanical Engineering and a MSc in Quality & Reliability Engineering, each from Technion-Israel Institute
of Technology.
Amichai Steimberg, Chairperson of the Board
Amichai Steimberg joined our board of
directors upon the completion of the Business Combination. Mr. Steimberg previously served as President and Chief Operating Officer
of Orbotech Ltd. from 2013 to 2019, and as Chief Executive Officer of Orbotech Ltd. from 2019 to 2020. Mr. Steimberg is the managing partner
of Amplify Operating Partners Ltd., and serves as a board member for several private companies, including as Chairperson of the Board
of Directors at Airovation Technologies Ltd. From September 2020 to January 2021, Mr. Steimberg served as Chairperson of the Board of
Directors of Highcon System Ltd., an Israeli company listed on the Tel Aviv Stock Exchange. Mr. Steimberg holds a BSc in Agricultural
Economics and Business Administration from the Hebrew University in Jerusalem.
Aharon Aharon, Director
Aharon Aharon joined our board of directors
upon the completion of the Business Combination. Since 2021, Mr. Aharon has run and operated C-Perto, a consulting service that he cofounded.
He also currently serves on the board of directors of The Tel Aviv Stock Exchange Ltd. as an independent director. From 2017 to 2021,
Mr. Aharon served as the Chief Executive Officer of the Israel Innovation Authority, an independent public entity that operates for
the benefit of the Israeli innovation ecosystem and Israeli economy as a whole. Prior to joining the Israeli Innovation Authority, Mr. Aharon
served as the Corporate Vice President of Hardware Technologies and General Manager of Apple Israel from 2011 to 2017. Prior to his time
at Apple, Mr. Aharon served as the Chief Executive Officer of Camero, a leading provider of UWB imaging radars, from 2004 to 2010
(when the company was acquired). In addition, Mr. Aharon served as Chairperson of the board of directors of Discretix Technologies
from 2003 to 2010 (Discretix was acquired by ARM in 2014). From 2001 to 2003, Mr. Aharon was the Chief Executive Officer of Seabridge.
Prior to joining Seabridge, Mr. Aharon was the Chief Operating Officer of Zoran, a Silicon Valley-based, leading provider of digital
solutions in the digital entertainment and digital imaging market. Mr. Aharon started his professional career at IBM Research and
has a BSc in Computer Engineering and a MSc in Electrical Engineering from the Israel Institute of Technology.
Dan Falk, Director
Dan Falk joined our board of directors upon
the completion of the Business Combination. Mr. Falk has served as a member of the board of directors of Nice Ltd. (Nasdaq: NICE),
since 2001, has served as a member of the board of directors of Ormat Technologies Inc. (NYSE: ORA), since 2004, and has served as a member
of the board of directors of Evogene (Nasdaq: EVGN), since 2021. From 1999 to 2000, Mr. Falk was President and Chief Operating Officer
of Sapiens International Corporation N.V. From 1985 to 1999, Mr. Falk served in various positions in Orbotech Ltd., the last of which
were Chief Financial Officer and Executive Vice President. From 1973 to 1985, he served in several executive positions in the Israel Discount
Bank. During the past five years, Mr. Falk served as a member of the board of directors of the following public companies, for which
he no longer serves as a director: Attunity Ltd, Orbotech Ltd. and Advanced Vision Technology (AVT) Ltd. Mr. Falk holds a Bachelor’s
degree in Economics and Political Science and a Master’s degree in Business Administration, both from the Hebrew University.
Ronit Maor, Director
Ronit Maor joined our board of directors upon
the completion of the Business Combination. Since 2017, Ms. Maor has served as the Chief Financial Officer of Earnix Inc., a leading
SaaS company providing an AI-driven pricing, rating and product personalization for insurance and banking customers. Prior to joining
Earnix Inc., Ms. Maor was Chief Financial Officer at Pontis, a leading digital customer engagement company, from 2012 until its acquisition
by Amdocs in 2016. Prior to her time at Pontis, Ms. Maor was VP Corporate Development at modu, an Israeli start-up designing unique
cellular phones, from 2007 to 2011. Ms. Maor also served as Chief Financial Officer of msystems Ltd., a Nasdaq-listed company, from
1997 until the company was sold to SanDisk in 2006. Ms. Maor has a BSc in Industrial Engineering and Management from Tel Aviv University.
55
James Sheridan, Director
James Sheridan joined our board of directors
upon the completion of the Business Combination. Mr. Sheridan is a senior operating executive with over 25 years of experience and
deep experience in the automotive industry. He has experience as both an operating executive (Chief Procurement Officer) and as a leader
of the Purchasing Practice at McKinsey. His prior experiences include roles as CPO at Forterra, Senior Expert at McKinsey, CPO at Champion,
and a variety of roles with Ford Motor. Jim earned a B.A. from the College of the Holy Cross and M.B.A from Carnegie Mellon. Mr. Sheridan
was appointed by Perception, which is entitled to appoint one director for so long as it beneficially owns at least 50% of the total number
of ordinary shares it beneficially owned at the date of the closing of the Business Combination.
Orit Stav, Director
Orit Stav joined our board of directors after
the completion of the Business Combination. Ms. Stav is a seasoned investment manager with 20 years of experience in the technology,
venture capital, and private equity sectors. She currently serves as a member of the board of directors of the following companies: Camtek
Ltd., Doral Renewable Energy Resources Ltd., Hadasit Bio-holdings Ltd., YSB Group, HomeBioGas, ORT Technologies Ltd, RAVTech Ltd, Altshuler
Shaham Properties Ltd, Poalim I.B.I. Underwriting & Issuing Ltd., Unicorn Technologies Limited Partnership and EFFI Capital Nadlan
Ltd. Since 2015, Ms. Stav has served as a Managing Partner at Israel Innovation Partners. Prior to that, she represented Siemens
Venture Capital in Israel, and led investments in technology startups. Ms. Stav holds a Master of Business Administration from Hertfordshire
University, UK, and a Bachelor’s degree in Arts (Economics and Management) from the Tel Aviv University.
B. Compensation of Directors and Executive Officers
Directors
Under the Companies Law, the compensation of a public company’s directors requires
the approval of its compensation committee, the subsequent approval of its board of directors and, unless exempted under regulations promulgated
under the Companies Law, the approval of its shareholders at a general meeting. If the compensation of a public company’s directors
is inconsistent with its stated compensation policy, then those provisions that must be included in the compensation policy according
to the Companies Law must have been considered by the compensation committee and board of directors, and the shareholder approval will
require a special majority under which:
| • |
at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest
in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such
matter voting against the compensation package does not exceed 2% of the aggregate voting rights in the company. |
Executive Officers Other Than the Chief Executive Officer
The Companies Law requires the approval of the compensation of a public company’s
executive officers (other than the chief executive officer) in the following order: (i) the compensation committee, (ii) the
company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation
policy, the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director compensation).
However, if the shareholders of the company do not approve a compensation arrangement with an executive officer that is inconsistent with
the company’s stated compensation policy, the compensation committee and board of directors may override the shareholders’
decision if each of the compensation committee and the board of directors provide detailed reasons for their decision.
Chief Executive Officer
Under the Companies Law, the compensation of a public company’s chief executive
officer is required to be approved by: (i) the company’s compensation committee; (ii) the company’s board of directors,
and (iii) the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director
compensation). However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer,
the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee
and the board of directors provide detailed reasons for their decision. The approval of each of the compensation committee and the board
of directors should be in accordance with the company’s stated compensation policy; however, in special circumstances, they may
approve compensation terms of a chief executive officer that are inconsistent with such policy provided that they have considered those
provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained
(by a special majority vote as discussed above with respect to the approval of director compensation). In addition, the compensation committee
may waive the shareholder approval requirement with regard to the approval of the engagement terms of a candidate for the chief executive
officer position if they determine that the compensation arrangement is consistent with the company’s stated compensation policy,
that the chief executive officer did not have a prior business relationship with the company or a controlling shareholder of the company
and that subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to engage the chief
executive officer candidate.
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Aggregate Compensation of Office Holders
The aggregate compensation, including share-based compensation, paid by our company
to its executive officers and directors as a group, for the year ended December 31, 2021, was approximately $6.8 million. This amount
includes approximately $0.3 million paid for pension, severance, retirement or similar benefits or expenses, but does not include
business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other benefit costs
commonly reimbursed or paid by companies in Israel. The amount does not include a one-time transaction-related share-based compensation
in the aggregate amount of approximately $47.1 million granted to our executive officers in 2021 in connection with the Business Combination.
As of December 31, 2021, options to purchase 5,107,552 of our ordinary shares
granted to our executive officers and directors as a group were outstanding under our equity incentive plans at a weighted average exercise
price of $10.67, per ordinary share.
In addition, 2,395,368 RSUs granted to our executive officers and directors were outstanding
under our equity incentive plans as of December 31, 2021.We pay to each of our non-employee directors an annual cash retainer
as follows: chairperson of the board of directors: $77,500; chairperson of the audit committee, compensation committee and nominating
committee: $50,000, $45,000 and $42,500, respectively; members of the audit committee, compensation committee and nominating committee:
$42,500, $40,000 and $38,750, respectively; and each other director: $35,000. Such compensation will not be cumulative and the non-employee
directors will receive the highest level of compensation to which they are entitled. Additionally, we grant each of our non-employee directors
annual grants in a value of up to $100,000 each. We also intend to reimburse them for expenses arising from their board membership.
Share Option Plans
2016 Share Incentive Plan
Our 2016 Share Incentive Plan (the “2016 Plan”) was adopted by our board
of directors on May 23, 2016. The Plan provides for the grant of options to employees, directors, office holders, service providers
and consultants of our company and its subsidiaries.
We no longer grant any awards under the 2016 Plan as it was superseded by our 2021
Share Incentive Plan (the “2021 Plan”), although outstanding options previously granted under the 2016 Plan remain governed
by the 2016 Plan. As of December 31, 2021, a total of 7,682,722 options to purchase ordinary shares were outstanding under the 2016
Plan, with a weighted average exercise price of $0.86 per share. Our board of directors, or a duly authorized committee of our board of
directors, administers the 2016 Plan.
2021 Share Incentive Plan
In connection with the closing of the Business Combination, we adopted a new share
incentive plan, or the 2021 Plan, under which we may grant equity-based incentive awards to attract, motivate and retain the talent for
which we compete. Following the adoption of the 2021 Plan, we will no longer grant any awards under the 2016 Plan, though previously granted
options under the 2016 Plan remain outstanding and governed by the 2016 Plan.
The maximum number of our ordinary shares available for issuance under the 2021 Plan
is equal to the sum of (i) 19,510,820 shares (together with any shares subject to awards under the 2016 Plan that expire or become
un-exercisable without having been exercised), and (ii) an annual increase on the first day of each year beginning in 2022 and ending
in and including 2031, equal to the lesser of (A) 5% of the outstanding shares on the last day of the immediately preceding calendar year
and (B) such amount as determined by our board of directors if so determined prior to January 1 of a calendar year; provided,
however, no more than 14,000,000 shares in total may be issued upon the exercise of incentive stock options under the 2021 Plan. If permitted
by us, shares tendered to pay the exercise price or withholding tax obligations with respect to an award granted under the 2021 Plan or
the 2016 Plan may again be available for issuance under the 2021 Plan. Our board of directors may also reduce the number of ordinary shares
reserved and available for issuance under the 2021 Plan in its discretion.
Our board of directors, or a duly authorized committee of our board of directors,
administers the 2021 Plan. Under the 2021 Plan, the administrator has the authority, subject to applicable law, to interpret the terms
of the 2021 Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms
of awards, including the exercise price of an option award, the fair market value of an ordinary share, the time and vesting schedule
applicable to an award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe
the forms of agreement for use under the 2021 Plan and take all other actions and make all other determinations necessary for the administration
of the 2021 Plan.
57
The administrator also has the authority to amend and rescind rules and regulations
relating to the 2021 Plan or terminate the 2021 Plan at any time before the date of expiration of its ten year term.
The 2021 Plan provides for granting awards under various tax regimes, including, without
limitation, for awards granted to our Israeli employees or service providers, in compliance with Section 102 of the Israeli Income
Tax Ordinance (New Version) 1961 (the “Ordinance”) or Section 3(i) of the Ordinance and for awards granted to our United
States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422
of the Code and Section 409A of the Code.
Section 102 of the Ordinance allows employees, directors and officers who are
not “controlling shareholders” (as used under the Ordinance) and are considered Israeli residents to receive favorable tax
treatment for compensation in the form of shares or options. Our non-employee service providers and controlling shareholders may
only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits.
The 2021 Plan provides for the grant of stock options (including incentive stock options
and nonqualified stock options), ordinary shares, restricted shares, restricted share units and other share-based awards. Options granted
under the 2021 Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of
Section 422 of the Code, or may be non-qualified stock options.
C. Board Practices
Board of Directors
Under the Companies Law and our amended and restated articles of association (“Articles”),
our business and affairs are managed under the direction of our board of directors. Our board of directors may exercise all powers and
may take all actions that are not specifically granted to our shareholders or to executive management. Our Chief Executive Officer (referred
to as a “general manager” under the Companies Law) is responsible for our day-to-day management. Our Chief Executive Officer
is appointed by, and serves at the discretion of, our board of directors. All other executive officers are appointed by the Chief Executive
Officer and are subject to the terms of any applicable employment or consulting agreements that we may enter into with them.
Under our Articles, our directors are divided into three classes with staggered three-year
terms. Each class of directors consists, as nearly as possible, of one-third of the total number of directors constituting the entire
board of directors. At each annual general meeting of our shareholders, the election or re-election of directors following the expiration
of the term of office of the directors of that class of directors will be for a term of office that expires on the third annual general
meeting following such election or re-election, such that each year the term of office of only one class of directors will expire. Further,
our Articles include a provision which provides that Perception had the right to appoint one director to our board of directors upon closing
of the Business Combination (the “Perception Director”). Mr. Sheridan was appointed as the Perception Director.
Our directors, other than the Perception Director, are divided among the three classes
as follows:
| • |
the Class I directors are Aharon Aharon and Orit Stav and their terms expire at our annual general meeting to be held in 2024;
|
| • |
the Class II directors are Dan Falk and Ronit Maor and their terms expire at our annual general meeting to be held in 2022;
and |
| • |
the Class III directors are Amichai Steimberg, Omer Keilaf and Oren Rosenzweig and their terms expire at our annual general
meeting to be held in 2023. |
58
Director Independence
As an Israeli company, our company is subject to various corporate governance requirements
under the Companies Law. However, pursuant to regulations promulgated under the Companies Law, companies with shares traded on certain
U.S. stock exchanges, including Nasdaq, may, subject to certain conditions, opt out from the Companies Law requirements to appoint external
directors and related Companies Law rules concerning the composition of the audit committee, compensation committee and nominating committee
of the board of directors (other than the gender diversification rule under the Companies Law, which requires the appointment of a director
from the other gender if at the time a director is appointed all members of the board of directors are of the same gender). In accordance
with these regulations, we have elected to opt out of those requirements of the Companies Law. These exemptions will continue to be available
to our company so long as: (i) we do not have a “controlling shareholder” as used under the Companies Law, (ii) our
shares are traded on certain U.S. stock exchanges, including Nasdaq, and (iii) we comply with the director independence requirements
and the audit committee, compensation committee and nominating committee composition requirements under U.S. laws (including applicable
Nasdaq rules) applicable to U.S. domestic issuers.
The term “controlling shareholder” as used in the Companies Law for purposes
related to external directors and for the requirements related to appointment to the audit committee, compensation committee or nominating
committee, as described below, means a shareholder with the ability to direct the activities of the company, other than by virtue of being
an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights
in a company or has the right to appoint the majority of the directors of the company or its general manager. With respect to certain
matters (including various related party transactions), a controlling shareholder is deemed to include a shareholder that holds 25% or
more of the voting rights in a public company if no other shareholder holds more than 50% of the voting rights in the company, but excludes
a shareholder whose power derives solely from his or her position as a director of the company or from any other position with the company.
Accordingly, we comply with Nasdaq rule 5605(b)(1), which requires that the board
of directors be comprised of a majority of independent directors. A majority of our board of directors is composed of directors who are
“independent” as defined by the rules of Nasdaq and all of the non-management directors qualify as “independent”
under these standards. The board of directors has established categorical standards to assist it in making its determination of director
independence. We use the definition of “independence” of Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2)
provides that an “independent director” is a person other than an officer or employee of our company or any other individual
having a relationship which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The Nasdaq rules provide that a director cannot be considered independent if:
| • |
the director is, or at any time during the past three years was, an employee of our company; |
| • |
the director or a family member of the director accepted any compensation from our company in excess of $120,000 during any period
of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among
other things, compensation for board or board committee service); |
| • |
a family member of the director is, or at any time during the past three years was, an executive officer of our company; |
| • |
the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity
to which our company made, or from which our company received, payments in the current or any of the past three fiscal years that exceed
5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
|
| • |
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past
three years, any of the executive officers of our company served on the compensation committee of such other entity; or |
| • |
the director or a family member of the director is a current partner of our outside auditor, or at any time during the past three
years was a partner or employee of our outside auditor, and who worked on our audit. |
Under the following three Nasdaq director independence rules a director is not considered
independent: (a) Nasdaq Rule 5605(a)(2)(A), a director is not considered to be independent if he or she also is an executive officer
or employee of the corporation, (b) Nasdaq Rule 5605(a)(2)(B), a director is not considered independent if he or she accepted any
compensation from our company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the
determination of independence, and (c) Nasdaq Rule 5605(a)(2)(D), a director is not considered to be independent if he or she is
a partner in, or a controlling shareholder or an executive officer of, any organization to which our company made, or from which our company
received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s
consolidated gross revenues for that year, or $200,000. Under such definitions, we have five independent directors.
59
The board of directors assesses on a regular basis, and at least annually, the independence
of directors and makes a determination as to which members are independent. References to “our company” above include any
subsidiary in a consolidated group with our company. The terms “immediate family member” and “executive officer”
above have the same meanings specified for such terms in the Nasdaq listing standards.
However, as a foreign private issuer, we are permitted to comply with Israeli corporate
governance practices instead of the Nasdaq corporate governance rules, provided that
we disclose which requirements we are not following and the equivalent Israeli requirement. We intend to rely on this “home country
practice exemption” solely with respect to the quorum requirement for shareholder meetings. As permitted under the Companies Law,
pursuant to our Articles, the quorum required for an ordinary meeting of shareholders will consist of at least two shareholders present
in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting power of its
shares (and in an adjourned meeting, with some exceptions, any number of shareholders), instead of 33 1/3% of the issued share capital
required under the Nasdaq corporate governance rules. We otherwise comply with the rules generally applicable to U.S. domestic companies
listed on Nasdaq. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other corporate
governance rules.
