UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
(Mark
One)
OR
For
the fiscal year ended
December
31
,
2024
OR
For
the transition period from to
OR
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)
(Translation of Registrant’s name into English)
State
of
Israel
(Jurisdiction of incorporation or organization)
(Jurisdiction of incorporation or organization)
Innoviz
Technologies Campus
(Address
of principal executive offices)
Chief Financial Officer
Innoviz Technologies Campus
+
972
-
74-700-3692
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
(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, 2024, the issuer had
169,397,030
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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☒
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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.
☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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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☒
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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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Page
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1
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1
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1
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4
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4
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4
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4
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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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4
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33
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A. History and Development of the Company
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33
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B. Business Overview
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33
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C. Organizational Structure
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47
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D. Property, Plant and Equipment
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47
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47
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48
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A. Results of Operations
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52
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B. Liquidity and Capital Resources
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56
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C. Research and Development, Patents and Licenses, etc.
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58
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D. Trend Information
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58
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E. Critical Accounting Policies and Use of Estimates
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59
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60
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A. Directors and Senior Management
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60
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B. Compensation of Directors and Executive Officers
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63
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C. Board Practices
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66
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D. Employees
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74
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E. Share Ownership
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75
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F. Disclosure of a registrant’s action to recover erroneously awarded compensation
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75
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75
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A. Major Shareholders
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75
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B. Related Party Transactions
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76
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C. Interests of Experts and Counsel
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77
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77
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A. Consolidated Statements and Other Financial Information
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77
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B. Significant Changes
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78
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A. Offer and Listing Details
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78 |
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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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78 |
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E. Dilution
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78 |
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F. Expenses of the Issue
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78 |
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A. Share Capital
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78
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B. Memorandum and Articles of Association
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79
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C. Material Contracts
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79
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D. Exchange Controls
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81
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E. Taxation
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81
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F. Dividends and Paying Agents
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92
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G. Statement by Experts
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92 |
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H. Documents on Display
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92 |
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I. Subsidiary Information
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J. Annual Report to Security Holders
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ii
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F-1
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iii
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,” or 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 “ILS” refer to Israeli New 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.
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
Report 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, including statements regarding the services offered by Innoviz, the
anticipated technological capability of Innoviz’s products, the markets in which Innoviz operates and Innoviz’s projected
future results. 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,” “strategy”, “seek,” “believe,” “estimate,” “predict,”
“potential,” “continue,” “will be,” “will continue,” “is likely,” “will
likely result,” “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.
1
Forward-looking statements may be influenced by factors including:
|
|
• |
our limited operating history and evolving business model makes evaluating our business and future prospects difficult and may increase
the risk of your investment;
|
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• |
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 in
incremental losses, which may adversely affect our business;
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|
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• |
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;
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• |
there are significant risks to providing our products as a direct supplier to customers, including additional operating costs, increased
liabilities, and additional indemnification responsibilities;
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• |
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;
|
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• |
we will likely need to obtain 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, which could negatively affect our business, prospects, financial condition and operating results;
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• |
we may experience significant delays in the design, production and launch of our LiDAR products, which could harm our business, prospects,
financial condition and operating results;
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• |
we are substantially dependent on a limited number of customers. The automotive industry is comprised of a relatively small number
of players, which makes each design win material for us, and our business could be materially and adversely affected if any of our customers
terminate our programs following such wins;
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• |
designing and manufacturing LiDARs on a mass-production scale requires meeting stringent quality requirements and we may face significant
challenges and complexities in this process;
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• |
our transition to production with a contract manufacturer and our ramp-up towards mass production may encounter significant challenges,
which could delay commercialization and increase costs;
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• |
the period of time from a design win to implementation is long and we are subject to the risk of cancellations or postponement of
contracts or failure to successfully meet customers’ requirements for start of production (“SOP”);
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• |
certain of our strategic, development and supply arrangements could be terminated or may not materialize into long-term contract
partnership arrangements;
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• |
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;
|
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• |
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;
|
|
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• |
the first vehicles deploying our LiDAR technology and software became commercially available to end users in 2024. If any vehicles
deploying our LiDAR technology and software are involved in traffic accidents or collisions actually or allegedly resulting from undetected
defects, errors, or bugs in our products, or if our products actually or allegedly fail to perform as expected, we may be exposed to product
liability, warranty and other claims, in addition to a decline in the market adoption of our products, damage to our reputation with current
or prospective customers, or increased regulatory scrutiny of our solutions which would adversely affect our operating costs, business
and prospects;
|
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• |
our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our ordinary
shares;
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2
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• |
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 we do;
|
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• |
we may be subject to securities litigation, class action and derivative lawsuits, which could result in substantial costs and could
divert management attention away from other business concerns; and
|
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• |
the other matters described in the section entitled Item 3.D. “
Key Information—Risk
Factors
” beginning on page 4.
|
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 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.