Chairperson of the Board
Our Articles provide that the chairperson of the board is appointed by the members
of the board of directors and serves as chairperson of the board throughout his or her term as a director, unless resolved otherwise by
the board of directors. Under the Companies Law, the chief executive officer (or any relative of the chief executive officer) may not
serve as the chairperson of the board of directors, and the chairperson (or any relative of the chairperson) may not be vested with authorities
of the chief executive officer without shareholder approval, for periods of up to three years each, consisting of a majority vote of the
shares present and voting at a shareholders meeting, provided that either:
| • |
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest
in the approval voted at the meeting are voted in favor (disregarding abstentions); or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such
appointment voting against such appointment does not exceed 2% of the aggregate voting rights in the company. |
In addition, a person subordinated, directly or indirectly, to the chief executive
officer may not serve as the chairperson of the board of directors; the chairperson of the board may not be vested with authorities that
are granted to those subordinated to the chief executive officer; and the chairperson of the board may not serve in any other position
in the company or a controlled company, but he may serve as a director or chairperson of a subsidiary.
External Directors
Under the Companies Law, companies incorporated under the laws of the State of Israel
that are public companies, including companies with shares listed on Nasdaq, are required to appoint at least two external directors who
must meet heightened independence requirements. Pursuant to regulations promulgated under the Companies Law, companies with shares traded
on certain U.S. stock exchanges, including Nasdaq, may, subject to certain conditions, opt out from the Companies Law requirements to
appoint external directors and related Companies Law rules concerning the composition of the audit committee, compensation committee and
nominating committee of the board of directors. In accordance with these regulations, we elected to opt out from these Companies Law requirements.
Instead, we must comply with the director independence requirements, the audit committee, the compensation committee and the nominating
committee composition requirements under U.S. laws (including applicable Nasdaq rules) applicable to U.S. domestic issuers.
Committees of the Board of Directors
Our board of directors has the following standing committees: an Audit Committee,
a Compensation Committee and a Nominating Committee.
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Audit Committee
The Audit Committee is responsible, among its other duties and responsibilities, for
overseeing our accounting and financial reporting processes, audits of financial statements, qualifications and independence of the independent
registered public accounting firm, the effectiveness of internal control over financial reporting and the performance of the internal
audit function and independent registered public accounting firm. The Audit Committee reviews and assesses the qualitative aspects of
our financial reporting, processes to manage business and financial risks, and compliance with significant applicable legal, ethical and
regulatory requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the
independent registered public accounting firm. In addition, the Audit Committee is responsible for the following additional matters pursuant
to the Companies Law:
| • |
recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement
fees and terms, in accordance with the Companies Law as well as approving the yearly or periodic work plan proposed by the internal auditor;
|
| • |
reviewing with our general counsel and/or external counsel, as deemed necessary, legal and regulatory matters that could have a material
impact on the financial statements; |
| • |
identifying irregularities in our business administration, including by consulting with the internal auditor or with the independent
auditor, and suggesting corrective measures to the board of directors; |
| • |
reviewing policies and procedures with respect to transactions (other than transactions related to the compensation or terms of services)
between the company and officers and directors, or affiliates of officers or directors, or transactions that are not in the ordinary course
of the Company’s business and deciding whether to approve such acts and transactions if so required under the Companies Law; and
|
| • |
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to
be provided to such employees. |
The charter of the Audit Committee is available without charge at https://innoviz.tech.
The members of the Audit Committee are Dan Falk, Ronit Maor and Orit Stav. Dan Falk
serves as the Chairperson of the Audit Committee. The board of directors has designated Dan Falk as an “audit committee financial
expert” and determined that each member is “financially literate” under the Nasdaq rules. The board of directors has
also determined that each member of the Audit Committee is “independent” as defined under the Nasdaq rules and Exchange Act
rules and regulations.
Compensation Committee
The Compensation Committee is responsible, among its other duties and responsibilities,
for reviewing and approving all forms of compensation to be provided to, and employment agreements with, our executive officers and directors,
establishing the general compensation policies of our company and its subsidiaries and reviewing, approving and overseeing the administration
of the employee benefits plans of our company and its subsidiaries. The Compensation Committee is also responsible for:
| • |
recommending to the board of directors with respect to the approval of the compensation policy for “office holders” (a
term used under the Companies Law, which means, in effect, directors and executive officers) and, once every three years, regarding any
extensions to a compensation policy that has been in effect for a period of more than three years; |
| • |
reviewing the implementation of the compensation policy and periodically recommending to the board of directors with respect to any
amendments or updates of the compensation plan; |
| • |
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
|
| • |
exempting, under certain circumstances, from the requirement of approval by the general meeting of shareholders, transactions with
the chief executive officer of our company. |
The charter of the Compensation Committee is available without charge at https://innoviz.tech.
The members of the Compensation Committee are Ronit Maor and Dan Falk. Ronit Maor
serves as the Chairperson of the Compensation Committee. The board of directors has determined that each member of the Compensation Committee
is “independent” as defined under the Nasdaq listing standards. The Compensation Committee has the authority to retain compensation
consultants, outside counsel and other advisers.
61
Compensation Policy Under the Companies Law
In general, under the Companies Law, a public company must have a compensation policy
approved by the board of directors after receiving and considering the recommendations of the Compensation Committee. In addition, a compensation
policy must be approved at least once every three years, first, by the issuer’s board of directors, upon recommendation of its Compensation
Committee, and second, by a simple majority of the ordinary shares present, in person or by proxy, and voting at a shareholders meeting,
provided that either:
| • |
such majority includes at least a majority of the shares held by shareholders who are not controlling shareholders and do not have
a personal interest in such compensation policy and who are present and voting (excluding abstentions); or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the
compensation policy and who vote against the policy, does not exceed 2% of the company’s aggregate voting rights. |
In the event that the shareholders fail to approve the compensation policy in a duly
convened meeting, the board of directors may nevertheless override that decision, provided that the Compensation Committee and then the
board of directors decide, on the basis of detailed reasons and after further review of the compensation policy, that approval of the
compensation policy is for the benefit of the company despite the failure of the shareholders to approve the policy.
If a company that adopts a compensation policy in advance of its initial public offering
(or in our case, prior to the closing of the Business Combination) describes the policy in its prospectus for such offering, then that
compensation policy shall be deemed validly adopted in accordance with the Companies Law and will remain in effect for term of five years
from the date such company becomes a public company.
The compensation policy must serve as the basis for decisions concerning the financial
terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation
of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the
company’s objectives, business plan and long-term strategy, and creation of appropriate incentives for office holders. It must also
consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must
furthermore consider the following additional factors:
| • |
the education, skills, experience, expertise and accomplishments of the relevant office holder; |
| • |
the office holder’s position, responsibilities and prior compensation agreements with him or her; |
| • |
the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the
company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost,
the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in
the company; |
| • |
if the terms of employment include variable components—the possibility of reducing variable components at the discretion of
the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and
|
| • |
if the terms of employment include severance compensation—the term of employment or office of the office holder, the terms
of his or her compensation during such period, the company’s performance during the such period, his or her individual contribution
to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the
company. |
The compensation policy must also include, among other things:
| • |
with regard to variable components of compensation: |
| • |
with the exception of office holders who report directly to the chief executive officer, provisions determining the variable components
on the basis of long-term performance and on measurable criteria; however, the company may determine that an immaterial part of the variable
components of the compensation package of an office holder shall be awarded based on non-measurable criteria, if such amount
is not higher than three monthly salaries per annum, while taking into account such office holder’s contribution to the company;
and |
| • |
the ratio between variable and fixed components, as well as the limit on the values of variable components at the time of their grant.
|
62
| • |
a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation
policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered
to be wrong, and such information was restated in the company’s financial statements; |
| • |
the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable,
while taking into consideration long-term incentives; and |
| • |
a limit on retirement grants. |
Our compensation policy, which became effective immediately following the consummation
of the Business Combination, is designed to promote retention and motivation of directors and executive officers, incentivize superior
individual excellence, align the interests of our directors and executive officers with our long-term performance and provide a risk management
tool. To that end, a portion of an executive officer compensation package is targeted to reflect our short and long-term goals, as well
as the executive officer’s individual performance. On the other hand, our compensation policy includes measures designed to reduce
an executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash
bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer
and minimum vesting periods for equity-based compensation.
The compensation policy also addresses our executive officers’ individual characteristics
(such as their respective positions, education, scope of responsibilities and contribution to the attainment of its goals) as the basis
for compensation variation among our executive officers and considers the internal ratios between compensation of our executive officers
and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may
include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special bonuses with respect to any special achievements,
such as outstanding personal achievement, outstanding personal effort or outstanding company performance), equity-based compensation,
benefits and retirement and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive
officer’s base salary. In addition, the total variable compensation components (cash bonuses and equity-based compensation) may
not exceed 95% of each executive officer’s total compensation package with respect to any given calendar year.
An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic
objectives and individual targets. The annual cash bonus that may be granted to our executive officers other than our chief executive
officer will be based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by
the chief executive officer and subject to minimum thresholds. The annual cash bonus that may be granted to executive officers other than
our chief executive officer may be based entirely on a discretionary evaluation. Furthermore, our chief executive officer is entitled
to recommend performance objectives, and such performance objectives will be approved by the Compensation Committee (and, if required
by law, by our board of directors).
The measurable performance objectives of our chief executive officer may be determined
annually by our Compensation Committee and board of directors and include the weight to be assigned to each achievement in the overall
evaluation. A less significant portion of the chief executive officer’s annual cash bonus may be based on a discretionary evaluation
of the chief executive officer’s overall performance by the Compensation Committee and the board of directors based on quantitative
and qualitative criteria.
The equity-based compensation under the compensation policy for our executive officers
is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus. Primary objectives
include enhancing the alignment between the executive officers’ interests and our long-term interests and those of our shareholders
and strengthening the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive
officer compensation in the form of share options or other equity-based awards, such as restricted shares and restricted share units,
in accordance with our share incentive plan then in place. All equity-based incentives granted to executive officers shall be subject
to vesting periods in order to promote long-term retention of the awarded executive officers. Equity-based compensation shall be granted
from time to time and be individually determined and awarded according to the performance, educational background, prior business experience,
qualifications, role and the personal responsibilities of the executive officer.
In addition, the compensation policy contains compensation recovery provisions which
allows us under certain conditions to recover bonuses paid in excess, enables our chief executive officer to approve immaterial changes
in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our compensation
policy) and allows us to exculpate, indemnify and insure our executive officers and directors subject to certain limitations as set forth
therein.
The compensation policy also provides for compensation to the members of our board
of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and
Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange
Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined
in the compensation policy.
Our compensation policy, which was approved by our board of directors and shareholders
on January 20, 2021 and January 29, 2021, respectively, became effective upon the closing of the Business Combination.
63
Nominating Committee
The members of the Nominating Committee are Orit Stav and Aharon Aharon. Orit Stav
serves as the Chairperson of the Nominating Committee. The Nominating Committee is responsible, among other things, for:
| • |
overseeing and assisting our board of directors in reviewing and recommending nominees for election as directors; |
| • |
assessing the performance of the members of the board of directors; and |
| • |
establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and
recommending to our board of directors a set of corporate governance guidelines applicable to our company. |
The charter of the Nominating Committee is available without charge at https://innoviz.tech.
Exculpation, Insurance and Indemnification of Office Holders
Under the Companies Law, a company may not exculpate an office holder from liability
for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability, in whole or in part,
for damages caused as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles
of association. Our Articles include such a provision. An Israeli company may not exculpate a director from liability arising out of a
prohibited dividend or distribution to shareholders.
An Israeli company may indemnify an office holder in respect of the following liabilities
and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision
authorizing such indemnification is contained in its articles of association:
| • |
a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s
award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance,
then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s
activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors
as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
| • |
reasonable litigation expenses, including legal fees, incurred by the office holder (1) as a result of an investigation or proceeding
instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that
(i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial
liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation
or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal
intent; and (2) in connection with a monetary sanction; |
| • |
reasonable litigation expenses, including legal fees, incurred by the office holder or imposed by a court in proceedings instituted
against him or her by the company, on its behalf or by a third-party or in connection with criminal proceedings in which the
office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent; and |
| • |
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative
proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder
by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law, 1968 (the “Israeli Securities Law”).
|
64
An Israeli company may insure an office holder against the following liabilities incurred
for acts performed as an office holder if and to the extent provided in the company’s articles of association:
| • |
a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis
to believe that the act would not prejudice the company; |
| • |
a breach of the duty of care to the company or to a third-party, including a breach arising out of the negligent conduct
of the office holder; |
| • |
a financial liability imposed on the office holder in favor of a third-party; |
| • |
a financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding;
and |
| • |
expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative
proceeding instituted against him or her, pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may not indemnify or insure an office holder against any of the
following:
| • |
a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe
that the act would not prejudice the company; |
| • |
a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the
office holder; |
| • |
an act or omission committed with intent to derive illegal personal benefit; or |
| • |
a fine, monetary sanction or forfeit levied against the office holder. |
Under the Companies Law, exculpation, indemnification and insurance of office holders
must be approved by the compensation committee and the board of directors (and, with respect to directors and the chief executive officer,
by the shareholders). However, under regulations promulgated under the Companies Law, the insurance of office holders does not require
shareholder approval and may be approved by only the compensation committee, if the engagement terms are determined in accordance with
the company’s compensation policy, which was approved by the shareholders by the same special majority required to approve a compensation
policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially impact the company’s
profitability, assets or obligations.
Our Articles allow us to exculpate, indemnify and insure our office holders for any
liability imposed on them as a consequence of an act (including any omission) which was performed by virtue of being an office holder.
Our office holders are currently covered by a directors and officers’ liability insurance policy.
We have entered into agreements with each of our directors and executive officers
exculpating them in advance from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to
indemnify them to the fullest extent permitted by law. This indemnification is limited to events determined as foreseeable by the board
of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under
the circumstances.
The maximum indemnification amount set forth in such agreements is limited to an amount
equal to the higher of $40,000,000 and 25% of our total shareholders’ equity as reflected in our most recent consolidated financial
statements prior to the date on which the indemnity payment is made (other than indemnification for an offering of securities to the public,
including by a shareholder in a secondary offering, in which case the maximum indemnification amount is limited to the gross proceeds
raised by us and/or any selling shareholder in such public offering). The maximum amount set forth in such agreements is in addition to
any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of the SEC, indemnification of directors and office holders for liabilities
arising under the Securities Act, however, is against public policy and therefore unenforceable.
There is no pending litigation or proceeding against any of our office holders as
to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification
by any office holder.
65
Internal Auditor
Under the Companies Law, the board of directors of a public company must appoint an
internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other things, to examine
whether a company’s actions comply with applicable law and orderly business procedure. Under the Companies Law, the internal auditor
cannot be an interested party or an office holder or a relative of an interested party or an office holder, nor may the internal auditor
be the company’s independent auditor or its representative. An “interested party” is defined in the Companies Law as:
(i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right
to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as
a director or as a chief executive officer of the company. We have recently appointed Ms. Sharon Cohen, CPA from Deloitte IL &
Co, a firm in the Deloitte Global Network, as our internal auditor.
D. Employees
We believe that our corporate culture and our relationship with our employees contribute
to our success. Our employees are continuously innovating, and our structure rewards productivity. As of December 31, 2021, we had
404 employees.
In regard to our Israeli employees, Israeli labor laws govern the length of the workday,
minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days,
advance notice of termination of employment, equal opportunity and anti-discrimination laws and other conditions of employment. Subject
to certain exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of an employee, and requires
us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration.
Our employees have pension plans that comply with the applicable Israeli legal requirements and we make monthly contributions to severance
pay funds for all employees, which cover potential severance pay obligations.
None of our employees work under any collective bargaining agreements. Extension orders
issued by the Israeli Ministry of Economy and Industry apply to us and affect matters such as cost of living adjustments to salaries,
length of working hours and week, recuperation pay, travel expenses and pension rights.
We have never experienced labor-related work stoppages or strikes and believe that
our relations with our employees are satisfactory.
E. Share Ownership
For information regarding the share ownership of directors and officers, see Item
7.A. “Major Shareholders and Related Party Transactions—Major Shareholders.”
For information as to our equity incentive plans, see Item 6.B. “Director, Senior Management and
Employees—Compensation—Share Option Plans.”
|
Item 7. |
Major Shareholders and Related Party Transactions |
A. Major Shareholders
The following table sets forth information with respect to the beneficial ownership
of our shares as of February 28, 2022 by:
| • |
each person or entity known by us to own beneficially more than 5% of our outstanding shares; |
| • |
each of our directors and executive officers individually; and |
| • |
all of our executive officers and directors as a group. |
The beneficial ownership of ordinary shares is determined in accordance with the SEC
rules and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power. For purposes
of the table below, we deem shares subject to options that are currently exercisable or exercisable within 60 days February 28, 2022,
and restricted share units that shall vest within 60 days of February 28, 2022, to be outstanding and to be beneficially owned by
the person holding the options or restricted share units for the purposes of computing the percentage ownership of that person but we
do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of shares beneficially
owned is based on 134,236,737 ordinary shares outstanding as of February 28, 2022.
All of our shareholders, including the shareholders listed below, have the same voting
rights attached to their ordinary shares. Unless otherwise noted below, each shareholder’s address is 2 Amal St., Afek Industrial
Park, Rosh HaAin 4809202, Israel.
66
A description of any material relationship that our principal shareholders have had
with us or any of our affiliates since January 1, 2021 is included under Item 7.B. “Major
Shareholders and Related Party Transactions—Related Party Transactions.”
|
Name of Beneficial Owner |
Number |
% |
||||||
|
Five Percent or More Holders
|
||||||||
|
Antara Capital LP(1)
|
14,724,666 |
11.0 |
% | |||||
|
Directors and Executive Officers
|
||||||||
|
Omer Keilaf(2)
|
6,472,013 |
4.8 |
% | |||||
|
Eldar Cegla(3)
|
467,287 |
* |
||||||
|
Oren Rosenzweig(4)
|
2,983,495 |
2.2 |
% | |||||
|
Oren Buskila(5)
|
2,714,352 |
2.0 |
% | |||||
|
Udy Gal-On(6)
|
47,099 |
* |
||||||
|
Amichai Steimberg(7)
|
10,142 |
* |
||||||
|
Aharon Aharon(7)
|
10,142 |
* |
||||||
|
Dan Falk(7)
|
10,142 |
* |
||||||
|
Ronit Maor(7)
|
10,142 |
* |
||||||
|
James Sheridan(8)
|
3,150,389 |
2.3 |
% | |||||
|
Orit Stav(7)
|
10,142 |
* |
||||||
|
All executive officers and directors as a group
(11 persons) |
15,885,345 |
11.2 |
% | |||||
|
* |
less than 1% |
| (1) |
Based on information reported on Schedule 13G/A filed with the SEC on February 8, 2022. Antara Capital Master Fund LP (“Antara
Master Fund”) directly holds 3,770,008 ordinary shares. Certain managed accounts for which Antara Capital LP (“Antara Capital”)
serves as investment manager (the “Managed Accounts”) directly hold 3,000,000 ordinary shares. In addition, Antara Master
Fund directly holds warrants to purchase 4,351,958 ordinary shares at an exercise price of $11.50 per share. In addition, Antara Master
Fund directly holds listed options to purchase 3,602,700 ordinary shares (“Listed Options”). Antara Capital is the investment
manager of the Antara Master Fund and the Managed Accounts. Antara Capital GP LLC (“Antara GP”) is the general partner of
Antara Capital. Himanshu Gulati (“Mr. Gulati”) is the sole member of Antara GP. Antara Capital, Antara GP and Mr. Gulati may
be deemed to beneficially own the securities of Innoviz held directly by Antara Master Fund and the Managed Accounts. The business address
of the foregoing persons is 55 Hudson Yards, 47th Floor,
Suite C, New York, NY 10001. |
| (2) |
Consists of 5,074,926 ordinary shares and 1,397,087 ordinary shares issuable upon vesting of RSUs or exercise of options that are
exercisable as of or within 60 days of February 28, 2022. |
| (3) |
Consists of 88,000 ordinary shares and 379,287 ordinary shares issuable upon vesting of RSUs or exercise of options that are exercisable
as of or within 60 days of February 28, 2022. |
| (4) |
Consists of 1,731,264 ordinary shares and 1,252,231 ordinary shares issuable upon vesting of RSUs or exercise of options that are
exercisable as of or within 60 days of February 28, 2022. |
| (5) |
Consists of 1,462,121 ordinary shares and 1,252,231 ordinary shares issuable upon vesting of RSUs or exercise of options that are
exercisable as of or within 60 days of February 28, 2022. |
| (6) |
Consists of 47,099 ordinary shares issuable upon vesting of RSUs or exercise of options that are exercisable within 60 days of February
28, 2022. |
| (7) |
Consists of 10,142 ordinary shares issuable upon vesting of RSUs that vest within 60 days of February 28, 2022. |
| (8) |
Consists of 10,142 ordinary shares issuable upon vesting of RSUs that vest within 60 days of February 28, 2022,. In addition,
Perception Capital Partners, LLC directly holds 75,000 ordinary shares and 3,065,247 warrants to purchase ordinary shares at a price of
$11.50 per share. Mr. Sheridan is the Chief Executive Officer of Perception Capital Partners, LLC and may be deemed to be the beneficial
owner of the securities held by Perception Capital Partners, LLC. |
To our knowledge, other than as disclosed in the table above, our other filings with
the SEC and this Annual Report, there has been no significant change in the percentage ownership held by any major shareholder since January 1,
2018. The major shareholders listed above do not have voting rights with respect to their ordinary shares that are different from the
voting rights of other holders of our ordinary shares.
As a number of our shares are held in book-entry form, we are not aware of the identity
of all of our shareholders. As of February 28, 2022, we had 3,384,737 ordinary shares held by 9 U.S. resident shareholders of record.
67
B. Related Party Transactions
The following is a description of our related party transactions since January 1,
2021.
Registration Rights Agreement
Concurrently with the execution of the Business Combination Agreement, Innoviz, certain
equityholders of Innoviz, certain equityholders of Collective Growth, Perception and Antara entered into a registration rights agreement
(the “Registration Rights Agreement”), pursuant to which Innoviz agreed to file a shelf registration statement with respect
to the registrable securities defined therein within (60 days of the closing of the Business Combination. Certain holders of registrable
securities under the Registration Rights Agreement may request to sell all or any portion of their registrable securities in an underwritten
offering up to twice in any 12-month period so long as the total offering price is reasonably expected to exceed $75.0 million. Innoviz
also agreed to provide customary “piggyback” registration rights. The Registration Rights Agreement also provides that Innoviz
will pay certain expenses relating to such registrations and indemnify the shareholders against certain liabilities. The Registration
Rights Agreement does not contemplate the payment of penalties or liquidated damages to the equityholders party thereto as a result of
a failure to register, or delays with respect to the registration of, the registrable securities.
Put Option Agreement
Concurrently with the execution of the Business Combination Agreement, Innoviz and Antara
entered into the Put Option Agreement, pursuant to which Innoviz caused Antara to subscribe for a number of Innoviz ordinary shares in
the PIPE with an aggregate equity value equal to $70,000,000. In consideration for entering into the Put Option Agreement, at the Effective
Time, Innoviz issued to an affiliate of Antara 3,784,753 warrants and 3,002,674 ordinary shares. In addition, Innoviz agreed to issue
to an affiliate of Antara 197,962 ordinary shares in the event that earnout shares are issued to Perception.
Agreements with Directors and Officers
Options and restricted share units. Since
our inception, we have granted options to purchase our ordinary shares to our executive officers. We describe our option plans under Item
6. “Directors, Senior Management and Employees.”
Exculpation, indemnification and insurance.
Our Articles permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted by the Companies Law. We
have entered into agreements with certain of our office holders, exculpating them from a breach of their duty of care to us to the fullest
extent permitted by law and undertaking to indemnify them to the fullest extent permitted by law, subject to certain exceptions, including
with respect to liabilities resulting from our initial public offering to the extent that these liabilities are not covered by insurance.
See Item 6.C. “Directors, Senior Management and Employees—Board
Practices—Exculpation, Insurance and Indemnification of Office Holders.”
Rights of Appointment. As part of the Business
Combination, our Articles include a provision which provides that Perception has the right to appoint, replace and remove one director
to our board of directors so long it beneficially holds, together with any permitted transferee, in the aggregate at least 1,087,500 of
our ordinary shares, which is equal to fifty percent (50%) of the total number of our ordinary shares Perception beneficially owned as
of the date of the adoption of our Articles.
Magna Manufacturing MOU
In October 2020, Innoviz signed an MOU with Magna Electronics Technology Inc. (“Magna
Tech”) for high-volume manufacturing of Innoviz LiDARs at Magna Tech’s automotive grade facility in Holly, Michigan. This
MOU contemplates Magna Tech’s manufacturing of our LiDAR solution for the BMW program.
Transaction with RavTech Beit Tochna Torani Ltd. (“RavTech”)
RavTech has provided engineering and operator services to the Company since December
2019. Fees paid to RavTech during fiscal years 2021, 2020 and 2019 were $100,000, $71,000, and $5,000, respectively. Orit Stav, a
director of the Company as of April 2021, is a director of RavTech. There are no amounts due to RavTech as of February 28, 2022.
Related Party Transaction Policy
Our board of directors has adopted a written related party transaction policy to set
forth the policies and procedures for identifying related party transactions.
C. Interests of Experts and Counsel
Not applicable.
68
|
Item 8. |
Financial Information |
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements
See Item 18. “Financial Statements.”
Legal and Arbitration Proceedings
From time to time, we may be involved in various claims and legal proceedings related
to claims arising out of our operations. We are not currently a party to any material legal proceedings, including any such material proceedings
that are pending or threatened, of which we are aware.
Dividend Policy
We have never declared or paid any dividends on our ordinary shares. We do not anticipate
paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand
our business. Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends,
the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that our directors may deem relevant.
The Companies Law imposes restrictions on our ability to declare and pay dividends.
See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Description
of Convertible Notes Financing and Capped Call Transaction.”
Payment of dividends may be subject to Israeli withholding taxes. See Item 10.E. “Taxation—Taxation
and Government Programs—Israeli Tax Considerations and Government Programs” for additional information.
B. Significant Changes
None.
|
Item 9. |
The Offer and Listing |
A. Offer and Listing Details
Our ordinary shares and warrants commenced trading on Nasdaq on April 6, 2021
under the trading symbols “INVZ” and “INVZW,” respectively. Prior to this, no public market existed for our ordinary
shares or warrants.
B. Plan of Distribution
Not applicable.
C. Markets
Our ordinary shares and warrants commenced trading on Nasdaq on April 6, 2021 under
the trading symbols “INVZ” and “INVZW,” respectively. Prior to this, no public market existed for our ordinary
shares or warrants.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
69
|
Item 10. |
Additional Information |
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
A copy of our Articles is incorporated by reference to Exhibit 1.1 to the Company’s
Annual Report on Form 20-F (File No. 001-40310) filed with the SEC on April 21, 2021. Other than as set forth below, the information called
for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference herein.
Share Capital
As of December 31, 2021, we had 134,098,120 ordinary shares and 16,231,241 warrants
outstanding.
Exchange Controls
There are currently no Israeli currency control restrictions on remittances of dividends
on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except
for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.
Shareholder Meetings
Under Israeli law, we are required to hold an annual general meeting of our shareholders
once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All meetings
other than the annual general meeting of shareholders are referred to in our Articles as “special general meetings”. Our board
of directors may call special general meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine.
In addition, the Companies Law provides that our board of directors is required to convene a special general meeting upon the written
request of (i) any two or more of our directors or one-quarter or more of the serving members of our board of directors or (ii) one
or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding issued shares and 1% or more of our outstanding
voting power or (b) 5% or more of our outstanding voting power.
Subject to the provisions of the Companies Law and the regulations promulgated thereunder,
shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board
of directors, which, as a company listed on an exchange outside Israel, may be between four and 40 days prior to the date of the
meeting. Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed at a general meeting
of our shareholders:
| • |
amendments to our articles of association; |
| • |
appointment, termination or the terms of service of our auditors; |
| • |
appointment of external directors (if applicable); |
| • |
approval of certain related party transactions; |
| • |
increases or reductions of our authorized share capital; |
| • |
mergers; and |
| • |
the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers
and the exercise of any of its powers is required for our proper management. |
The Companies Law requires that a notice of any annual general meeting or special
general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes, among
other things, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties
or the approval of a merger, notice must be provided at least 35 days prior to the meeting. Under the Companies Law and our Articles,
shareholders are not permitted to take action by way of written consent in lieu of a meeting.
70
C. Material Contracts
The following is a summary of each material contract, other than material contracts
entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date
of this Annual Report:
| • |
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form
F-4 (File No. 333-252023) filed with the SEC on February 12, 2021). See Item 6. “Directors,
Senior Management and Employees” for more information about this agreement. |
| • |
Compensation Policy for Directors and Officers (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement
on Form F-4 (File No. 333-252023) filed with the SEC on February 12, 2021). See Item 6. “Directors,
Senior Management and Employees” for more information about this agreement. |
| • |
2016 Share Incentive Plan of Innoviz Technologies Ltd. (incorporated by reference to Exhibit 10.10 to the Company’s Registration
Statement on Form F-4 (File No. 333-252023) filed with the SEC on February 12, 2021). See Item 6. “Directors,
Senior Management and Employees” for more information about this agreement. |
| • |
2021 Share Incentive Plan of Innoviz Technologies Ltd. See Item 6. “Directors,
Senior Management and Employees” for more information about this agreement. |
| • |
Warrant Agreement, dated as of April 30, 2020, between Continental Stock Transfer & Trust Company and Collective Growth Corporation
(incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form F-4 (File No. 333-252023) filed with
the SEC on January 11, 2021). See Exhibit 2.1 for more information about this agreement. |
| • |
Assignment, Assumption and Amendment Agreement, by and among Innoviz Technologies Ltd., Collective Growth Corporation, American Stock
Transfer & Trust Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.11 to the Company’s
Annual Report on Form 20-F filed with the SEC on April 21, 2021). See Exhibit 2.1 for more information about this agreement. |
| • |
Registration Rights Agreement, dated as of December 10, 2020, by and among Innoviz, certain equityholders of Innoviz, certain
equityholders of Collective Growth, Perception and Antara Capital (incorporated by reference to Exhibit 4.8 to the Company’s Registration
Statement on Form F-4 (File No. 333-252023) filed with the SEC on January 11, 2021). See Item 7. “Major
Shareholders and Related Party Transactions—B. Related Party Transactions” for more information about this agreement.
|
| • |
Put Option Agreement, dated as of December 10, 2020, by and between Innoviz and Antara Capital (incorporated by reference to Exhibit
10.7 to the Company’s Registration Statement on Form F-4 (File No. 333-252023) filed with the SEC on January 11, 2021). See
Item 7. “Major Shareholders and Related Party Transactions—B. Related Party Transactions”
for more information about this agreement. |
| • |
Magna Joint Development and Master Supply Agreement |
In December 2017, we entered into a Joint Development and Master Supply Agreement
(“JDMSA”) with Magna pursuant to which the parties agreed to work together to jointly develop and commercialize various LiDAR-related
technologies. This agreement provides the framework for the collaboration between Magna as a leading Tier-1 partner and our company as
a leading LiDAR company. The initial term of this agreement is eight years with automatic renewals of 1-year periods thereafter, subject
in each case to mutual termination rights in the event of material breach, insolvency or bankruptcy.
| • |
BMW SOW |
In connection with the JDMSA, in February 2018, we entered into the BMW SOW with
Magna Electronics Europe describing the services to be performed and deliverables to be provided to BMW, to equip Innoviz LiDAR products
into BMW’s Level 3 vehicle platform.
The parties have mutual termination rights, including in the event of a material
breach by the other party. Serial production volumes will ultimately be highly dependent on numerous factors and therefore are binding
only upon issuance of a purchase order.
In 2019, the parties signed an amendment to the BMW SOW, under which BMW advanced
certain payments due under the BMW SOW in consideration for development activities and delivery of early samples to Magna Electronics
Europe by the end of August 2019.
71
| • |
Magna Manufacturing MOU |
In October 2020, Innoviz signed a memorandum of understanding with Magna Tech (the
“Magna MOU”) for high-volume manufacturing of Innoviz LiDARs at Magna Tech’s automotive grade facility in Holly, Michigan.
The Magna MOU contemplates Magna Tech’s manufacturing of our LiDAR solution for the BMW program.
| • |
New Lease Agreement |
In November 1, 2021, Innoviz entered into the New Lease Agreement with Mifaley Tahanot
Ltd. pursuant to which our activity, including engineering, research and development, testing, product, sales and administrative functions,
as well as garage space, will be relocated to a new facility in Nitsba Park at Rosh HaAin, Israel in the summer of 2022. This new leased
space is approximately 16,350 square meters and will include office space and labs. In addition, the Company also intends to lease
a garage space in the office building.
D. Exchange Controls
There are currently no Israeli currency control restrictions on remittances of dividends
on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except
for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.
E. Taxation
Taxation and Government Programs
The following description is not intended to constitute a complete analysis of all
tax consequences relating to the acquisition, ownership and disposition of our ordinary shares and warrants. You should consult your own
tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws
of any state, local, foreign or other taxing jurisdiction.
Israeli Tax Considerations and Government
Programs1
The following is a brief summary of the material Israeli tax laws applicable to us,
and certain Israeli Government programs that benefit us. This section also contains a discussion of material Israeli tax consequences
concerning the ownership and disposition of our ordinary shares. This summary does not discuss all the aspects of Israeli tax law that
may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject
to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject
to special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not
yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts
will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli
law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences
described below.
General corporate tax structure in Israel. Israeli
companies are generally subject to corporate tax. In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative
Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years) which reduces the corporate income tax rate from 25% to
24% effective from January 1, 2017, and to 23% effective from January 1, 2018. However, the effective tax rate payable by a
company that derives income from an Approved Enterprise, a Preferred Enterprise, a Special Preferred Enterprise, a Beneficiary Enterprise
or a Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject
to the corporate tax rate.
72
Law for the Encouragement of Industry (Taxes), 5729-1969.
The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several
tax benefits for “Industrial Companies.” We believe that we currently qualify as an Industrial Company within the meaning
of the Industry Encouragement Law.
The Industry Encouragement Law defines an “Industrial Company” as an Israeli
resident-company, of which 90% or more of its income in any tax year, other than income from certain government loans, is derived from
an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition
under section 3A of the Ordinance. An “Industrial Enterprise” is defined as an enterprise whose principal activity in
a given tax year is industrial production.
Following are the main tax benefits available to Industrial Companies:
| • |
Amortization of the cost of purchased patent, rights to use a patent, and know-how, which are used for the development
or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised;
|
| • |
Under limited conditions, an election to file consolidated tax returns with controlled Israeli Industrial Companies; |
| • |
Expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering.
|
Eligibility for benefits under the Industry Encouragement Law is not contingent upon
approval of any governmental authority.
Tax benefits and grants for research and development.
Israeli tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year
in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:
| • |
The expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
| • |
The research and development must be for the promotion of the company; and |
| • |
The research and development is carried out by or on behalf of the company seeking such tax deduction. |
The amount of such deductible expenses is reduced by the sum of any funds received
through government grants for the finance of such scientific research and development projects. No deduction under these research and
development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation
rules of the Ordinance. Expenditures that are unqualified under the conditions above are deductible in equal amounts over three years.
From time to time we may apply to the Israel Innovation Authority for approval to
allow a tax deduction for all or most of research and development expenses during the year incurred. There can be no assurance that such
application will be accepted. If we will not be able to deduct research and development expenses during the year of the payment, we will
be able to deduct research and development expenses during a period of three years commencing in the year of the payment of such expenses.
Law for the Encouragement of Capital Investments,
5719-1959. The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides
certain incentives for capital investments in production facilities (or other eligible assets).
The Investment Law was significantly amended effective as of April 1, 2005 (the
“2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”) and as of January 1, 2017 (the “2017
Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior
to its revision by the 2005 Amendment remain in force, but any benefits granted subsequently are subject to the provisions of the amended
Investment Law. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the
Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior
to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect
instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment introduces new benefits
for Technological Enterprises, alongside the existing tax benefits.
Tax benefits under the 2011 amendment. The
2011 Amendment canceled the availability of the benefits granted to Industrial Companies under the Investment Law prior to 2011 and, instead,
introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such
terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated
in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled
and managed from Israel. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect
to its income derived by its Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development
zone, in which case the rate will be 10%. Under the 2011 Amendment, such corporate tax rate was reduced from 15% and 10%, respectively,
to 12.5% and 7%, respectively, in 2013, 16% and 9% respectively, in 2014, 2015 and 2016, and 16% and 7.5%, respectively, in 2017 and thereafter.
Income derived by a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law)
would be entitled, during a benefits period of 10 years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise
is located in a certain development zone.