3
PART I
| Item 1 . |
Identity of Directors, Senior Management and Advisers
|
Not applicable.
| Item 2 . |
Offer Statistics and Expected Timetable
|
Not applicable.
| 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.
|
|
|
• |
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 in incremental losses, which may adversely affect our
business.
|
|
|
• |
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, including additional operating costs, increased
liabilities, and additional indemnification responsibilities, in each case.
|
|
|
• |
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.
|
|
|
• |
We will likely need to obtain 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, which could negatively affect our business, prospects, financial condition and operating results.
|
|
|
• |
We may experience significant delays in the design, production and launch of our LiDAR products, which could harm our business, prospects,
financial condition and operating results.
|
4
|
|
• |
We are substantially dependent on a limited number of customers. The automotive industry is comprised of a relatively small number
of players, which makes each design win material for us, and our business could be materially and adversely affected if any of our customers
terminate our programs following such wins.
|
|
|
• |
Designing and manufacturing LiDARs and LiDAR components on a mass-production scale requires meeting stringent quality requirements
and we may face significant challenges and complexities in this process.
|
|
|
• |
Our transition to production with a contract manufacturer and our ramp-up towards mass production may encounter significant challenges,
which could delay commercialization and increase costs.
|
|
|
• |
The period of time from a design win to implementation is long and we are subject to the risk of cancellations or postponement of
contracts or failure to successfully meet customers’ requirements for SOP.
|
|
|
• |
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.
|
|
|
• |
Certain of our strategic, development and supply arrangements could be terminated or may not materialize into long-term contract
partnership arrangements.
|
|
|
• |
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. 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 requires us to continue to develop new products
and product innovations and could adversely affect market adoption of our products.
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• |
Certain of our strategic, development and supply arrangements could be terminated or may not materialize into long-term contract
partnership arrangements.
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• |
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.
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• |
Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.
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• |
We may experience difficulties in expanding our operations.
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• |
As part of growing our business, we may in the future 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 and adversely affected and the
price of our ordinary shares and warrants could decline.
|
|
|
• |
The first vehicles deploying our LiDAR technology and software became commercially available to end users in 2024. If any vehicles
deploying our LiDAR technology and software are involved in traffic accidents or collisions actually or allegedly resulting from undetected
defects, errors, or bugs in our products, or if our products actually or allegedly fail to perform as expected, we may be exposed to product
liability, warranty and other claims, in addition to a decline in the market adoption of our products, damage to our reputation with current
or prospective customers, or increased regulatory scrutiny of our solutions which would adversely affect our operating costs, business
and prospects.
|
|
|
• |
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our ordinary
shares.
|
|
|
• |
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 we do.
|
5
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• |
We rely on third-party suppliers and 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.
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• |
Our sales and operations in international markets expose us to operational, financial and regulatory risks.
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• |
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.
|
|
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• |
Our business may be adversely affected by changes in automotive safety regulations or concerns that drive further regulation of the
automobile safety market.
|
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• |
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.
|
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• |
As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial
reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company
and, as a result, the value of our ordinary shares.
|
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• |
The market price and trading volume of our ordinary shares and warrants may be volatile and could decline significantly.
|
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• |
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.
|
|
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• |
We may be subject to securities litigation, class action and derivative lawsuits, which could result in substantial costs and could
divert management attention away from other business concerns.
|
|
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• |
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 the
Nasdaq Stock Market LLC (“Nasdaq”).
|
|
|
• |
The war in Israel and other conditions in Israel could materially and adversely affect our business.
|
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• |
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.
|
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|
• |
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 this section titled “
Risk
Factors
”.
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, components,
and software 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, in addition to our
traditional model of selling LiDAR systems directly to customers, we are currently selling a chipset containing components to Magna Electronics
Inc. (“Magna”), which then assembles the LiDAR system for one of our customers.
6
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.
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.
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 in incremental 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 to reduce the price of our products. It is possible that pricing pressures beyond our expectations could intensify
as our customers 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.
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.
There are significant
risks to providing our products as a direct supplier to customers, including additional operating costs, increased liabilities, and additional
indemnification responsibilities.