73
Dividends distributed from income which is attributed to a “Preferred Enterprise”
will be subject to withholding tax at source at the following rates: (i) Israeli resident corporations – 0%, (although, if
such dividends are subsequently distributed to individuals or a non-Israeli company the below rates detailed in sub sections (ii)
and (iii) shall apply), (ii) Israeli resident individuals – 20%, and (iii) non-Israeli residents (individuals
and corporations)–25% or 30%, and subject to a reduced tax rate under the provisions of any applicable double tax treaty (subject
to the receipt in advance of a valid certificate from the Israel Tax Authority (“ITA”) allowing for a reduced tax rate–20%)
or a reduced tax rate under the provisions of any applicable double tax treaty.
The 2011 Amendment also provided transitional provisions to address companies already
enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, that unless an irrevocable
request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1,
2011, a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect,
provided that certain conditions are met.
We do not currently intend to implement the 2011 Amendment.
New tax benefits under the 2017 Amendment that became
effective on January 1, 2017. The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on
December 29, 2016, and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology
Enterprises,” as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.
The 2017 Amendment provides that a technology company satisfying certain conditions
will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that
qualifies as “Preferred Technology Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for
a Preferred Technology Enterprise located in development zone “A”. In addition, a Preferred Technology Company will enjoy
a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined
in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after
January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the Israel Innovation Authority.
The 2017 Amendment further provides that a technology company satisfying certain conditions
(group consolidated revenues of at least NIS 10 billion) will qualify as a “Special Preferred Technology Enterprise”
and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s
geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6%
on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted
Intangible Assets were either developed by the Special Preferred Enterprise or acquired from a foreign company on or after January 1,
2017, and the sale received prior approval from the Israel Innovation Authority. A Special Preferred Technology Enterprise that acquires
Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least
ten years, subject to certain approvals as specified in the Investment Law.
Dividends distributed to Israeli shareholders by a Preferred Technology Enterprise
or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are generally subject to withholding tax at source
at the rate of 20% (in the case of non-Israeli shareholders—subject to the receipt in advance of a valid certificate from the ITA
allowing for a reduced tax rate, 20% or such lower rate as may be provided in an applicable tax treaty). However, if such dividends are
paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals
or a non-Israeli company, withholding tax at a rate of 20% or such lower rate as may be provided in an applicable tax treaty, will apply).
If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli
company and other conditions are met, the withholding tax rate will be 4%.
We believe that we may be eligible to receive the tax benefits under the 2017 Amendment.
It should be noted that the proportion of income that may be considered Preferred Technology Income and enjoy the tax benefits described
above should be calculated according to the Nexus Formula, which is based on the proportion as that of qualifying expenditures in the
IP compared to overall expenditures.
74
Taxation of Our Shareholders
Capital gains taxes applicable to non-Israeli resident
shareholders. A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were
purchased after the company was listed for trading on a stock exchange outside of Israel should be exempt from Israeli tax unless, among
others requirements, the shares were held through a permanent establishment that the non-resident maintains in Israel. If not exempt,
a non-Israeli resident shareholder would generally be subject to tax on capital gain at the ordinary corporate tax rate (23% in 2021),
if generated by a company, or at the rate of 25%, if generated by an individual, or 30%, if generated by an individual who is a “substantial
shareholder” (as defined under the Tax Ordinance), at the time of sale or at any time during the preceding 12-month period (or if
the shareholder claims a deduction for interest and linkage differences expenses in connection with the purchase and holding of such shares).
A “substantial shareholder” is generally a person who, alone or together with such person’s relative or another person
who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control”
of the corporation. “Means of control” generally include, among others, the right to vote, receive profits, nominate a director
or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless
of the source of such right. Individual and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable
to business income (a corporate tax rate for a corporation (23% in 2022) and a marginal tax rate of up to 47% for an individual in 2022
(excluding excess tax as discussed below)) unless contrary provisions in a relevant tax treaty apply. Non-Israeli corporations will not
be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest more than 25% in such non-Israeli corporation
or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether
directly or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the
shares are deemed to be business income.
Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli
capital gains tax under the provisions of an applicable tax treaty. For example, under The Convention Between the Government of the United
States of America and the Government of the State of Israel with respect to Taxes on Income, as amended (the “United States-Israel
Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of
the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S. Israel
Tax Treaty (a “Treaty U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital gain
arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from
such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition
is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly,
shares representing 10% or more of the voting capital during any part of the 12 month period preceding the disposition, subject to certain
conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant
taxable year. In each case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable;
however, under the United States-Israel Tax Treaty, the taxpayer may be permitted to claim a credit for such taxes against the U.S. federal
income tax imposed with respect to such sale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign
tax credits. The United States-Israel Tax Treaty does not provide such credit against any U.S. state or local taxes.
In some instances where our shareholders may be liable for Israeli tax on the sale
of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may
be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of
sale (i.e., resident certificate or other documentation).
Taxation of non-Israeli shareholders on receipt of
dividends. Non-Israeli residents (either individuals or corporations) are generally subject to Israeli income tax on the receipt
of dividends paid on our ordinary shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty
between Israel and the shareholder’s country of residence (subject to the receipt in advance of a valid certificate from the ITA
allowing for a reduced tax rate). With respect to a person who is a “substantial shareholder” at the time of receiving the
dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. Such dividends are generally subject to Israeli
withholding tax at a rate of 25% so long as the shares are registered with a nominee company (whether the recipient is a substantial shareholder
or not) and, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 15% if the dividend
is distributed from income attributed to an Approved Enterprise or a Beneficiary Enterprise and 20% if the dividend is distributed from
income attributed to a Preferred Enterprise or Preferred Technology Enterprise or such lower rate as may be provided in an applicable
tax treaty. For example, under the United States Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends
paid to a holder of our ordinary shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax
on dividends, not generated by a Preferred Enterprise or Beneficiary Enterprise, that are paid to a United States corporation holding
10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous
tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends
and interest. Notwithstanding the foregoing, dividends distributed from income attributed to an Approved Enterprise, Beneficiary Enterprise
or Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a
shareholder that is a U.S. corporation, provided that the conditions related to 10% or more holding and to our gross income for the previous
year (as set forth in the previous sentence) is met. The aforementioned rates under the United States-Israel Tax Treaty would not apply
if the dividend income is derived through a permanent establishment of the U.S. resident in Israel. If the dividend is attributable partly
to income derived from an Approved Enterprise, Benefited Enterprise or Preferred Enterprise, and partly to other sources of income, the
withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will
designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
75
A non-Israeli resident who receives dividends from which tax was withheld is generally
exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income was not generated
from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect
to which a tax return is required to be filed, and (iii) the taxpayer is not obligated to pay excess tax (as further explained below).
Surtax. Subject to the provisions of an applicable
tax treaty, individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident)
are also subject to an additional tax at a rate of 3% on annual income (including, but not limited to, dividends, interest and capital
gain) exceeding NIS 647,640 for 2021, which amount is linked to the annual change in the Israeli consumer price index.
Estate and Gift Tax. Israeli law presently
does not impose estate or gift taxes.
United States Federal Income Taxation
The following is a description of the material U.S. federal income tax consequences
of the acquisition, ownership and disposition of our ordinary shares and warrants. This description addresses only the U.S. federal income
tax consequences to U.S. Holders (as defined below) that hold our ordinary shares or warrants as capital assets within the meaning of
Section 1221 of the Code, and that have the U.S. dollar as their functional currency. This discussion is based upon the Code, applicable
U.S. Treasury regulations, administrative pronouncements and judicial decisions, in each case as in effect on the date hereof, all of
which are subject to change (possibly with retroactive effect). No ruling has been or will be requested from the IRS regarding the tax
consequences of the acquisition, ownership or disposition of the ordinary shares and warrants, and there can be no assurance that the
IRS will agree with the discussion set out below. This summary does not address any U.S. tax consequences other than U.S. federal income
tax consequences (e.g., the estate and gift tax or the Medicare tax on net investment income) and does not address any state, local or
non-U.S. tax consequences.
This description does not address tax considerations applicable to holders that may
be subject to special tax rules, including, without limitation:
| • |
banks, financial institutions or insurance companies; |
| • |
real estate investment trusts or regulated investment companies; |
| • |
dealers or brokers; |
| • |
traders that elect to mark to market; |
| • |
tax exempt entities or organizations; |
| • |
“individual retirement accounts” and other tax deferred accounts; |
| • |
certain former citizens or long term residents of the United States; |
| • |
persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States;
|
| • |
persons that acquired our ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation for
the performance of services; |
76
| • |
persons holding our ordinary shares or warrants as part of a “hedging,” “integrated” or “conversion”
transaction or as a position in a “straddle” for U.S. federal income tax purposes; |
| • |
partnerships or other pass through entities and persons holding ordinary shares or warrants through partnerships or other pass through
entities; or |
| • |
holders that own directly, indirectly or through attribution 10% or more of the total voting power or value of all of our outstanding
shares. |
For purposes of this description, a “U.S. Holder” is a beneficial owner
of our ordinary shares or warrants that, for U.S. federal income tax purposes, is:
| • |
an individual who is a citizen or resident of the United States; |
| • |
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the
laws of the United States or any state thereof, including the District of Columbia; |
| • |
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| • |
a trust if such trust has validly elected to be treated as a United States person for U.S. federal income tax purposes or if (1) a
court within the United States is able to exercise primary supervision over its administration and (2) one or more United States
persons have the authority to control all of the substantial decisions of such trust. |
If a partnership (or any other entity or arrangement treated as a partnership for
U.S. federal income tax purposes) holds our ordinary shares or warrants, the tax treatment of a partner in such partnership will generally
depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor
as to the particular U.S. federal income tax consequences of acquiring, owning and disposing of our ordinary shares or warrants in its
particular circumstance.
You should consult your tax advisor with respect to the U.S. federal, state, local
and foreign tax consequences of acquiring, owning and disposing of our ordinary shares and warrants.
Distributions on Ordinary Shares
Subject to the discussion under “—Passive Foreign Investment Company considerations”
below, the gross amount of any distribution made to you with respect to our ordinary shares, before reduction for any Israeli taxes withheld
therefrom, generally will be includible in your income as dividend income on the date on which the dividends are actually or constructively
received, to the extent such distribution is paid out of our current or accumulated earnings and profits as determined under U.S. federal
income tax principles. To the extent that the amount of any distribution by us exceeds our current and accumulated earnings and profits
as determined under U.S. federal income tax principles, it will be treated first as a tax free return of your adjusted tax basis in our
ordinary shares and thereafter as capital gain. However, we do not expect to maintain calculations of our earnings and profits under U.S.
federal income tax principles and, therefore, you should expect that the entire amount of any distribution generally will be reported
as dividend income to you. If you are a non-corporate U.S. Holder you may qualify for the lower rates of taxation with respect to dividends
on ordinary shares applicable to long term capital gains (i.e., gains from the sale of capital assets held for more than one year), provided
that we are not a PFIC (as discussed below under “—Passive Foreign Investment Company considerations”) with respect
to you in our taxable year in which the dividend was paid or in the prior taxable year and certain other conditions are met, including
certain holding period requirements and the absence of certain risk reduction transactions. However, such dividends will not be eligible
for the dividends received deduction generally allowed to corporate U.S. Holders.
Dividends paid to you with respect to our ordinary shares generally will be treated
as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations,
Israeli tax withheld on dividends may be credited against your U.S. federal income tax liability or, at your election, be deducted from
your U.S. federal taxable income. Dividends that we distribute generally should constitute “passive category income” for purposes
of the foreign tax credit. A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy certain
minimum holding period requirements. The rules relating to the determination of the foreign tax credit are complex, and you should consult
your tax advisor to determine whether and to what extent you will be entitled to this credit.
77
Sale, Exchange or Other Disposition of Ordinary Shares and Warrants
Subject to the discussion under “Passive Foreign Investment Company considerations”
below, you generally will recognize gain or loss on the sale, exchange or other disposition of our ordinary shares or warrants equal to
the difference between the amount realized on such sale, exchange or other disposition and your adjusted tax basis in our ordinary shares
or warrants, and such gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange
or other disposition of ordinary shares or warrants is currently generally eligible for a preferential rate of taxation applicable to
capital gains, if your holding period for such ordinary shares or warrants exceeds one year (i.e., such gain is long term capital gain).
The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Any such gain or loss
that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.
Exercise or Lapse of a Warrant
Except as discussed below with respect to the cashless exercise of a warrant, a U.S.
Holder generally will not recognize gain or loss upon the acquisition of an ordinary share on the exercise of a warrant for cash. A U.S.
Holder’s tax basis in the ordinary shares received upon exercise of warrants generally should be an amount equal to the sum of the
U.S. Holder’s tax basis in the warrants exchanged therefor and the exercise price. The U.S. Holder’s holding period for ordinary
shares received upon exercise of warrants will begin on the date following the date of exercise (or possibly on the date of exercise)
of the warrants and will not include the period during which the U.S. Holder held the warrants. If a warrant is allowed to lapse unexercised,
a U.S. Holder generally will recognize a capital loss equal to such holder’s tax basis in the warrant.
The tax consequences of a cashless exercise of a warrant are not clear under current
U.S. federal income tax law. A cashless exercise may be tax-deferred, either because the exercise is not a realization event or because
the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either tax-deferred situation, a U.S. Holder’s
basis in the ordinary shares received would equal the U.S. Holder’s basis in the warrants exercised therefore. If the cashless exercise
is not treated as a realization event, a U.S. Holder’s holding period in the ordinary shares would be treated as commencing on the
date following the date of exercise (or possibly on the date of exercise) of the warrants. If the cashless exercise were treated as a
recapitalization, the holding period of the ordinary shares would include the holding period of the warrants exercised therefore.
It is also possible that a cashless exercise of a warrant could be treated in part
as a taxable exchange in which gain or loss would be recognized in the manner set forth above under “—Sale, exchange or other
disposition of ordinary shares and warrants.” In such event, a U.S. Holder could be deemed to have surrendered warrants equal to
the number of ordinary shares having an aggregate fair market value equal to the exercise price for the total number of warrants to be
exercised. The U.S. Holder would recognize capital gain or loss in an amount generally equal to the difference between (i) the fair market
value of the warrants deemed surrendered and (ii) the U.S. Holder’s tax basis in such warrants deemed surrendered. In this
case, a U.S. Holder’s tax basis in the ordinary shares received would equal the sum of (i) U.S. Holder’s tax basis in
the warrants deemed exercised and (ii) the exercise price of such warrants. A U.S. Holder’s holding period for the ordinary
shares received in such case generally would commence on the date following the date of exercise (or possibly on the date of exercise)
of the warrants.
Due to the absence of authority on the U.S. federal income tax treatment of a cashless
exercise of warrants, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above
would be adopted by the IRS or a court of law. Accordingly, U.S. Holders should consult their tax advisors regarding the tax consequences
of a cashless exercise of warrants.
Possible constructive distributions
The terms of each warrant provide for an adjustment to the number of ordinary shares
for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of
preventing dilution generally is not taxable. A U.S. Holder of a warrant would, however, be treated as receiving a constructive distribution
from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (for
instance, through an increase in the number of ordinary shares that would be obtained upon exercise of such warrant) as a result of a
distribution of cash or other property such as other securities to the holders of the ordinary shares which is taxable to such holders
under “—Distributions on ordinary shares” above. Such constructive distribution would be subject to tax as described
under that section in the same manner as if the U.S. Holder of such warrant received a cash distribution from us equal to the fair market
value of such increased interest.
Passive Foreign Investment Company Considerations
In general, a non-U.S. corporation will be classified as a “passive foreign
investment company” or “PFIC” for any taxable year if at least (i) 75% of its gross income is classified as “passive
income” or (ii) 50% of its gross assets (generally determined on the basis of a quarterly average) produce or are held for the production
of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and
securities transactions and the excess of gains over losses from the disposition of assets which produce passive income. For these purposes,
cash and other assets readily convertible into cash are considered passive assets, and goodwill and other unbooked intangibles are generally
taken into account. In making this determination, the non-U.S. corporation is treated as earning its proportionate share of any income
and owning its proportionate share of any assets of any corporation in which it directly or indirectly holds 25% or more (by value) of
the stock.
78
We believe we were not a PFIC for our taxable year ending December 31, 2021. However,
as discussed below, whether we were a PFIC for any given taxable year is based on a complex and factual determination and there is no
assurance that the IRS will agree with our determination. Based on the current and anticipated composition of our income, assets and operations,
and those of our subsidiaries, we cannot be sure as to whether we will be a PFIC for U.S. federal income tax purposes for our taxable
year ending December 31, 2022 or in future taxable years. However, because PFIC status is based on our income, assets and activities for
the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for our current taxable year or future
taxable years until after the close of the applicable taxable year. Moreover, we must determine our PFIC status annually based on tests
that are factual in nature, and our status in the current year and future years will depend on our income, assets and activities in each
of those years and, as a result, cannot be predicted with certainty as of the date hereof.
If we are determined to be a PFIC for any taxable year (or portion thereof) that is
included in the holding period of a U.S. Holder of our ordinary shares or warrants and, in the case of our ordinary shares, the U.S. Holder
did not make either a timely qualified electing fund (“QEF”) election or a mark-to-market election for our first taxable year
as a PFIC in which the U.S. Holder held (or was deemed to hold) ordinary shares, as described below, such holder generally will be subject
to special rules with respect to:
| • |
any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or warrants; and |
| • |
any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable
year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the
ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for
the ordinary shares). |
Under these rules,
| • |
the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the
ordinary shares and warrants; |
| • |
the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess
distribution, or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we are
a PFIC, will be taxed as ordinary income; |
| • |
the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed
at the highest tax rate in effect for that year and applicable to the U.S. Holder; and |
| • |
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such
other taxable year of the U.S. Holder. |
In general, if we are determined to be a PFIC, a U.S. Holder may avoid the PFIC tax
consequences described above with respect to our ordinary shares (but not our warrants) by making a timely QEF election (if eligible to
do so) to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as
ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with
which our taxable year ends.
A U.S. Holder generally may make a separate election to defer the payment of taxes
on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge. A U.S.
Holder may not make a QEF election with respect to its warrants. As a result, if a U.S. Holder sells or otherwise disposes of such warrants
(other than upon exercise of such warrants), under currently proposed Treasury regulations, any gain recognized generally may be subject
to the special tax and interest charge rules treating the gain as an excess distribution, as described above, if we were a PFIC at any
time during the period the U.S. Holder held the warrants. If a U.S. Holder that exercises such warrants properly makes a QEF election
with respect to the newly acquired ordinary shares (or has previously made a QEF election with respect to our ordinary shares), the QEF
election will apply to the newly acquired ordinary shares, but the adverse tax consequences relating to PFIC shares, adjusted to take
into account the current income inclusions resulting from the QEF election, will continue to apply with respect to such newly acquired
ordinary shares (which generally will be deemed to have a holding period for purposes of the PFIC rules that includes the period the U.S.