We are leveraging our in-house knowledge developed via our engagement
and development history, to approach and to supply customers directly. This approach means entering into direct agreements with customers
and not having a Tier-1 “middleman” to take on some of the risks involved in such long-term engagements. These risks include
the responsibilities associated with interacting directly with customers on complex tasks such as full design validation, direct customer
support and vehicle integration. Each of these responsibilities includes additional operating costs, increased liabilities, and additional
indemnification responsibilities. In addition, conflicts may arise when we compete with our existing customers for business as a Tier-1
supplier and this competition may adversely affect our existing business relationships with these other Tier-1s. Furthermore, as a Tier-1
supplier we are competing directly with more-established Tier-1s that have existing agreements and relationships with the automotive OEMs,
which may provide them certain advantages as compared to us.
7
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.
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 $73.8 million, $92.7 million and $95.1 million during the years ended
December 31, 2024, 2023 and 2022, respectively. Future research and development expenses may 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 will likely need to
obtain 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,
which could negatively affect our business, prospects, financial condition and operating results.
We will likely 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 financing (which
may be in form of debt or equity and may be a strategic investment) 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. Further, downgrades by Moody’s,
SP and Fitch Rating agencies of the credit rating of Israel, as well as the downgrade by some of the agencies of their outlook rating
from “stable” to “negative”, may also make it more difficult for us to obtain additional capital in the future.
If we are unable to obtain adequate financing or to obtain 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.
We may experience significant
delays in the design, production and launch of our LiDAR products, which could harm our business, prospects, financial condition and operating
results.
Some of our products are still in the development phase. Any
delay in the design, production and commercial release of such products 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 any future product, our growth prospects could be adversely affected as we may fail
to increase our market share.
Moreover, our products are technologically complex and require
high standards to manufacture. In addition, our products require extensive and lengthy testing and validation cycles, particularly
in connection with our sensors and software, to ensure safety of the autonomous systems prior to commercial deployment. We have experienced
in the past and will likely 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. Such delays could damage our relationships with customers and lead them to seek alternative sources
of supply. In addition, we could face material legal claims for breach of contract or tort as a result of such delays. 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 ability to deliver and our reliability. Further, 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.
We are substantially dependent
on a limited number of customers. The automotive industry is comprised of a relatively small number of players, which makes each design
win material for us, and our business could be materially and adversely affected if any of our customers terminate our programs following
such wins.
Historically, our business was substantially dependent on our
design win with BMW. We are the supplier of LiDAR technology and software technology to the BMW Level 3 program (“BMW L3 Program”),
through our Tier-1 partner, Magna. Our business is substantially dependent on our design wins with Cariad SE for the Volkswagen
brands (“Volkswagen”) and our recently announced partnership with Mobileye Vision Technologies Ltd. (“Mobileye”).
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There can be no assurance that we will be able to maintain our
relationship with our customers and secure orders from them or that our design wins will result in increased revenues or profitability.
If major customers terminate or significantly alter or delay our programs with them and/or alter their respective relationships with us
in an adverse manner, our business would be materially and adversely affected.
Designing and manufacturing
LiDARs and LiDAR components on a mass-production scale requires meeting stringent quality requirements and we may face significant challenges
and complexities in this process.
In 2023, Magna began the series-production manufacturing of our
LiDARs in connection with the BMW L3 Program. We expect in the future to begin manufacturing LiDARs on a mass-production scale in connection
with our other design win programs. The design and manufacturing of LiDARs on a mass-production scale requires us to meet stringent quality
requirements and obtain various certifications. To date, we have not manufactured LiDARs on a mass-production scale in connection with
any of our programs, and we expect to face significant challenges and complexities which we will need to resolve expeditiously while continuing
to develop new products. For example, since manufacturing LiDARs requires investing significant capital expense in complex and unique
machinery, unexpected malfunctions of such machinery could affect our operational efficiency and may result in loss of production
equipment. In addition, we may face various unexpected operational risks such as damage to production facilities, delays, environmental
damage, and potential legal liabilities. As a result of these challenges and risks, we may not be able to manufacture LiDARs on a mass-production
scale without delays or unexpected costs, among other factors, which could adversely affect our business.
Our transition to production
with a contract manufacturer and our ramp-up towards mass production may encounter significant challenges, which could delay commercialization
and increase costs.
We are transitioning from producing our InnovizTwo samples in-house
to manufacturing samples with our contract manufacturer as we prepare for mass production. This transition presents several risks, including
the need to validate production lines and achieve consistent quality and yield at scale. Significant delays or inefficiencies in this
process could impact our ability to meet customer requirements, including timelines. The production of LiDAR sensors requires stringent
quality control and manufacturing expertise. If our contract manufacturer encounters difficulties, we may experience quality issues, increased
scrap rates, or delays in meeting our customers’ milestones and requirements. Additionally, as we ramp-up towards mass production,
we may face unforeseen technical challenges, supply chain constraints, yield issues, or manufacturing process refinements that could extend
the timeline to achieving stable, high-yield production. Reaching full manufacturing maturity—where production is optimized for
cost efficiency, reliability, and scalability—can take longer than anticipated. If we are unable to transition effectively to mass
production, or if we encounter prolonged challenges in achieving manufacturing maturity, our ability to fulfill customer demand, meet
revenue targets, and establish a competitive cost structure could be adversely affected. Any disruption in this transition could delay
commercialization, increase our costs, and could negatively impact our business, financial condition, and market position.
The period of time from
a design win to implementation is long and we are subject to the risk of cancellations or postponement of contracts, or failure to successfully
meet customers’ requirements for SOP.
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 four to five years or more. 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 or nomination. 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 either the entire program or the 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.
9
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 are applied to different use
cases across end markets, we have been and expect to continue to be 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 continue to introduce LiDAR products in commercially
available vehicles in the near future. LiDAR products are still relatively new to 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. The speed
of market growth for ADAS or autonomous vehicles is difficult, if not impossible, to predict, and it is more difficult to predict such
market’s future growth in light of the economic consequences of, among other things, changes in inflation and interest rates in
the U.S. and globally, the conflicts in the Middle East and the Ukraine-Russia war. 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 expect or the market expects,
our business, results of operations and financial condition will be materially and adversely affected. If other sensing modalities are
to be preferred over our LiDAR product by either developers of autonomous driving systems or ADAS, OEMs, regulators, 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, they may even 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 because, among other things,
these companies have extremely strong negotiation positions to demand terms that are beneficial for them, including reduced prices. 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.
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:
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investing in research and development;
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attracting and retaining talent to develop, support and promote our business across different functions and geographies, further
enhancing our manufacturing processes and partnerships; and
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investing in legal, accounting and other administrative functions necessary to support our operations as a public company.
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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 markets we expect to serve generate significant demand for our products, if at all.
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. We cannot guarantee that our new products will be released
in a timely manner, or at all, or achieve market acceptance. In addition, we may in the future need to make strategic decisions to account
for low market acceptance. These actions and any similar future actions may materially and adversely affect our business and results of
operations. Delays in delivering new products that meet customer requirements could damage our relationships with customers and lead them
to seek alternative sources of supply.
10
If we are unable to devote adequate resources to develop and
improve our 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, term sheets, letters of intent, 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 and adversely affected.
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 passenger cars and the light commercial vehicle markets, such as trucking, robotaxis, delivery vehicles and shuttles. 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.
Adoption of LiDAR products, including our products for these segments, 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. If LiDAR technology does not achieve commercial success in such markets,
or if the market develops at a pace slower than we expect, our business, results of operation and financial condition may 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,
China 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.
We may experience difficulties
in expanding 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 continue to
strengthen 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.
11
As part of growing our
business, we may in the future 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 and adversely affected and the price of our ordinary shares and warrants
could decline.
From time to time, we may in the future 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. In
addition, acquisitions may require a significant commitment of management time, capital investment and other resources.
To date, we have not grown our business through acquisitions
and we do not have a history of integrating acquired technology and personnel. However, failure to successfully identify, complete, manage
and integrate any future 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 first vehicles deploying
our LiDAR technology and software became commercially available to end users in 2024. If any vehicles deploying our LiDAR technology and
software are involved in traffic accidents or collisions actually or allegedly resulting from undetected defects, errors, or bugs in our
products, or if our products actually or allegedly fail to perform as expected, we may be exposed to product liability, warranty and other
claims, in addition to a decline in the market adoption of our products, damage to our reputation with current or prospective customers,
or increased regulatory scrutiny of our solutions which would adversely affect our operating costs, business and prospects.
Our products are technologically complex and require high standards
to manufacture and may, from time to time, have, or could be alleged to have, undetected errors or defects. As the first vehicles deploying
our LiDAR technology and software became commercially available to end users in 2024, some errors or defects in our products could
be, despite rigorous testing and stringent manufacturing standards, initially undetected and discovered only after they have commercialized
and deployed by customers, which could result in serious injury, including fatalities, to the end users or those in the surrounding
area; our customers not 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. In accordance
with customary practice in the automotive industry, we provide our customer with a time-limited warranty for our products. Currently,
none such errors or defects have been detected, however, if such errors or defects occur in the future and 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, including class actions, by our customers or by third parties, and in some cases, may even lead to product recall and additional 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, enhanced publicity surrounding such claims may also
increase the regulatory scrutiny of ADAS and autonomous driving solutions in general, and our products in particular, which could have
a material adverse effect on our ability to achieve our business plans. Further, 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.
12
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 we do.