Holder held the warrants), unless the U.S. Holder makes a purging election. One type of purging election creates a deemed sale of such
shares at their fair market value. Any gain recognized in this deemed sale will be subject to the special tax and interest charge rules
treating the gain as an excess distribution, as described above. As a result of this election, the U.S. Holder will have additional basis
and, solely for purposes of the PFIC rules, a new holding period in the ordinary shares acquired upon the exercise of the warrants. U.S.
Holders are urged to consult their tax advisors as to the application of the rules governing purging elections to their particular circumstances
(including a potential separate “deemed dividend” purging election that may be available if we are a “controlled foreign
corporation” for U.S. federal income tax purposes).
79
The QEF election is made on a shareholder-by-shareholder basis and, once made, can
be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching a completed IRS Form 8621 (Information
Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC
Annual Information Statement, to a timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive
QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or
with the consent of the IRS. U.S. Holders should consult their tax advisors regarding the availability and tax consequences of a retroactive
QEF election under their particular circumstances.
In order to comply with the requirements of a QEF election, a U.S. Holder must receive
a PFIC Annual Information Statement from us. There can be no assurance, however, that we will timely provide such information for
the current taxable year or subsequent taxable years. The failure to provide such information on an annual basis could prevent a U.S.
Holder from making a QEF election or result in the invalidation or termination of a U.S. Holder’s prior QEF election.
If a U.S. Holder has made a QEF election with respect to our ordinary shares, and
the special tax and interest charge rules do not apply to such shares (because of a timely QEF election for our first taxable year as
a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares or a purge of the PFIC taint pursuant to a purging election,
as described above), any gain recognized on the sale of our ordinary shares generally will be taxable as capital gain and no interest
charge will be imposed under the PFIC rules. As discussed above, U.S. Holders of a QEF are currently taxed on their pro rata shares of
its earnings and profits, whether or not distributed. In such case, a subsequent distribution of such earnings and profits that were previously
included in income generally should not be taxable as a dividend to such U.S. Holders. The tax basis of a U.S. Holder’s shares in
a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under
the above rules.
Although a determination as to our PFIC status will be made annually, an initial determination
that our company is a PFIC will generally apply for subsequent years to a U.S. Holder who held ordinary shares or warrants while we were
a PFIC, whether or not we meet the test for PFIC status in those subsequent years. A U.S. Holder who makes the QEF election discussed
above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) ordinary shares, however, will not be
subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be
subject to the QEF inclusion regime with respect to such ordinary shares for any taxable year of us that ends within or with a taxable
year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable
years in which we are a PFIC and the U.S. Holder holds (or is deemed to hold) ordinary shares, the PFIC rules discussed above will continue
to apply to such ordinary shares unless the U.S. Holder makes a purging election, as described above, and pays the tax and interest charge
with respect to the gain inherent in such shares attributable to the pre-QEF election period.
Alternatively, if a U.S. Holder, at the close of its taxable year, owns shares in
a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable
year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder
holds (or is deemed to hold) ordinary shares and for which we are determined to be a PFIC, such U.S. Holder generally will not be subject
to the PFIC rules described above in respect to its ordinary shares. Instead, in general, the U.S. Holder will include as ordinary income
each year the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in
its ordinary shares. Such a U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted
basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent
of the net amount of previously included income as a result of the mark-to-market election). Such U.S. Holder’s basis in its ordinary
shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition
of the ordinary shares will be treated as ordinary income. Currently, a mark-to-market election may not be made with respect to our warrants.
The mark-to-market election is available only for stock that is regularly traded on
a national securities exchange that is registered with the SEC, including Nasdaq, or on a foreign exchange or market that the IRS determines
has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. U.S. Holders should consult
their tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our ordinary shares under
their particular circumstances.
80
Certain of the PFIC rules may impact U.S. Holders with respect to equity interests
in subsidiaries and other entities which we may hold, directly or indirectly, that are PFICs (collectively, “Lower-Tier PFICs”).
There can be no assurance, however, that we do not own, or will not in the future acquire, an interest in a subsidiary or other entity
that is or would be treated as a Lower-Tier PFIC. If we own any interests in a Lower-Tier PFIC, a U.S. Holder generally must make a separate
QEF election for each Lower-Tier PFIC, subject to our providing the relevant tax information for each Lower-Tier PFIC on an annual basis.
U.S. Holders should consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
A U.S. Holder of a PFIC may be required to file an IRS Form 8621 on an annual basis
in certain circumstances which include, but are not limited to, if a U.S. Holder recognizes gain on a disposition of such ordinary shares
or receives distributions with respect to such ordinary shares. U.S. Holders should consult their tax advisors regarding any reporting
requirements that may apply to them if we are a PFIC.
The rules dealing with PFICs and with the QEF and mark-to-market elections are very
complex, are unclear in certain respects, and are affected by various factors in addition to those described above. Accordingly, U.S.
Holders of ordinary shares or warrants should consult their tax advisors concerning the application of the PFIC rules to our ordinary
shares or warrants under their particular circumstances.
Backup Withholding Tax and Certain Information Reporting Requirements
Distribution payments on, and proceeds paid from the sale or other taxable disposition
of, the ordinary shares and warrants may be subject to information reporting to the IRS. In addition, a U.S. Holder may be subject to
backup withholding on payments received in connection with distribution payments and proceeds from the sale or other taxable disposition
of ordinary shares or warrants made within the United States or through certain U.S. related financial intermediaries.
Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct
taxpayer identification number, provides other required certification and otherwise complies with the applicable requirements of the backup
withholding rules or that is otherwise exempt from backup withholding (and, when required, demonstrates such exemption). Backup withholding
is not an additional tax. Rather, any amount withheld under the backup withholding rules will be creditable or refundable against the
U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Foreign Asset Reporting
Certain U.S. Holders are required to report their holdings of certain foreign financial
assets, including equity of foreign entities, if the aggregate value of all of these assets exceeds certain threshold amounts, by filing
IRS Form 8938 with their federal income tax return. Our ordinary shares and warrants are expected to constitute foreign financial assets
subject to these requirements unless the ordinary shares or warrants are held in an account at certain financial institutions. U.S. Holders
are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and
disposition of our ordinary shares and warrants and the significant penalties for non-compliance.
The above description is not intended to constitute a complete analysis of all tax
consequences relating to acquisition, ownership and disposition of our ordinary shares and warrants. You should consult your tax advisor
concerning the tax consequences of your particular situation.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the informational requirements of the Exchange Act. Accordingly,
we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K.
As a foreign private issuer, we are exempt under the Exchange Act from, among other
things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are
exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we
are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act. We are required to make certain filings with the SEC. The SEC maintains
an internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with
the SEC. The address of that site is www.sec.gov.
Our ordinary shares and warrants are quoted on Nasdaq. Information about us is also
available on our website at www.innoviz.tech. Our website and the information contained therein or connected thereto will not be deemed
to be incorporated into this annual report and you should not rely on any such information in making your decision whether to purchase
our ordinary shares or warrants.
81
I. Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures
About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk
represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market
risk exposure is primarily a result of foreign currency exchange rates and interest rates, which are discussed in detail below.
Interest Rate Risk
As of December 31, 2021, and 2020, our cash equivalents consisted of interest-bearing
short-term deposits and marketable securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by
changes in the general level of interest of the Bank of Israel, and U.S. Federal Reserve interest rates. Due to the short-term nature
and the low-risk profile of our interest-bearing accounts, an immediate 10% change in interest rates would not have
a material effect on the fair market value of our cash and cash equivalents and short-term restricted bank deposits or on our financial
position or results of operations. We are not currently exposed to significant market risk related to changes in foreign currency exchange
rates; however, we have contracted with and may continue to contract with vendors located in China, Europe and Israel. Our operations
may be subject to fluctuations in foreign currency exchange rates in the future.
We do not believe that inflation had a material effect on our business, financial
condition or results of operations during the years ended December 31, 2021 and 2020.
Foreign Currency Risk
Our financial results are reported in U.S. dollars, and changes in the exchange rate
between USD and local currencies in those countries in which we operate (primarily the ILS) may affect the results of our operations.
In 2021, approximately 97% of our revenues were denominated in U.S dollars. The USD cost of our operations in countries other than the
United States, may be negatively influenced by revaluation of the USD against other currencies.
During 2021, the value of the USD decreased as compared to the value of the ILS by
approximately 3.3%. Our most significant foreign currency exposures are related to our operations in Israel. The company hedges its anticipated
exposure by exchanging USD in to ILS in amounts sufficient to fund 3-4 months of operations, and monitors foreign currency exchange rates
over time.
Item 12. Description of
Securities Other than Equity Securities
Not applicable.
82
PART II
Item 13. Defaults, Dividend Arrearages
and Delinquencies
None.
Item 14. Material Modifications to
the Rights of Security Holders and Use of Proceeds
None.
Item 15. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) that are designed to ensure that information
required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls
and procedures were effective to accomplish their objectives at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining adequate internal control
over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment
of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated
Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our
management concluded that, as of December 31, 2021, our internal control over financial reporting was effective.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our registered public
accounting firm due to a transition period established by rules of the SEC for newly public companies. In addition, we are an emerging
growth company and, accordingly, are exempt from the requirement to provide such a report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting (as such term
is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) that occurred during the period covered by this Annual
Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16A. Audit Committee Financial
Expert
Our board of directors has determined that Mr. Dan Falk satisfies the “independence”
requirements set forth in Rule 10A-3 under the Exchange Act. Our board of directors has also determined that Mr. Dan Falk is
considered an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Exchange Act.
Item 16B. Code of Ethics
We have adopted a Code of Ethics and Conduct that applies to all our employees, officers
and directors, including our principal executive, principal financial and principal accounting officers. Our Code of Ethics and Conduct
addresses, among other things, competition and fair dealing, conflicts of interest, financial matters and external reporting, company
funds and assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the Code of Ethics
and Conduct, employee misconduct, conflicts of interest or other violations. Our Code of Ethics and Conduct is intended to meet the definition
of “code of ethics” under Item 16B of 20-F under the Exchange Act.
We will disclose on our website any amendment to, or waiver from, a provision of our
Code of Ethics and Conduct that applies to our directors or executive officers to the extent required under the rules of the SEC or Nasdaq.
Our Code of Ethics and Conduct is available on our website at www.innoviz-tech.com. The information contained on or through our website,
or any other website referred to herein, is not incorporated by reference in this Annual Report. You may request a copy of our Code of
Ethics and Conduct, free of charge, by writing to us at the following address: investors@innoviz-tech.com.
83
Item 16C. Principal Accounting Fees
and Services
The consolidated financial statements of Innoviz Technologies Ltd. as of December 31,
2020 and 2021, and for each the two years in the period ended December 31, 2021, appearing in this Annual Report have been audited
by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm,
as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority
of such firm as experts in accounting and auditing. The current address of Kost Forer Gabbay & Kasierer is 144 Menachem Begin
Road, Building A, Tel Aviv 6492101, Israel.
The table below sets out the total amount of services rendered to us by Kost Forer
Gabbay & Kasierer, a member of Ernst & Young Global, for services performed in the years ended December 31, 2020
and 2021, and breaks down these amounts by category of service:
|
|
2021
|
2020
|
||||||
|
|
(in thousands) |
|||||||
|
Audit Fees
|
$ |
1,445 |
$ |
500 |
||||
|
Audit Related Fees
|
— |
— |
||||||
|
Tax Fees
|
45 |
180 |
||||||
|
All Other Fees
|
— |
— |
||||||
|
Total
|
$ |
1,490 |
$ |
680 |
||||
Audit Fees
Audit fees for the years ended December 31, 2021, and 2020 include fees for the
audit of our annual financial statements. This category also includes services that the independent accountant generally provides, such
as consents and assistance with and review of documents filed with the SEC as well as certain fees related to the audit in connection
with our business combination transaction.
Audit Related Fees
None.
Tax Fees
Tax fees for the years ended December 31, 2021 and 2020 were related to ongoing
tax advisory, tax compliance and tax planning services.
All Other Fees
None.
Pre-Approval Policies and Procedures
The advance approval of the Audit Committee or members thereof, to whom approval authority
has been delegated, is required for all audit and non-audit services provided by our auditors.
All services provided by our auditors are approved in advance by either the Audit
Committee or members thereof, to whom authority has been delegated, in accordance with the Audit Committee’s pre-approval policy.
84
Item 16D. Exemptions from the
Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity
Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s
Certifying Accountant
None.
Item 16G. Corporate Governance
We are a “foreign private issuer” (as such term is defined in Rule 3b-4
under the Exchange Act) and our ordinary shares are listed on the Nasdaq Capital Market. We believe the following to be the significant
differences between our corporate governance practices and those applicable to U.S. companies under the Nasdaq listing standards. Under
the Nasdaq Stock Market rules, listed companies that are foreign private issuers are permitted to follow home country practice in lieu
of the corporate governance provisions specified by the Nasdaq Stock Market with limited exceptions. We rely on this “home country
practice exemption” with respect to the quorum requirement for shareholder meetings. As permitted under the Companies Law, pursuant
to our Articles, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person,
by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting power of our shares (and
in an adjourned meeting, with some exceptions, any number of shareholders), instead of 33 1/3% of the issued share capital required under
the Nasdaq Stock Market corporate governance rules.
We otherwise comply with and intend to continue to comply with the rules generally
applicable to U.S. domestic companies listed on the Nasdaq Stock Market. We may in the future, however, decide to use other foreign
private issuer exemptions with respect to some or all of the other Nasdaq Stock Market listing rules. Following our home country governance
practices may provide less protection than is accorded to investors under the Nasdaq Stock Market listing rules applicable to domestic
issuers.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Not applicable.
85
PART III
Item 17. Financial Statements
We have provided financial statements pursuant to Item 18.
Item 18. Financial Statements
The audited consolidated financial statements as required under Item 18 are attached
hereto starting on page F-1 of this Annual Report. The audit report of Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global, an independent registered public accounting firm, is included herein preceding the audited consolidated financial statements.
Item 19. Exhibits
List all exhibits filed as part of the registration statement or annual report, including
exhibits incorporated by reference.
|
|
|
Incorporation by Reference
| ||||
|
Exhibit No. |
Description |
Form |
File No. |
Exhibit
No. |
Filing Date |
Filed /
Furnished |
|
1.1 |
20-F |
001-40310 |
1.1 |
April 21, 2021 |
| |
|
2.1 |
20-F |
001-40310 |
2.1 |
April 21, 2021 |
||
|
4.1† |
F-4 |
333-252023 |
10.12 |
February 12, 2021 |
| |
|
4.2† |
F-4 |
333-252023 |
10.13 |
February 12, 2021 |
| |
|
4.3† |
F-4 |
333-252023 |
10.10 |
January 11, 2021 |
| |
|
4.4† |
|
|
|
|
* | |
|
4.5†† |
F-4 |
333-252023 |
10.15 |
January 11, 2021 |
| |
|
4.6†† |
F-4 |
333-252023 |
10.16 |
January 11, 2021 |
| |
|
4.7†† |
F-4 |
333-252023 |
10.17 |
January 11, 2021 |
| |
|
4.8†† |
F-4 |
333-252023 |
10.18 |
January 11, 2021 |
| |
|
4.9†† |
F-4 |
333-252023 |
10.19 |
January 11, 2021 |
| |
|
4.10 |
F-4 |
333-252023 |
4.4 |
January 11, 2021 |
| |
|
4.11 |
20-F |
001-40310 |
4.11 |
April 21, 2021 |
||
|
4.12 |
F-4 |
333-252023 |
4.8 |
January 11, 2021 |
| |
|
4.13 |
F-4 |
333-252023 |
10.7 |
January 11, 2021 |
| |
|
4.14 |
|
|
* | |||
|
8.1 |
|
|
|
* | ||
|
12.1 |
|
|
|
|
* | |
|
12.2 |
|
|
|
|
* | |
|
13.1 |
|
|
|
|
** | |
|
13.2 |
|
|
|
|
** | |
| 15.1 |
* | |||||
|
101.INS |
XBRL Instance Document. |
|
|
|
|
* |
|
101.SCH |
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
* |
|
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase
Document. |
|
|
|
|
* |
|
101.DEF |
XBRL Taxonomy Definition Linkbase Document.
|
|
|
|
|
* |
|
101.LAB |
XBRL Taxonomy Extension Label Linkbase
Document. |
|
|
|
|
* |
|
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase
Document |
|
|
|
|
* |
* Filed herewith.
** Furnished herewith.
† Indicates management contract or compensatory plan or arrangement.
†† Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit.
Certain agreements filed as exhibits to this Annual Report contain representations
and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit
of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties
to such agreements and that may not be reflected in such agreements. In addition, these representations and warranties may be intended
as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements
of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of
facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date
of such agreements.
86
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| INNOVIZ TECHNOLOGIES LTD. | |||
|
Date: March 30, 2022 |
By: |
/s/ Eldar Cegla |
|
| Name: Eldar Cegla | |||
| Title: Chief Financial Officer | |||
87
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
INDEX
| Page | ||
|
Report of Independent Registered Public Accounting Firm (PCAOB ID
|
F-2 | |
| F-3 - F-4 | ||
| F-5 | ||
| F-6 | ||
| F-7 - F- 8 | ||
| F-9 - F-43 |
- - - - - - - - - - -
F - 1
|
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
To the Shareholders and the Board of Directors of
INNOVIZ TECHNOLOGIES LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Innoviz Technologies Ltd. and its subsidiaries (the “Company”), as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in convertible preferred shares and shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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 the Company’s 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 misstatements, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audits we are required to obtain an understanding of internal controls over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.
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/
A Member of Ernst & Young Global
We have served as the Company’s auditor since 2016.