The markets for sensing technology applicable to autonomous solutions
across numerous industries are highly competitive. Our future success will depend on our ability to 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 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. Our competitors include, among others:
Valeo SA, Hesai, Aeva, Robosense, Seyond (ex-Innovusion), Luminar and Cepton (acquired by Koito). 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.
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.
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:
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changes in tax laws or the regulatory environment;
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changes in accounting and tax standards or practices;
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changes in the composition of operating income by tax jurisdiction; and
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our operating results before taxes.
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Because we do not have a long history of operating at our present
scale, 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 guarantee 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 Keilaf, our Co-Founder, Chief Executive Officer and Director.
Our success depends to a significant degree upon the continued
contributions of Omer Keilaf, our Co-Founder, Chief Executive Officer and director. 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 and may make it more difficult to retain existing employees and
members of management.
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.
13
On January 31, 2024, we announced a strategic realignment of
our operations to expand our cash runway and optimize our path towards profitability and free cash flow generation, which included a reduction
in the company’s headcount by approximately 13% during the first quarter of 2024. Additionally, the workforce reduction may make
it more difficult to preserve our company organizational culture and may negatively impact employees’ morale.
Our primary research and development activities as well as significant
elements of our operations, general and administrative activities are conducted at our headquarters in Israel, and we face significant
competition for suitably skilled employees in Israel. 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, in retaining personnel or
in effectively replacing such current personnel who may depart with qualified or effective successors. 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 decreased in value.
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
of 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 our products and programs,
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 our 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.
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 ILS. As a result, we are exposed to exchange rate risks that may materially and adversely
affect our financial results. If ILS appreciates against the USD or if the value of ILS declines against the USD 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 ILS, then the USD cost of
our operations in Israel would increase and our results of operations could be materially and adversely affected. 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 ILS against the USD. The Israeli
annual rate of inflation amounted to 3.2%, 3.0%, and 5.3% for the years ended December 31, 2024, 2023 and 2022, respectively. The value
of the USD appreciated against the value of the ILS by approximately 0.6%, 3.1% and 13.2% in 2024, 2023 and 2022, respectively.
We rely on third-party
suppliers and 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. Other global events, including political events and trade-related
trends may also disrupt our supply chain and operations. For example, the Houthi movement, a terrorist group in Yemen that is limiting
the movement of marine vessels traversing the Red Sea, has led to delays in shipping and to increased shipping and transport costs. These
or other events may delay our future production, including our ability to timely set up a production line in Asia, which may require
us to find alternative location for our production line due to such instabilities. In addition, 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 loss of revenues, or such customers using competitors’ products instead
of ours.
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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 91.2%, 99.6% and 98% of our revenue in the years ended December 31,
2024, 2023 and 2022, 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:
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exchange rate fluctuations;
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political and economic instability, international terrorism and anti-Israeli sentiment, such as the war and hostilities between Israel,
Hamas, Hezbollah, the Houthi movement and Iran;
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global or regional health crises;
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potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;
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preference for locally branded products, and laws and business practices favoring local competition;
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potential complexities of operating in China with increased data collection regulations, and government-mandates which are subject
to change per unprecedented regulation;
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increased difficulty in managing inventory;
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delayed revenue recognition;
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less effective protection of intellectual property;
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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;
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difficulties and costs of staffing and managing foreign operations;
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import and export laws and the impact of tariffs; and
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changes in local tax and customs duty laws, or changes in the enforcement, application or interpretation of such laws.
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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, including events resulting from climate change, as well
as 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, could have an adverse
effect on our business and operating results. There are inherent physical climate-related risks wherever our business is conducted.
Various meteorological phenomena and extreme weather events (including, but not limited to, storms, flooding, drought, wildfire, and extreme
temperatures) may disrupt our operations or those of our suppliers and business partners, and may therefore require us to incur additional
operating or capital expenditures, or otherwise adversely impact our business, financial condition, or results of operations. Climate
change may impact the frequency and/or intensity of such events. Mitigating our business risks associated with climate change may require
us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections
associated with managing climate risks.
In addition, 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, could cause disruptions in our manufacturing operations,
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 currently have a formal disaster recovery
plan. However, we are currently in the process of formalizing our plan, and auditing our suppliers’ plans by our quality personnel. However,
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.
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, particularly with respect to software patents, where infringement is significantly
harder to prove, we are less likely to successfully assert our patents. 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.
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 LiDAR solutions or certain aspects
of our solutions that we consider proprietary could seriously adversely affect our business, operating results, financial condition and
prospects.
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In addition to patented
technology, we rely on our unpatented proprietary technology, processes and know-how.
We rely on proprietary information (such as trade secrets, 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 our trade secret policy, related employee training,
and 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 or misappropriating 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 or misappropriate their intellectual property rights, particularly as we expand our presence in the market. If such a claim
were to prevail, we could incur high cost and time-consuming litigation and licensing fees. Alternatively, we may incur costly development
of alternative technological solutions to work-around such patent-protected solutions. 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 or misappropriation 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.
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 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.
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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 comply in all material
respects with the applicable laws and regulations. If there is an unanticipated or onerous new legislation or regulation that significantly
impacts our use or marketing of various components or requires more expensive components, such legislation or regulation could materially
and 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 or access to, energy or water, which may have an
effect on the way we manufacture products or utilizes energy or water 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 or water 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.
Reporting expectations are also increasing, with a variety of
customers, capital providers, and regulators seeking increased information on climate-related risks and impacts. Various policymakers
have adopted or are considering to adopt, requirements for companies to provide significantly expanded climate-related disclosures in
their periodic reporting, including reporting requirements that require companies to monitor their third parties, any of which may require
us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes
and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on
our management and board of directors. All of these risks may also impact our suppliers, business partners or customers, which may indirectly
impact our business, financial condition, or results of operations.
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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.
Although we believe increasing automotive safety standards will
present a market opportunity for our products, government safety regulations are subject to change based on a number of factors that are
not within our control, including but not limited to, new scientific or technological data, public concerns regarding alleged safety risks
of ADAS or autonomous driving, adverse publicity generated by government safety investigations, industry recalls or 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 ADAS
and autonomous driving 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.
In the United States at the federal government level, regulation
of ADAS and autonomous driving falls primarily within the purview of the National Highway Traffic Safety Administration (“NHTSA”)
of the U.S. Department of Transportation (USDOT), although other USDOT divisions, such as, for example, the Federal Motor Carrier Safety
Administration (FMCSA), also are engaged to a more limited extent. Other federal agencies also are involved in regulation as relevant
to the agency’s mission; for example, the Federal Communications Commission (“FCC”) has jurisdiction over spectrum for
communications technology that will allow vehicles to sense and communicate with each other and with other devices and environmental factors,
such as infrastructure, pedestrians, and cyclists. USDOT envisions a division of responsibility between the federal government and the
states whereby NHTSA regulates safety design and performance while states regulate human driver and vehicle operations. Both federal and
state authorities in the U.S. have been actively engaged in regulatory scrutiny of ADAS and autonomous driving solutions in general. Such
authorities may impose more stringent compliance and reporting requirements in response to product recalls and safety issues in the automotive
industry.
For any of our products incorporated into vehicles, we are a
vehicle equipment manufacturer subject to existing requirements under the National Traffic and Motor Vehicle Safety Act of 1966 (“Vehicle
Safety Act”) and the Federal Motor Vehicle Safety Standards (FMVSS) and other regulations promulgated by the NHTSA pursuant thereto.
These requirements include a duty to report, subject to strict timing requirements, any defect with our products that is related to motor
vehicle safety. The Vehicle Safety Act imposes potentially significant civil penalties for violations, including for failure to report
such defects. We are also subject to the Transportation Recall Enhancement, Accountability and Documentation Act (“TREAD”)
and NHTSA’s implementing regulations and must comply with “Early Warning” requirements by reporting a wide range of
information (
e.g.
, consumer complaints, warranty claims, etc.) that could indicate a potential
safety defect. TREAD imposes criminal liability for violating such requirements if a defect is confirmed subsequently and has caused death
or bodily injury. In addition, the Vehicle Safety Act authorizes NHTSA to require a manufacturer to recall and repair vehicles with any
safety defect or that fail to comply with any FMVSS, and this obligation would apply in the event our products had a safety defect and
prompted such a recall and repair action. Our distribution into foreign countries may be subject to similar regulations. If we cannot
rapidly address any safety concerns or defects with our products, our business may be adversely affected.
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NHTSA also has taken a number of actions in the past several
years specific to ADAS and autonomous driving. These actions include a Standing General Order, updated in August 2021, that requires
identified manufacturers and operators to report certain crashes involving vehicles equipped with automated driving systems or SAE Level
2 advanced driver assistance systems. In addition, NHTSA expanded in January 2021 its Automated Vehicle Transparency and Engagement for
Safe Testing (“AV TEST”) Initiative from a pilot to a full program, and through this Initiative a variety of stakeholders
provide documentation covering specific topics, 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.
NHTSA has been utilizing this information to impose additional regulatory obligations on ADAS and automated driving systems. In particular,
NHTSA has been engaged in rulemaking to update certain FMVSS to address ambiguities and other issues created by the application of FMVSS
to innovative, non-conventional vehicle designs utilized, or anticipated to be utilized, in certain ADAS and autonomous driving vehicles.