March 30, 2022
F - 2
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands (except share and per share data)
| December 31, | ||||||||
| 2021 | 2020 | |||||||
|
ASSETS |
||||||||
|
CURRENT ASSETS: |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Short term deposits |
||||||||
| Marketable securities | ||||||||
|
Short-term restricted cash |
||||||||
|
Trade receivables |
||||||||
|
Inventory |
||||||||
|
Prepaid expenses and other current assets |
||||||||
|
Total current assets |
||||||||
|
LONG-TERM ASSETS: |
||||||||
| Marketable securities | ||||||||
|
Restricted deposits |
||||||||
|
Other long-term assets |
||||||||
|
Property and equipment, net |
||||||||
|
Total long-term assets |
||||||||
|
Total assets |
$ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 3
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
| December 31, | ||||||||
| 2021 | 2020 | |||||||
|
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ DEFICIT
|
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Trade payables
|
$ | $ | ||||||
|
Advances from customers and deferred revenues
|
||||||||
|
Employees and payroll accruals
|
||||||||
|
Accrued expenses and other current liabilities
|
||||||||
| Short-term loan and current maturities | ||||||||
|
Total current liabilities
|
||||||||
|
LONG-TERM LIABILITIES:
|
||||||||
|
Loan, net of current maturities
|
||||||||
|
Long-term advances from customers and deferred revenues
|
||||||||
| Other long-term liabilities | ||||||||
| Warrants liability | ||||||||
|
Total long-term liabilities
|
||||||||
|
CONVERTIBLE PREFERRED SHARES:
|
||||||||
|
Convertible Preferred A Shares of
|
||||||||
|
Series B Convertible Preferred Shares of
|
||||||||
|
Series B-1 Convertible Preferred Shares of
|
||||||||
|
Series C Convertible Preferred Shares of
|
||||||||
|
Series C-1 Convertible Preferred Shares of
|
||||||||
|
Total convertible preferred shares
|
||||||||
|
SHAREHOLDERS’ EQUITY (DEFICIT):
|
||||||||
|
Ordinary Shares of
|
||||||||
|
Additional paid-in capital
|
||||||||
|
Accumulated deficit
|
( |
) | ( |
) | ||||
|
Total shareholders’ equity (deficit)
|
( |
) | ||||||
|
Total liabilities, convertible preferred shares and shareholders’ equity (deficit)
|
$ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements
F - 4
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands (except share and per share data)
| Year ended December 31, |
||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
|
Revenues (2020 revenues net of issuance of Preferred C-1 Shares in the amount of $ |
$ | $ | ( |
) | $ | |||||||
|
Cost of revenues |
( |
) | ( |
) | ( |
) | ||||||
|
Gross loss |
( |
( |
) | ( |
) | |||||||
|
Operating expenses: |
||||||||||||
|
Research and development |
||||||||||||
|
Selling and marketing |
||||||||||||
|
General and administrative |
||||||||||||
|
Total operating expenses |
||||||||||||
|
Operating loss |
( |
) | ( |
) | ( |
) | ||||||
|
Financial income ,net |
||||||||||||
|
Loss before taxes on income |
( |
) | ( |
) | ( |
) | ||||||
|
Taxes on income |
( |
) | ( |
) | ( |
) | ||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Basic and diluted net loss per ordinary share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share |
||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands (except share and per share data)
| Convertible Preferred Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Preferred Shares A |
Convertible Preferred Shares B |
Convertible Preferred Shares B-1 |
Convertible Preferred Shares C |
Convertible Preferred Shares C-1 |
Total | Ordinary Shares | Additional Paid-in |
Accumulated | Total Shareholders’ Equity |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Number | Amount | Amount | Number | Amount | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance as of January 1, 2019 |
$ | $ | $ | $ | $ | $ | $ |
|
$ | $ | ( |
) |
$ | ( |
) |
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Issuance of Convertible Preferred Shares C, net of issuance cost. |
- | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Exercise of shares options |
- |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Share-based compensation |
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net Loss |
- | - | - | - | - | - | - | - | ( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2019 |
$ | $ | $ | $ | $ | $ | $ |
|
$ | $ | ( |
) |
$ | ( |
) |
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Issuance of Convertible Preferred Shares C-1, net of issuance cost |
- | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Exercise of shares options |
- |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Share-based compensation |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net Loss |
- | - | - | - | - | - | - | ( |
) |
( |
) |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2020 |
$ | $ | $ | $ | $ | $ | $ |
|
$ | $ | ( |
) |
$ | ( |
) |
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Issuance of Convertible Preferred Shares C-1 |
- | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
conversion of convertible preferred shares (see Note 1d) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ( |
) |
( |
) |
( |
) |
|
|||||||||||||||||||||||||||||||||||||||||
|
Issuance of common shares in connection with PIPE offering, net of issuance costs (see Note 1d) |
- |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Transactions, net of issuance cost (see Note 1d) |
- |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Reclassification of warrants liability to equity |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Exercise of shares options |
- |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Vesting of RSUs |
- | - | - | - | - | - | - | - | - | - | - |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Share-based compensation |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Net Loss |
- | - | - | - | - | - | - | ( |
) |
( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2021 |
$ | $ | $ | $ | $ | $ | $ |
|
$ | $ |
( |
) | $ |
|
||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands (except share and per share data)
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Cash Flows from Operating Activities:
|
||||||||||||
|
Net loss
|
$
|
( |
)
|
$
|
( |
)
|
$
|
( |
)
|
|||
|
Adjustments required to reconcile net loss to net cash used in Operating Activities:
|
||||||||||||
|
Depreciation and amortization
|
||||||||||||
|
Remeasurement of warrants liability
|
( |
)
|
||||||||||
|
Issuance cost allocated to warrants liability
|
|
|
|
|||||||||
|
Increase in accrued interest and exchange rate on short-term and long-term deposits
|
( |
)
|
||||||||||
|
Remeasurement of marketable securities
|
|
|
|
|||||||||
|
Share-based compensation
|
||||||||||||
|
Realization of investment in non-marketable equity securities |
( |
) | ||||||||||
|
Capital gain, net
|
|
( |
)
|
|||||||||
|
Share-based payment to a customer
|
|
|
|
|||||||||
|
Interest and foreign exchange gain
|
( |
)
|
( |
)
|
( |
)
|
||||||
|
Decrease (increase) in prepaid expenses and other assets
|
( |
)
|
||||||||||
|
Decrease (increase) in trade receivables
|
( |
)
|
( |
)
|
||||||||
|
Increase in inventories
|
( |
)
|
( |
)
|
( |
)
|
||||||
|
Increase (decrease) in trade payables
|
( |
)
|
( |
)
|
||||||||
|
Increase (decrease) in accrued expenses and other liabilities
|
( |
)
|
( |
)
|
||||||||
|
Increase in employees and payroll accruals
|
||||||||||||
|
Increase (decrease) in advances from customers and deferred revenues
|
( |
)
|
||||||||||
|
Net cash used in operating activities
|
( |
)
|
( |
)
|
( |
)
|
||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Purchase of property and equipment
|
( |
)
|
( |
)
|
( |
)
|
||||||
|
Proceeds from sales of property and equipment
|
||||||||||||
|
Withdrawal of (investment in) short term deposits, net
|
( |
)
|
( |
)
|
||||||||
|
Decrease (increase) in restricted deposits
|
( |
)
|
||||||||||
|
Investment in marketable securities
|
( |
)
|
||||||||||
|
Proceeds from sale of non-marketable securities
|
|
|
|
|||||||||
|
Net cash provided by (used in) investing activities
|
$
|
( |
)
|
$
|
$
|
( |
)
|
|||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands (except share and per share data)
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Cash received from Transactions, net of issuance cost
|
|
|
|
|||||||||
|
Issuance of ordinary shares, net of issuance cost
|
|
|
|
|||||||||
|
Proceeds from issuance of convertible preferred shares, net of issuance cost
|
|
|
|
|||||||||
|
Proceeds from exercise of options
|
|
|
|
|||||||||
|
Proceeds from loans
|
|
|
|
|||||||||
|
Repayment of loans
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net cash provided by financing activities
|
|
|
|
|||||||||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
|
|||||||||
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
(
|
)
|
(
|
)
|
|
|||||||
|
Cash, cash equivalents and restricted cash at beginning of the year
|
|
|
|
|||||||||
|
Cash, cash equivalents and restricted cash at end of the year
|
$
|
|
$
|
|
$
|
|
||||||
|
Supplementary disclosure of cash flows activities:
|
||||||||||||
|
(1) Cash received during the year for:
|
||||||||||||
|
Interest
|
$
|
|
$
|
|
$
|
|
||||||
|
(2) Cash paid during the year for:
|
||||||||||||
|
Interest
|
$
|
|
$
|
|
$
|
|
||||||
|
Income taxes
|
$
|
|
$
|
|
$
|
|
||||||
|
(3) Non-cash transactions:
|
||||||||||||
|
Non-marketable equity securities in consideration for property and equipment
|
$
|
|
$
|
|
$
|
|
||||||
|
Reclassification from property and equipment, net to inventories
|
$ |
|
$ |
|
$ |
|
||||||
|
Conversion of preferred shares to ordinary shares
|
$ |
|
$ |
|
$ |
|
||||||
|
Purchase of property and equipment
|
$ |
|
$ |
|
$ |
|
||||||
|
Reclassification of warrants liability to equity
|
$ |
|
$ |
|
$ |
|
||||||
|
Issuance cost paid in equity
|
$
|
|
$
|
|
$
|
|
||||||
|
(4) Cash, cash equivalents and restricted cash at end of the year
|
||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Short-term restricted deposits
|
|
|
|
|||||||||
|
Restricted deposits
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
| NOTE 1:- |
GENERAL |
| a. |
Innoviz Technologies Ltd. and its subsidiaries (the “Company” or “Innoviz”) is a leading provider of high-performance, solid-state LiDAR and perception solutions that bring enhanced vision and superior performance to enable safe autonomous driving at a mass scale. The Company provides a complete and comprehensive solution for OEMs and Tier-1 partners that are developing and marketing autonomous driving vehicles to the passenger car and other relevant markets, such as robotaxis, shuttles and trucking. Innoviz’ unique LiDAR and perception solutions, which feature technological breakthroughs across core components, have propelled Innoviz to the first Level 3 LiDAR Automotive series production contract in its industry. In addition, Innoviz’ solutions can enable safe autonomy for other industries, including drones, robotics and mapping. |
| b. |
The Company was incorporated on January 18, 2016, under the laws of the state of Israel. |
| c. |
On February 17, 2021, Innoviz effected a |
|
| d. |
On December 10, 2020, the Company entered into definitive agreements in connection with a merger (the “Transactions”) with Collective Growth Corporation (“Collective Growth”), a special purpose acquisition company, that resulted in Collective Growth becoming a wholly owned subsidiary of the Company upon the consummation of the Transactions on April 5, 2021 (the “Closing Date”).
The Transactions were accounted for as a recapitalization in accordance with accounting principles generally accepted in the United States (“GAAP”).
Upon closing of the Transactions,
In connection with the Transactions (i)
In connection with the Transactions, the Company incurred direct and incremental costs of $
|
F - 9
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 1:- |
GENERAL (Cont.) |
|
In addition, on the Closing Date, in connection with the consummation of the Transactions (i) the Company issued Perception Capital Partners LLC (“Perception”) an aggregate of
In addition, in the event that the earnout Target is reached during the Earnout Period (both “Target” and “Earnout Period” as defined in the Business Combination Agreement), then: (A) Perception shall also be entitled to receive up to Additionally, on the Closing Date, the Company completed the sale of Ordinary Shares to certain accredited investors (“Investors”), at a price per share of $ Upon closing of the Transactions, the Company has adopted, amended and restated articles of association to align such organizational documents with consistent with those of a publicly held company and has become a publicly traded company. |
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES |
|
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). |
| a. |
Transactions: |
|
|
The Transactions were accounted for as a recapitalization as pre-combination Innoviz was determined to be the accounting acquirer under Financial Accounting Standards Board (FASB)’s Accounting Standards Codification Topic 805, Business Combinations (ASC 805). In connection with the recapitalization, outstanding share capital of the pre-combination Innoviz was converted into Company Ordinary Shares, representing a recapitalization, and the net assets of the Company remained at historical cost, with no goodwill or intangible assets recorded.
The pre-combination Innoviz was deemed to be the predecessor of the Company, and the consolidated assets and liabilities and results of operations prior to the Closing Date are those of the pre-combination Innoviz. |
F - 10
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Ordinary Share Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrants’ specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, are indexed to the Company’s own share and whether the warrants are eligible for equity classification under ASC 815-40. This assessment is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.
Warrants that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Warrants that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value through earnings at each balance sheet date thereafter.
Upon the closing of the Transactions,
Each warrant entitles the holder to purchase one Company Ordinary Share at a price of $
Conversely, since the public warrants do not include provisions that provide for potential changes to the settlement amounts that are dependent on the characteristics of the holder of the warrant and since the Company has only one class of shares outstanding (after the Transactions), the public warrants are indexed to the Company's own share and qualify for equity classification under ASC Section 815-40.
As of December 31, 2021, |
F - 11
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| b. |
Use of estimates:
|
|
|
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
|
||
|
Significant items subject to such estimates and assumptions include inventory reserves, warranty provision, valuation allowance for deferred tax assets, share-based compensation including the fair value of the Company’s ordinary shares before the company became public, fair value of warrants liability and useful lives of property, plant, and equipment. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.
The novel coronavirus (“COVID-19”) pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on the Company’s customers. The Company considered the impact of COVID-19 on the estimates and assumptions and determined that there were no material adverse impacts on the consolidated financial statements for the period ended December 31, 2021. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
|
| c. |
Financial statements in U.S. dollars:
|
|
|
A substantial portion of the Company’s financing activities, including equity transactions and cash investments, are incurred in U.S. dollars. The Company’s management believes that the U.S. dollar is the currency of the primary economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the U.S. dollar.
|
||
|
A subsidiary’s functional currency is the currency of the primary economic environment in which the subsidiary operates; normally, that is the currency of the environment in which a subsidiary primarily generates and expends cash. In making the determination of the appropriate functional currency for a subsidiary, the Company considers cash flow indicators, local market indicators, financing indicators and the subsidiary’s relationship with both the parent company and other subsidiaries. For subsidiaries that are primarily a direct and integral component or extension of the parent entity’s operations, the U.S. dollar is the functional currency.
|
||
|
The Company has determined the functional currency of its foreign subsidiaries is the U.S. Dollar. The foreign operations are considered a direct and integral part or extension of the Company’s operations. The day-to-day operations of the foreign subsidiary are dependent on the economic environment of the U.S. Dollar.
|
F - 12
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are remeasured into U.S. dollars in accordance with Statement of the Accounting Standard Codification (“ASC”) No. 830 “Foreign Currency Matters” (“ASC No. 830”). All transaction gains and losses of the remeasured monetary balance sheet items are reflected in the statements of operations as financial income or expenses as appropriate.
|
| d. |
Principles of consolidation:
|
|
|
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
|
| e. |
Cash and Cash Equivalents and Restricted Cash:
|
|
|
The Company considers all highly liquid short-term deposits with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in short term deposits. Restricted cash consists of long-term deposits that serves as collateral for a credit card agreement and lease agreements at the Company’s financial institutions.
|
| f. |
Inventories:
|
|
|
Inventories are stated at the lower of cost or estimated net realizable value.
Cost of inventories is determined as follows:
Raw materials and work in process - based on weighted average cost. Finished goods - based on standard cost method or actual cost method, as applicable.
The Company charges cost of revenues 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, manufacturing yields, demand forecasts, historical revenue and assumptions about future demand and market conditions.
|
F - 13
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| g. |
Property and equipment, net:
|
|
|
Property and equipment are stated at cost, net of accumulated depreciation and impairment. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related assets, at the following annual rates:
|
||
|
%
|
|
|
Computers and software
|
|
|
Office furniture and equipment
|
|
|
Electronic equipment
|
|
|
Leasehold improvements
|
Over the shorter of the related lease
period or the useful life of the assets
|
| h. |
Impairment of long-lived assets:
|
|
|
Long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” a (“ASC 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment exists when the carrying value of the asset exceeds the aggregate undiscounted cash flows expected to be generated by the asset. The impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. During the years ended December 31, 2021, 2020 and 2019, the Company recorded impairment losses in the amount of $
|
| i. |
Revenue recognition:
|
|
|
The Company follows the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which applies to all contracts with customers. Under Topic 606, revenues are recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine the appropriate revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps:
|
|
• |
identify the contract(s) with a customer; |
|
| • |
identify the performance obligations in the contract;
|
| • |
determine the transaction price;
|
| • |
allocate the transaction price to the performance obligations in the contract; and
|
| • |
recognize revenue when (or as) the entity satisfies a performance obligation.
|
F - 14
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.
The Company evaluates each performance obligation to determine if it is satisfied at a point in time or over time.
Nature of Products and Services
The Company derives its revenues mainly from sales of LiDAR sensors and critical components. Revenue from LiDAR sensors and critical components is recognized at a point in time when the control of the goods is transferred to the customer, generally upon delivery.
The Company also provides application engineering services for its customers that are not part of a long-term production arrangement. Application engineering services revenue is recognized at a point in time or over time depending, among other considerations, on whether the Company has an enforceable right to payment for performance completed to date. Services to certain customers may require substantive customer acceptance due to performance acceptance criteria that is considered more than a formality. For these services, revenue is recognized upon customer acceptance. The Company did not recognize revenue related to application engineering services during the years ended December 31, 2021, 2020 and 2019 as acceptance criteria were not met.
In addition, during the year ended December 31, 2021, the Company received an upfront payment of $
The Company applies the practical expedient and does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
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.
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.
Deferred Revenue
Deferred revenues, which represent a contract liability, include amounts paid by customers not yet recognized as revenues.
On December 7, 2017, the Company entered into an agreement with a tier-1 partner (“Partner”) to provide application engineering services. Revenue related to the agreement are deferred and recognized upon customer acceptance. As of December 31, 2021 and 2020, the Company recorded deferred revenue of $3.5
F - 15
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Contract liabilities consist of deferred revenue and customer advanced payments. Deferred revenue includes billings in excess of revenue recognized related to product sales and is recognized as revenue when the Company performs under the contract. The long-term portion of deferred revenue, mostly related to obligations under development agreement with OEMs and Partner, is classified as non-current contract liabilities and is included in Long-term advances from customers and deferred revenues in the Company’s consolidated balance sheets. Customer advanced payments represent required customer payments in advance of product shipments according to customer’s payment terms. Customer advance payments are recognized as revenue when control of the performance obligation is transferred to the customer.
Contract liabilities consisted of the following as of December 31, 2021 and 2020:
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Contract Liabilities, Current
|
||||||||
|
Deferred Revenue
|
$
|
$
|
||||||
|
Customer Advance Payment
|
||||||||
|
Total
|
$
|
$
|
||||||
|
Contract Liabilities, Long-Term
|
||||||||
|
Deferred Revenue
|
$
|
$
|
||||||
|
Total Contract Liabilities
|
$
|
$
|
||||||
During the year ended December 31, 2021, the Company recognized $199 that was included in deferred revenues balance at December 31, 2020.
During the year ended December 31, 2020, the Company recognized $283 that was included in deferred revenues balance at December 31, 2019.
Remaining Performance Obligation
The Company’s remaining performance obligations are comprised of product and engineering services revenues not yet delivered. As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $12.2 million, which the Company expects to recognize as revenues.
F - 16
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Revenues (Reduction of Revenues) related to Magna (see also Note 16)
On October 12, 2020, the Company signed a Memorandum of Understanding (the "MOU") with Magna International Inc. (“Magna") one of its shareholders and a tier-1 partner, to manufacture and sell an Optical Module to an OEM customer based on the Company’s design. According to the MOU, in order to allow the manufacture of the Optical Module, the Company will supply to Magna critical components and certain machinery which is required to meet specifications and requirements as agreed by the parties. The Company identified two performance obligations in the agreement – the first, delivering a production line to Magna, consisting of the agreed upon machinery and design; the second performance obligation is the Company's obligation to enhance the production capacity of the production line.