In 2023, NHTSA promulgated the “Occupant Protection for Vehicles with Automated Driving Systems” final rule to update several
FMVSS to account for vehicles that are equipped with ADAS and do not have traditional manual controls associated with human drivers. It
also jointly proposed a rule with FMCSA regarding advanced emergency breaking (“AEB”) test devices for heavy vehicles. In
2024, NHTSA finalized rules to update FMVSS for crash avoidance, safety messaging and passengerless vehicles as well as a rule to
require AEB by 2029 in all passenger and light duty vehicles. On January 15, 2025, NHTSA proposed a voluntary national framework for the
evaluation and oversight of certain vehicles equipped with automated driving systems. The proposed framework, called ADS-Equipped Vehicle
Safety, Transparency and Evaluation Program (“AV STEP”), would remove the 2,500 cap on driverless vehicles allowed on the
roadways and expand as well as streamline the program for exemption from FVMSS for ADS-equipped vehicles, but would impose additional
data reporting requirements on all vehicles participating in AV STEP. The program would be available only for vehicles equipped
with a defined level of self-driving capabilities. Specifically, participants must have vehicles equipped with ADS, defined as “hardware
and software that are collectively capable of performing the entire dynamic driving task on a sustained basis, regardless of whether the
system is limited to a specific operational design domain” and without any expectation of an attentive human driver. Driver support
features, referred to as ADAS, would not be eligible for the program. While the proposed program does not subscribe to the current
SAE International Levels of Driving Automation, NHTSA indicates that certain vehicles operating at SAE Levels 3, 4, or 5 would likely
be eligible for the AV STEP program. Comments on the proposed AV STEP program are due on March 17, 2025. It is currently uncertain how
the Trump Administration, which came into office after the program was proposed, will handle it going forward.
To the extent such additional obligations apply to our products,
our compliance obligations may increase, and to the extent such additional obligations require changes in the design or operation of our
products, we could suffer adverse business consequences.
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 involve the
processing of information that relates to individuals and/or constitutes “personal data,” “personal information,”
“personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal
Information”) and thus subject us, and may subject our customers and vendors, to a variety of federal, state, and foreign data privacy
laws, rules, industry standards, regulations, and other requirements addressing privacy and the collection, use, storage, processing,
disclosure, transfer and protection of a variety of types of Personal Information data. These requirements, and their application, interpretation
and amendment are constantly evolving and developing. For example, the UK and EU General Data Protection Regulations are directly applicable
across the UK and European Economic Area; China has adopted a stringent new data privacy and security framework; Japan has amended its
regime, California has enacted the California Consumer Privacy Act (which has prompted a wave of similar laws in other states); and the
IL Protection of Privacy law, 5741-1981 has been recently significantly amended (effective as of August 2025). Each of these regimes provide
for potentially material penalties for non-compliance and may, among other things, impose data security requirements, disclosure
and contracting requirements, and restrictions on data collection, uses, transfers 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 Personal Information
collected by our solutions in the course of their use by our end users or customers, unless our customers choose to proactively provide
such Personal 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.
Even though we and our vendors periodically assess the continually
evolving privacy and data security regimes and consider measures we believe are appropriate to take in response, these laws are in some
cases relatively new and their interpretation and application are uncertain. In addition, we are subject to our customers’ privacy
and data security requirements and audits and are working to enhance our privacy and data security measures as a result. Since these privacy
and data security regimes and requirements are evolving, uncertain and complex, especially for a global business like ours, we may need
to update or enhance our compliance measures even further as our products, markets and customer demands further develop, and these updates
or enhancements may require implementation costs. Moreover, the compliance measures we adopt may prove ineffective. Any failure, or perceived
failure, by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in significant
proceedings or actions against us by individuals, consumer rights groups, government agencies, or others. We could incur significant costs
(including the costs of mitigation and recovery) in investigating and defending such claims and, if found liable, pay significant damages
or fines or be required to make changes to our business. Further, these proceedings and any subsequent adverse outcomes may subject us
to 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 and a breach of our commitments
to our customers. If any of these events were to occur, they could have an adverse effect on our financial condition, results of operations,
reputation, and business.
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We are subject to cybersecurity
risks to operational systems, security systems, infrastructure, firmware and software in our LiDAR and customer data and other information
processed by us or third-party vendors or suppliers, and any material failure, weakness, interruption, cyber event, or incident, or breach
of security could prevent us from effectively operating our business.
We rely on computer systems, hardware, software, technology infrastructure
and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”).
We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services.
We and certain of our third-party providers store, handle, transmit and otherwise process data that includes Personal Information as well
as proprietary information such as trade secrets (collectively, “Confidential Information”).