In 2021, the Company has transferred control over the production line to Magna and completed the first performance obligation. As a result, revenue in an amount of $1,059 was recognized.
Revenue from future enhancements will be recognized when such enhancements are provided to Magna. As of December 31, 2021, these enhancements were not provided, as such long-term deferred revenue in the amount of $244 was recorded.
In connection with the MOU, on December 10, 2020, the Company issued to Magna 1,755,966 Preferred C-1 Shares of no-par value, for additional consideration.
Furthermore, on December 10, 2020, the Company signed a performance-based warrant agreement (the "Warrant") with Magna, pursuant to which, upon the completion of certain milestones by Magna, the Company will issue to Magna warrants to receive up to: (i) 7,023,865 Ordinary Shares, in the event the Company will be registered as a public company before the issuance of the warrants, or (ii) 4,939,922 Preferred C-1 Shares in the event that the Company is not registered as a public company before the issuance of the warrants. The warrants will expire at the earlier of (i) March 31, 2023, or (ii) the date of the consummation of a change of control by the Company. As of December 31, 2021, the achievement of the performance condition was not probable.
Share-based payment awards granted to a customer are measured and classified in accordance with ASC 606 and reflected as a reduction of the transaction price and, therefore, of revenue unless the consideration is in exchange for a distinct good or service. Since the issuance of the Preferred C-1 Shares were not for distinct services, the fair value of which was not established, the Company reflected this amount as a reduction of net revenue.
F - 17
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| j. |
Warranty provision:
|
|
|
The Company provides standard product warranties, for its pre-SOP products, for period of up to twelve months, at no extra charge, that covers the compliance of the products with agreed-upon specifications. Standard warranties are considered to be assurance type warranties and are not accounted for as separate performance obligations. A provision is recorded for estimated warranty costs based on the Company's experience.
|
||
|
Changes in the warranty provision, presented in Accrued expenses and other current liabilities, was as follow:
|
|
Year ended
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Balance at beginning of the year
|
$
|
$
|
||||||
|
Warranty provision
|
||||||||
|
Warranty claims settled
|
( |
)
|
( |
)
|
||||
|
Balance at end of the year
|
$
|
$
|
||||||
| k. |
Research and development expenses:
|
|
|
Research and development costs include personnel-related expenses associated with the Company’s engineering personnel responsible for the design, development and testing of its products. Such costs related to software development are included in research and development expense until the technological feasibility is reached, which for the Company's software products, is generally shortly before the products are released to production. Research and development costs are charged to the consolidated statements of operations as incurred.
|
| l. |
Patent costs:
|
|
|
Legal and related patent costs are charged to general and administrative expenses in the consolidated statements of operations as incurred, since their realization is uncertain. |
F - 18
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| m. |
Share-based compensation:
|
|
|
The Company accounts for share-based compensation in accordance with ASC No. 718, “Compensation—Stock Compensation” (“ASC No. 718”). ASC No. 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the award is recognized as an expense over the requisite service period. |
||
|
The Company selected the Black-Scholes option pricing model as the most appropriate model for determining the fair value for its share options awards, whereas the fair value of restricted share units is based on the closing market value of the underlying shares at the date of grant. The option pricing model requires several assumptions, of which the most significant are the expected share price volatility and the expected option term. The company recognizes forfeitures of equity-based awards as they occur. For graded vesting awards subject to a service condition only, the Company recognizes compensation expenses based on the straight-line method over the requisite service period.
A Monte-Carlo simulation model was used to determine the grant date fair value of the Company’s Management earn-out shares by simulating the future share price daily up to the expiration date of the award. For each simulation path we determined the value of the award. The grant date fair value of this award is the average of the values determined by each simulation. The simulation was also used to derive the requisite service period.
|
| n. |
Accrued post-employment benefit:
|
|
|
Severance pay
|
||
|
The Israeli Severance Pay Law, 1963 ("Severance Pay Law"), specifies that employees are entitled to severance payment, following the termination of their employment. Under the Severance Pay Law, the severance payment is calculated as one-month salary for each year of employment, or a portion thereof.
|
||
|
The Company's liability for all of its Israeli employees is covered by the provisions of Section 14 of the Severance Pay Law ("Section 14"). Under Section 14 employees are entitled to monthly deposits, at a rate of
|
||
|
Severance pay expenses under Section 14 for the years ended December 31, 2021, 2020 and 2019, amounted to $
|
F - 19
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
401(k) profit sharing plans
|
||
|
The Company has a 401(k) retirement savings plan for its employees in the U.S. Each eligible employee may elect to contribute a portion of the employee’s compensation to the plan.
The U.S. subsidiary matches
|
| o. |
Income taxes:
|
|
|
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes” (ASC 740"). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value, if it is more likely than not that a portion or all of the deferred tax assets will not be realized. |
||
|
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. Accounting guidance addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements, under which a Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
|
| p. |
Concentration of credit risk:
|
|
|
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, trade receivables, marketable securities, short-term deposits and restricted deposits.
|
||
|
Trade receivable of the Company are mainly derived from customers located globally. The Company mitigates its credit risks by performing credit evaluations of its customers’ financial conditions and requires customer advance payments in certain circumstances. The Company generally does not require collateral.
The Company invests in marketable securities with an average credit rating of “A” and a maturity of up to three years. The Company’s investment policy is not to invest more than |
F - 20
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| q. |
Trade receivables:
|
|
|
Trade receivables are recorded at the invoiced amount and do not bear interest. Trade receivables are periodically assessed for 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, the current receivables aging and current payment patterns. The allowance of doubtful accounts was not material for the periods presented.
|
r. Investment in marketable securities:
The Company's investment in marketable securities consists of corporate and government debentures with quoted OTC market prices. All the Company's marketable securities are classified as trading securities pursuant to ASC 320, “Investments - Debt Securities”. Marketable securities are stated at fair value as determined by the closing price of each security at balance sheet date. Unrealized gains and losses on these securities are included in financial income, net in the consolidated statements of operations.
| s. |
Fair value of financial instruments:
|
|
|
The Company applies ASC No. 820, “Fair Value Measurements and Disclosures” (“ASC No. 820”), with respect to fair value measurements of all financial assets and liabilities which are required to be measured at fair value. |
|
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
|
|
Level 1 - |
Unadjusted quoted prices in active markets that are accessible on the measurement date for identical, unrestricted assets or liabilities; |
||
| Level 2 - |
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
|
| Level 3 - |
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
|
|
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
|
F - 21
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
The carrying values of cash and cash equivalents, short-term and restricted deposits, trade receivables, prepaid expenses and other current assets, trade payables, employees and payroll accruals and accrued expenses and other current liabilities approximate fair values due to the short-term maturities of these instruments.
|
| t. |
Loss per share:
|
|
|
The Company computes basic loss per share in accordance with ASC Topic260, “Earnings per Share” by dividing the net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted loss per share is computed by considering the potential dilution that could occur upon the exercise of options granted under share based compensation plans using the treasury stock method.
|
||
|
Prior to the Transactions, the Company computed net loss per share using the two-class method required for participating securities. The two-class method requires income available to common shareholders for the period to be allocated between common shares and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company considered its preferred shares to be participating securities as the holders of the preferred shares were entitled to dividends that would have been distributed to the holders of common shares, on a pro-rata basis assuming conversion of all preferred shares into common shares. These participating securities did not contractually require the holders of such shares to participate in the Company’s losses. As such, net loss for the periods presented was not allocated to the Company’s participating securities.
|
| u. |
Other comprehensive loss:
|
||
|
The Company has no components of comprehensive loss other than net loss. Thus, comprehensive loss is the same as net loss for the periods presented.
|
F - 22
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| v. |
Recently adopted accounting pronouncement:
|
||
|
On January 1, 2021, the Company early adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature and a beneficial conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, the amendments in this update remove certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. The adoption of ASU No. 2020-06 did not have a material impact on the consolidated financial statements. |
| w. |
Recently issued accounting pronouncements not yet adopted:
As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflects this election. |
|||
|
|
||||
| 1. |
In February 2016, the FASB issued ASU 2016-02 - Leases, requiring the recognition of lease assets and liabilities on the balance sheet. The standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12 months. The standard is effective for public entities for fiscal years beginning after December 15, 2018, and for the Company for fiscal years beginning after December 15, 2020. In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which defers the effective date of ASU 2016-02 for non-public entities to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company intends to adopt the ASU on January 1, 2022, and interim periods within.
The Company expects adoption of the ASU to have a material impact on its consolidated balance sheet, which will result in the recognition of ROU assets and lease liabilities of approximately $ |
|||
F - 23
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| 2. |
In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments— Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.
|
| 3. |
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing a variety of exceptions within the framework of ASC 740. These exceptions include the exception to the incremental approach for intra-period tax allocation in the event of a loss from continuing operations and income or a gain from other items (such as other comprehensive income), and the exception to using general methodology for the interim period tax accounting for year-to-date losses that exceed anticipated losses. The guidance will be effective for the Company beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements and related disclosures. |
| 4. |
In November 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. Retrospective application of the guidance is permitted. The amendments in this ASU are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. The adoption of ASU No. 2021-10 is not expected to have a material impact on the consolidated financial statements. |
| 5. |
In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which clarifies and reduces diversity in accounting for modifications or exchanges of freestanding equity-written call options that remain equity classified after modifications or exchanges based on the substance of the transactions. The amendments in this ASU are effective for all entities for fiscal years beginning after December
15, 2021, including interim periods within those fiscal years. The adoption of ASU No. 2021-04 is not expected to have a material impact on the consolidated financial statements. |
F - 24
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 3:- |
INVENTORIES
|
| a. |
Inventories are comprised of the following: |
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Raw materials
|
$
|
$
|
||||||
|
Work in process
|
||||||||
|
Finished goods (1)
|
||||||||
|
|
||||||||
|
$
|
$
|
|||||||
(1) finished goods as of December 31, 2020 includes machinery to be sold to Magna (for further information see Note 2i).
| b. |
During the years ended December 31, 2021, 2020 and 2019, the Company recorded inventory write offs in the amount of $
|
|
NOTE 4:-
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
|
Prepaid expenses and other current assets consist of the following:
|
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Government authorities
|
$
|
$
|
||||||
|
Prepaid expenses
|
||||||||
|
Other receivables
|
||||||||
|
Others
|
|
|
||||||
|
|
||||||||
|
$
|
$
|
|||||||
F - 25
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 5:- |
PROPERTY AND EQUIPMENT, NET |
| a. |
Property and equipment, net consist of the following: |
| December 31, | ||||||||
| 2021 | 2020 | |||||||
|
Cost: |
||||||||
|
Computers and software |
$ |
$ | ||||||
|
Office furniture and equipment |
||||||||
|
Electronic equipment |
||||||||
|
Leasehold improvements |
||||||||
|
|
|
|
|
|||||
|
|
|
|
|
|||||
|
Accumulated depreciation |
||||||||
|
|
|
|
|
|||||
| $ | $ | |||||||
|
|
|
|
|
|||||
| b. |
Depreciation expenses for the years ended December 31, 2021, 2020 and 2019, amounted to $ |
|
NOTE 6:- |
FAIR VALUE MEASUREMENTS |
|
As for December 31, 2020, the Company had no recurring fair value measurements in the scope of ASC 820.
The below table sets forth the Company’s assets and liabilities that were measured at fair value as of December 31, 2021 by level within the fair value hierarchy.
|
|
December 31, 2021
|
||||||||||||||||
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Assets:
|
||||||||||||||||
|
Marketable securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
||||||||||||||||
|
Total financial assets
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Liabilities:
|
||||||||||||||||
|
Warrants (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Total financial liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
F - 26
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 6:- |
FAIR VALUE MEASUREMENTS (Cont.) |
| (1) |
As part of the Transactions (see Note 1d), the Company assumed a derivative warrants liability related to previously issued private placement warrants in connection with Collective Growth’s initial public offering. The Company utilizes a Black-Scholes option pricing model to estimate the fair value of the private placement warrants which is considered a Level 3 fair value measurement. The warrants are measured at each reporting period, with changes in fair value recognized in financing income, net. The change in the fair value of the derivative private warrants liability for the year ended December 31, 2021 is summarized as follows:
|
|
Year ended
December 31,
2021
|
||||
|
Balance as of December 31, 2020
|
$
|
|
||
|
Private warrants liability assumed in Transactions
|
|
|||
|
Change in fair value of warrants liability
|
(
|
)
|
||
|
Reclassification of warrants liability to equity
|
(
|
)
|
||
|
Balance as of December 31, 2021
|
$
|
|
||
The estimated fair value of the private placement warrant derivative liabilities is determined using Level 3 inputs. Inherent in a Black-Scholes option pricing model are assumptions related to expected share price volatility, expiration, risk-free interest rate and dividend yield. The Company estimates the volatility of its private warrants based on implied volatility of the publicly traded warrants and the historical volatility of the company’s share price and of a selected peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve as of the valuation date for a maturity similar to the expiration of the warrants. The dividend yield is based on the historical rate, which the Company anticipates remaining at zero. The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
|
As of
|
||||||||
|
April 5,
|
December 31,
|
|||||||
|
2021
|
2021
|
|||||||
|
Fair vale determined per warrant
|
|
$ |
|
$ |
||||
|
Expected volatility
|
|
|
||||||
|
Expected annual dividend yield
|
|
|
||||||
|
Expected term (years)
|
||||||||
|
Risk-free rate
|
|
|
||||||
F - 27
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 7:- |
OTHER LONG-TERM ASSETS |
|
Other long-term assets consisted of the following: |
|
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Investment in non-marketable securities
|
$ |
|
$ |
|
||||
|
Deferred transaction costs
|
|
|
||||||
|
|
||||||||
|
$
|
|
$
|
|
|||||
| a. |
In November 2021, the Company sold its equity investment in a privately held company with no readily determinable fair value which was accounted for under the measurement alternative pursuant to ASC 320, for $
|
| b. |
Deferred transactions costs consist primarily of accounting, legal, and other fees related to the Transactions. The Company capitalized $
|
| NOTE 8:- |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
|
Accrued expenses and other current liabilities consisted of the following: |
| December 31, | ||||||||
| 2021 | 2020 | |||||||
|
Warranty provision |
$ | $ | ||||||
|
Accrued expenses |
||||||||
|
Fixed assets creditors |
||||||||
|
Others |
||||||||
| $ | $ | |||||||
F - 28
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 9:- |
COMMITMENTS AND CONTINGENCIES
|
| a. |
Operating lease commitments:
|
Lease of a new Office Building
On November 1, 2021 the Company entered into a lease agreement (“New Lease Agreement”) of an office building located in Rosh Ha’ayen, Israel (“Premises”). The New Lease Agreement included a right to use office spaces and related facilities.
The lease term is for 67 months, starting from July 1, 2022. However, the Company was given access to the Premises starting from November 2021 in order to allow it to construct leasehold improvements. The Company has an option to renew the lease for additional 60 months, which will be exercised automatically unless the Company informs the lessor in advance.
The lease payments are linked to the Israeli consumer price index (CPI).
Other lease agreements
In May 2018 the Company entered into a lease agreement of a facility for its office (“Current Lease Agreement”). As a result of the New Lease Agreement, the Company informed the lessor it does not intend to extend the Current Lease Agreement beyond November 2021. In November 2021 the parties agreed to modify the existing lease agreement for an additional period, ending in August 2022. As part of the Current Lease Agreement, the Company received a loan from the owner of the Company’s office in Israel in the amount of NIS 9,700 thousand (approximately $3,119 ) to be used for constructing lease hold improvements. The loan bears an annual interest of 3.58 % and is to be repaid in 120 fixed monthly installments of NIS 98,500 (approximately $32 ). As part of Company’s decision not to extend the lease, the loan was repaid in full in 2021.
Financial expenses with respect to loan for the years ended December 31, 2021, 2020 and 2019, amounted to $94 , $89 and $94 , respectively.
The Company also leases additional office spaces, mainly in USA.
The minimum future lease payments under the operating leases agreements subsequent to December 31, 2021, are as follows (including relevant option periods):
|
Year ended December 31,
|
Total
|
|||
|
2022
|
$
|
|||
|
2023
|
||||
|
2024
|
||||
|
2025
|
||||
|
2026 and thereafter
|
||||
|
|
||||
|
$
|
||||
Total rent expenses for the years ended December 31, 2021, 2020 and 2019 amounted to $1,819 , $956 and $777 , respectively.
F - 29
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 9:- |
COMMITMENTS AND CONTINGENCIES (Cont.)
|
| b. |
Legal proceedings:
|
The Company is currently not part, as plaintiff or defendant, to any legal proceedings that, individually or in the aggregate, are expected by the Company to have a material effect on the Company's business, financial position, results of operations or cash flows. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. These accruals are reviewed at least yearly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a matter.
| NOTE 10:- |
CONVERTIBLE PREFERRED SHARES |
| a. |
Convertible Shares as of December 31, 2021 and 2020, are comprised of the following: |
|
December 31,
|
||||||||||||||||||||||||
|
Authorized
|
Issued and outstanding
|
Liquidation preference
|
||||||||||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
2021
|
2020
|
|||||||||||||||||||
|
Number of shares
|
||||||||||||||||||||||||
|
Preferred A Shares of no- par value (1)
|
$
|
|||||||||||||||||||||||
|
Preferred B Shares of no- par value (1)
|
$
|
|||||||||||||||||||||||
|
Preferred B-1 Shares of no- par value (1)
|
$
|
|||||||||||||||||||||||
|
Preferred C Shares of no- par value (1)
|
$
|
|||||||||||||||||||||||
|
Preferred C-1 Shares of no- par value (1)
|
$
|
|||||||||||||||||||||||
| (1) |
Preferred shares A, B, B-1, C, and C-1 (collectively “Preferred Shares”) conferred upon their holders the same rights conferred by the Company’s legacy Ordinary Shares (for further information see Note 12a in addition to the following rights:
|
|
Conversion rights - the holders of the Preferred Shares were entitled, at their option, to convert the Preferred Shares into Ordinary Shares by dividing the original issue price for such series of Preferred Share by the conversion price for such series of Preferred Share that was in effect at the time of conversion. The initial conversion price would have been the respective original issue price for such series of Preferred Share. The original issue price was $
|
F - 30
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
CONVERTIBLE PREFERRED SHARES (Cont.) |
|
Dividend - the holders of the Preferred Shares were entitled to a dividend only when and if declared by the Company’s board of directors. The Company was not to declare, pay or set aside any dividends on any other class or series of capital share unless the Company's outstanding Preferred Shares first received, or simultaneously received, a dividend on each outstanding Preferred Share. All dividends declared by the Company and legally available for distribution among the shareholders, would have been distributed in the following order of preference: |
|
I. |
First, the holders of the Preferred C and C-1 Shares (collectively “Preferred C Shares”) were entitled to receive, prior to any distribution to any other shareholder, on a proportional basis an amount equal to the original issue price for such series of Preferred Share, plus interest at a rate of
|
|
II. |
Second, the holders of the Preferred B and B-1 Shares (collectively “Preferred B Shares”) were entitled to receive, in preference to each inferior class, on a proportional basis an amount calculated in the same manner as described above with respect to the Preferred C Shares.
|
|
III. |
Third, the holders of the Preferred A Shares were entitled to receive, in preference to each inferior class, an amount calculated in the same manner as described above with respect to the Preferred C Shares.
|
F - 31
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
CONVERTIBLE PREFERRED SHARES (Cont.) |
|
IV. |
Following the full payment of the entire preferred preference to the holders of Preferred Shares, the holders of the Ordinary Shares were entitled to receive the remaining distribution proceeds (if any), pro rata based on the number of Ordinary Shares held by each such holder.
|
|
No dividends have been declared till the Transactions occurred. |
|
|
Liquidation preference - in the event of “Distribution Event”, as defined in the Company's Articles of Association in effect at the time (the “AOA”), which included liquidation (including Deemed Liquidation, events such as change in control, license of substantially all of the company’s intellectual property, etc.), dissolution or winding up of the Company, all assets or proceeds of the Company legally available for distributing among the shareholders, would have been distributed among the shareholders in the same order and calculated in the same manner as described above with respect to dividend distribution. |
|
Redemption - according to the AOA, certain holders of the Preferred C and Preferred C-1 Shares were entitled to redemption rights in the event that the Company failed to hold a board meeting within a calendar year or complete an IPO or liquidation event within the 6-year anniversary of February 2019. The AOA did not provide redemption rights to the holders of Preferred A, B and B-1 Shares. |
| b. |
On February 24, 2019, the Company closed its initial Series C Preferred Share financing round. Pursuant to the Series C Preferred Share Purchase Agreement, the Company issued
|
|
During 2019, the Company issued additional
|
|
|
c. |
On October 1, 2020, the Company closed its initial Series C-1 Preferred Share financing round with new and existing investors, according to which the Company issued
|
F - 32
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
CONVERTIBLE PREFERRED SHARES (Cont.) |
|
The transaction documents also conferred upon certain of holders of Preferred C-1 Shares the following rights: |
| 1. |
In the event that: (i) definitive agreement in connection with transaction between the Company and a SPAC, had not been signed prior to December 31, 2020, or (ii) the closing of the Transactions contemplated under such aforementioned definitive agreements shall not have taken place prior to April 30, 2021, the Company were to issue additional Preferred C-1 Shares for no additional consideration, such that after the issuance of the additional Preferred C-1 Shares, the aggregate number of Preferred C-1 Shares held by such investors were to equal to the aggregate investment made by the investor divided by price per share as defined in the transaction documents (for the Preferred C-1 Shares actually issued see Note 10e). |
| 2. | In the event the closing of the Transactions contemplated under such aforementioned definitive agreements shall have taken place prior to April 30, 2021, with pre-money valuation of the Company lower than $ |
|
The Company concluded that the rights above are embedded within the Preferred C-1 Shares and are not eligible to be bifurcated as an embedded derivative. As such, the Company accounted for the embedded rights and the Preferred C-1 Shares as a single unit of account. |
|
|
On December 10, 2020, the Company issued to Magna |
|
| d. |
On February 17, 2021, the Company effected a one-for- |
| e. |
Immediately prior to the closing of the Transactions, and in accordance with the Preferred C-1 transaction documents, the Company issued to certain shareholders |
| f. | Upon closing of the Transactions, all issued and outstanding Preferred Shares were automatically converted into Ordinary Shares of no-par value. As such, the Company reclassified the preferred shares carrying amount into permanent equity (for further information see Note 1d). |
| g. |
Classification:
|
|
Since a deemed liquidation event is not solely within the control of the Company, the Preferred Shares were classified outside of permanent equity as temporary equity pursuant to ASC 480-10-S99. |
|
|
As of December 31, 2020, the Company did not adjust the carrying values of the Preferred Shares to the deemed liquidation values of such shares since a liquidation event was not probable. |
F - 33
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 11:- |
SHAREHOLDERS' EQUITY
|
| a. |
Composition of share capital:
|
|
December 31,
|
||||||||||||||||
|
2021
|
2020
|
|||||||||||||||
|
Authorized
|
Issued and outstanding
|
Authorized
|
Issued and outstanding
|
|||||||||||||
|
Number of Shares
|
Number of Shares
|
|||||||||||||||
|
Ordinary Shares of no-par value (1)
|
|
|
|
|
||||||||||||
| (1) |
|
| b. |
On February 17, 2021, the Company effected a one-for-
|
|
|
| NOTE 12:- |
SHARE-BASED COMPENSATION |
| a. |
Share incentive plans: |
|
|
In 2016 the Company's Board of Directors adopted an Employee Shares Incentive Plan (the “2016 Plan”). Under the 2016 Plan, options may be granted to employees, officers, consultants and directors of the Company and its subsidiaries. |
||
|
The 2016 plan was terminated in 2021, although option awards outstanding as of that date will continue in full force in accordance with the terms under which they were granted. |
||
|
In 2021 The Company’s Board of Directors adopted a new Share Incentive Plan (the “2021 Plan”). According to the 2021 Plan, share awards, options to purchase shares or Restricted Share Units (RSUs) may be granted to employees, directors, consultants and other service providers of the Company or any affiliate of the Company. |
|
Under the 2021 Plan, as of December 31, 2021, a total of
|
F - 34
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 12:- |
SHARE-BASED COMPENSATION (Cont.) |
| b. |
Options granted:
|
|
|
The fair value of the Company’s share options granted for the years ended December 31, 2021, 2020 and 2019, was estimated using the following weighted average assumptions:
|
|
Year ended December 31,
|
||||||
|
2021
|
2020
|
2019
|
||||
|
Expected term, in years
|
||||||
|
Expected volatility
|
|
|||||
|
Risk-Free interest rate
|
|
|
|
|||
|
Expected dividend yield
|
||||||
|
A summary of option balances as of December 31, 2021, and changes during the year then ended are as follows: |
|
Number of options
|
Weighted-average exercise price
|
Weighted- average remaining contractual term
(in years)
|
Aggregate intrinsic value
|
|||||||||||||
|
Outstanding at January 1, 2021
|
$
|
$
|
||||||||||||||
|
Granted
|
$
|
|||||||||||||||
|
Exercised
|
( |
)
|
$
|
$
|
||||||||||||
|
Forfeited
|
( |
)
|
$
|
|||||||||||||
|
Expired
|
( |
)
|
$
|
|||||||||||||
|
Outstanding at December 31, 2021
|
$
|
$
|
||||||||||||||
|
Exercisable at December 31, 2021
|
$
|
$
|
||||||||||||||
The weighted-average grant date fair value of options granted during the years ended December 31, 2021, 2020 and 2019, was $4.75 , $3.01 and $1.58 , respectively.
Exercise price - before the Company became public in April 2021, in determining the exercise prices for share options granted, the Board of Directors considered the fair value of Ordinary Shares as of each grant date. The fair value of Ordinary Shares underlying the share options was determined by the Board of Directors at each award grant date based upon a variety of factors, including the results obtained from independent third-party valuations, the Company’s financial position and historical financial performance, the status of technological developments within the Company’s products, the composition and ability of the current management team, an evaluation or benchmark of the Company’s competition, the current business climate in the marketplace, the illiquid nature of the Ordinary Shares, arm’s length sales of the Company’s capital share, the effect of the rights and preferences of the Preferred Shares, and the prospects of a liquidity event, among others. From the date the Company became public, the fair value of each Ordinary Share was based on the closing price of the Company’s publicly traded Ordinary Shares as reported on the date of the grant.
F - 35
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 12:- |
SHARE-BASED COMPENSATION (Cont.) |
Expected volatility - as the Company became public in April 2021, there is not sufficient historical volatility for the expected term of the share options. Therefore, the Company uses an average historical share price volatility based on an analysis of reported data for a peer group of comparable publicly traded companies which were selected based upon industry similarities.
Expected term (years) - represents the period that the Company’s options granted are expected to be outstanding. There is not sufficient historical share exercise data to calculate the expected term of the share options. Therefore, the Company elected to utilize the simplified method to value option grants. Under this approach, the weighted-average expected life is presumed to be the average of the shortest vesting term and the contractual term of the option.
Risk-free interest rate - the Company determined the risk-free interest rate by using a weighted-average equivalent to the expected term based on the U.S. Treasury yield curve in effect as of the date of grant.
Expected dividend yield - since inception, the Company has not paid and does not anticipate paying any dividends in the foreseeable future. Thus, the Company used 0% as its expected dividend yield.
| c. |
RSUs granted: |
|
|
A summary of RSUs activity for the year ended December 31, 2021, is as follows: |
|
Number of
shares
|
Weighted average grant date fair value per share
|
|||||||
|
Unvested as of December 31, 2020
|
$
|
|||||||
|
Granted
|
$
|
|||||||
|
Vested
|
(
|
)
|
$
|
|
||||
|
Forfeited
|
( |
)
|
$
|
|||||
|
Unvested as of December 31, 2021
|
|
$
|
|
|||||
F - 36
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 12:- |
SHARE-BASED COMPENSATION (Cont.) |
| d. |
Management earn-out shares: |
|
|
The fair value of the Management earn-out shares granted to officers on May 12, 2021 was estimated using the Monte Carlo pricing model under the following assumptions: |
|
May 12, 2021
|
||||
|
Share Price
|
|
$ |
||
|
Expected volatility
|
|
|||
|
Risk-Free interest rate
|
|
|||
|
Threshold
|
|
$ |
||
|
Term (years)
|
|
|||
Share price - the share price was based on the closing price of the share on day of grant.
Expected volatility - the Company estimates the volatility of the earn-out shares based on the historical volatility of the company’s share price and of a selected peer companies that matches the expected remaining life of the earn-out shares.
Risk-free interest rate - the Company determined the risk-free interest rate by using a weighted average equivalent to the expected term based on the U.S. Treasury yield curve in effect as of the date of grant.
Threshold - the Company determined the earnout share price as part of the Transactions agreement.
| e. |
The total share-based compensation expense related to all of the Company's equity-based awards, which include options and RSUs recognized in the Company's consolidated statements of operations are as follow: |
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Research and development
|
$
|
$
|
$
|
|||||||||
|
Sales and marketing
|
||||||||||||
|
General and administrative
|
||||||||||||
|
|
||||||||||||
|
$
|
$
|
$
|
||||||||||
As of December 31, 2021, unrecognized compensation cost related to share options and RSUs was $
| f. |
For awards issued for non-employees services, see Note 1d. |
These awards were accounted for as issuance costs in connection with the Transactions.
F - 37
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 13:- |
TAXES ON INCOME
|
| a. |
Corporate tax rates in Israel:
|
The corporate tax rate in Israel in 2019 and thereafter is 23 %.
| b. |
Income taxes in US subsidiary:
|
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “U.S. Tax Reform”); a comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes, most of which are effective for tax years beginning after December 31, 2017, include several key tax provisions that might impact the Company, including, among others: (i) a permanent reduction to the statutory federal corporate income tax rate from 35 % (top rate) to 21 % (flat rate) effective for tax years beginning after December 31, 2017; (ii) a new tax deduction in the amount of 37.5 % of “foreign derived intangible income” that effectively reduces the federal corporate tax on certain qualified foreign derived sales/licenses/leases and service income in excess of a base amount to 13.125 % (as compared to the regular corporate income tax rate of 21%); (iii) stricter limitations on the tax deductibility of business interest expense; (iv) a participation exemption for certain repatriations of earnings to the United States (along with certain rules designed to prevent erosion of the U.S. income tax base); (v) a one-time deemed repatriation tax on accumulated offshore earnings held in cash and illiquid assets, with the latter taxed at a lower rate; and (vi) an expansion of the U.S. controlled foreign corporation (“CFC”) anti-deferral starting with the CFC’s first tax year beginning in 2018 intended to tax in the U.S. “global intangible low-taxed income” (“GILTI”).
| c. |
Carryforward tax losses and credits:
|
As of December 31, 2021, the Company had operating loss carry forwards for Israeli income tax purposes of approximately $311,000 which may be offset indefinitely against future taxable income.
F - 38
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 13:- |
TAXES ON INCOME (Cont.)
|
| d. |
Deferred income taxes:
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The principal components of the Company’s deferred tax assets are as follows:
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Net operating loss carryforward
|
$
|
$
|
||||||
|
Research and development costs carryforward
|
||||||||
|
Accrued Expenses
|
||||||||
|
Share-based compensation
|
||||||||
|
Property and equipment
|
||||||||
|
Other
|
||||||||
|
Total deferred tax assets
|
||||||||
|
Valuation allowance
|
( |
)
|
( |
)
|
||||
|
Deferred tax liabilities:
|
||||||||
|
Property and equipment
|
( |
)
|
||||||
|
Other
|
( |
)
|
||||||
|
Total deferred tax liabilities
|
( |
)
|
( |
)
|
||||
|
Net deferred tax
|
$
|
$
|
||||||
Based on the available evidence, management believes that it is more likely than not that certain of its deferred tax assets relating to net operating loss carryforwards and other temporary differences in Israel will not be realized and accordingly a valuation allowance has been provided.
As of December 31, 2021, and 2020, the Company has not provided a deferred tax liability in respect of cumulative undistributed earnings relating to the Company’s foreign subsidiaries, as the Company intends to keep these earnings permanently invested.
F - 39
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 13:- |
TAXES ON INCOME (Cont.)
|
| e. |
Loss before taxes on income is comprised as follows:
|
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Domestic
|
$
|
( |
)
|
$
|
( |
)
|
$
|
( |
)
|
|||
|
Foreign
|
( |
)
|
||||||||||
|
|
||||||||||||
|
Loss before taxes on income
|
$
|
( |
)
|
$
|
( |
)
|
$
|
( |
)
|
|||
| f. |
Income taxes are comprised as follows:
|
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Current
|
$
|
|
$
|
|
$
|
|
||||||
|
Domestic
|
|
|
|
|||||||||
|
Foreign
|
|
|
|
|||||||||
|
|
||||||||||||
|
Income taxes
|
$
|
|
$
|
|
$
|
|
||||||
| g. |
The reconciliation of the tax benefit at the Israeli statutory tax rate to the Company’s income taxes is as follows:
|
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Israel tax provision at statutory rate
|
%
|
%
|
%
|
|||||||||
|
Non-deductible share-based compensation
|
( |
)%
|
( |
)%
|
( |
)%
|
||||||
|
Effect of other permanent differences
|
%
|
( |
)%
|
( |
)%
|
|||||||
|
Change in valuation allowance
|
( |
)%
|
( |
)%
|
( |
)%
|
||||||
|
Issuance costs
|
%
|
|||||||||||
|
Other adjustments
|
%
|
%
|
||||||||||
|
|
||||||||||||
|
Effective tax rate
|
( |
)%
|
( |
)%
|
( |
)%
|
||||||
| h. |
Tax assessments:
|
The Company is currently in the process of income tax audits in Israel, for the tax years 2016 through 2018. The Company's tax assessments through 2015 are considered final.
As of December 31, 2021, the tax returns of the Company and its main subsidiaries are still subject to audits by the tax authorities for the tax years 2016 through 2021.
F - 40
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 13:- |
TAXES ON INCOME (Cont.)
|
| i. |
Uncertain tax positions:
|
The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. As of December 31, 2021 and 2020, the Company has not recorded any uncertain tax position liability.
| NOTE 14:- |
BASIC AND DILUTED NET LOSS PER SHARE
|
The following table sets forth the computation of the net loss per share for the period presented:
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Numerator:
|
||||||||||||
|
Net loss
|
$
|
( |
)
|
$
|
( |
)
|
$
|
( |
)
|
|||
|
Preferred share accrued cumulative dividend rights
|
( |
)
|
( |
)
|
( |
)
|
||||||
|
Total loss attributable to ordinary shares
|
$
|
( |
)
|
$
|
( |
)
|
$
|
( |
)
|
|||
|
Denominator:
|
||||||||||||
|
|
||||||||||||
The following potential ordinary shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect:
| a. |
|
| b. |
|
| c. |
|
F - 41
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 15:- |
GEOGRAPHIC AND CUSTOMER INFORMATION
|
| a. |
Geographic information:
|
|
|
Following is a summary of revenues by geographic areas. Revenues attributed to geographic areas, based on the location where the customers accept delivery of the products and services: |
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Europe, Middle East and Africa (*)
|
$
|
$
|
$
|
|||||||||
|
Asia Pacific
|
||||||||||||
|
North America (**)
|
( |
)
|
||||||||||
|
$
|
$
|
( |
)
|
$
|
||||||||
| (*) |
|
| (**) |
|
| b. |
The Company's long-lived assets (property and equipment, net) are located as follows:
|
|
Year ended
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Israel
|
$
|
$
|
||||||
|
United States
|
||||||||
|
Germany
|
||||||||
|
Belarus
|
||||||||
|
$
|
$
|
|||||||
| c. |
Customers accounted for over 10% of revenue:
|
As of December 31, 2021, the Company had one customer that accounted for 82 % of revenues.
As of December 31, 2020, the Company had three customers that accounted for 51 %, 22 % and 10 % of revenues (excluding the reduction of revenues of issuance of Preferred C-1 Shares).
As of December 31, 2019, the company had one customer that accounted for 64 % of revenues
F - 42
INNOVIZ TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 16:- |
RELATED PARTY BALANCES AND TRANSACTIONS
|
| a. |
Balances with the related parties:
|
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
Trade receivable
|
$
|
|
$
|
|
||||
|
Long term deferred revenues
|
$
|
|
$
|
|
||||
| b. |
Transactions with the related parties:
|
|
Year ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Revenues (net revenues)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
During the years ended December 31, 2021, 2020 and 2019 the Company earned $4,500 , $(12,014 ) and $1,002 respectively, in revenues (net revenues) from the sale of services and goods to a shareholder (also refer to Note 2i).
As of December 31, 2021 and 2020, the Company recorded receivables of $420 and $1,146 , respectively from the same shareholder mentioned above in connection with the revenues earned, included as Trade Receivable on the accompanying consolidated balance sheets. The receivables are collected in the ordinary course of business.
As of December 31, 2021 and 2020, the Company recorded deferred revenue of $3,864 and $3,473 , respectively, from the same shareholder mentioned above in connection with the revenues earned, included as Long-term advances from customers and deferred revenues on the accompanying consolidated balance sheets.
F - 43