We are subject to evolving laws on cybersecurity and face numerous
and evolving cyber risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information,
including from diverse threat actors, such as insiders (through inadvertence or with malicious intent) or malicious third parties (including
nation-states or nation-state supported actors), as well as through diverse attack vectors, such as social engineering/phishing, malware
(including ransomware), malfeasance by insiders, human or technological error, and as a result of malicious code embedded in open-source
software, or misconfigurations, bugs or other vulnerabilities in commercial software that is integrated into our (or our suppliers’
or service providers’) IT Systems, products or services. Threat actors are becoming increasingly sophisticated in using techniques
and tools—including artificial intelligence—that circumvent any infrastructure we use to protect our network, evade detection
and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or incidents,
or to avoid a material adverse impact to our IT Systems, Confidential Information or business. Such cyber incidents could materially disrupt
operational systems and cause disruption to our business; result in loss of Confidential Information; jeopardize the security of our facilities;
impact our financial results; or affect the performance of in-product technology and the integrated software in our LiDAR solutions. In
addition, we rely on third-party service providers to host or otherwise process our Confidential Information, and any failure by a third
party, or any other entity in our collective supply chain, to prevent or mitigate data security breaches or improper access to, or use,
acquisition, disclosure, alteration, or destruction of, such Confidential Information could have similar adverse consequences for us.
For instance, cyber criminals or insiders may target us or third
parties with which we have business relationships in an effort to obtain Confidential Information, or in a manner that disrupts our operations
or our development tools or compromises our products or IT Systems into which our products are integrated. Cyber criminals could also
target accessing our IT Systems in a manner which could impact our sensor data or the development process. Remote and hybrid working arrangements
at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing and
controlling remote computing assets and security vulnerabilities that are present in many non-corporate and home network devices. Additionally,
any integration of artificial intelligence in our or any service providers’ operations, products or services is expected to pose
new or unknown cybersecurity risks and challenges. The techniques used by cyber attackers change frequently and may be difficult to detect
for long periods of time. We have experienced and expect to continue to experience actual and attempted cyber-attacks of our IT networks,
such as through phishing scams and ransomware. Although, to our knowledge, none of these actual or attempted cyber-attacks have had a
material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact
in the future. We are also at risk for cyber incidents resulting from interruptions, outages and breaches of: operational systems, including
business, corporate, human resources, financial, accounting, product development, data processing or production processes, owned by us
or our third-party vendors or suppliers; facility security systems, owned by us or our third-party vendors or suppliers; in-product technology
owned by us or our third-party vendors or suppliers; the integrated software in our LiDAR solutions or development tools; or customer
or driver data that we process or our third-party vendors or suppliers process on our behalf.
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Although we maintain information technology measures designed
to protect our IT Systems and Confidential Information, such measures will require updates and improvements, and we cannot guarantee that
such measures, including our policies, controls or procedures, will be fully implemented, complied with or effective in detecting, preventing
or mitigating cyber incidents. Furthermore, given the nature of complex systems, software and services like ours, and the scanning tools
that we deploy across our networks and products, we regularly identify and track security vulnerabilities. We are unable to comprehensively
apply patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities
are exploited by a threat actor. The implementation, maintenance, segregation and ongoing improvement of our IT Systems requires significant
management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current
IT Systems, including the disruption of our data management, procurement, production execution, finance, supply chain and sales and service
processes. These risks may affect our ability to manage our data and inventory, procure parts or supplies or produce, sell, deliver and
service our solutions, adequately protect our Confidential Information or achieve and maintain compliance with, or realize available benefits
under, applicable laws, regulations and contracts. If we do not successfully implement, maintain or expand these IT Systems as planned,
our operations may be disrupted, our ability to accurately and timely report our financial results could be impaired, and deficiencies
may arise in our internal control over financial reporting, which may impact our ability to certify our financial results. Further, our
Confidential Information could be compromised or misappropriated, and our reputation may be adversely affected. If these IT Systems do
not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for
performing these functions.
Any adverse impact to the availability, integrity or confidentiality
of our IT Systems or Confidential Information could impact production capability and our ongoing operations, harm our reputation, cause
us to breach our contracts with other parties or subject us to regulatory investigations, enforcement actions, fines and penalties, litigation
(including class actions), negative reputational impacts that may cause us to lose existing or future customers, and/or significant incident
response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially affect our business,
prospects, financial condition and operating results. Any problems with our third-party cloud hosting providers, whether due to cyber
security failures or other causes, could result in lengthy interruptions in our business. Finally, we cannot guarantee that any costs
and liabilities incurred in relation to a cybersecurity attack or incident will be covered by our existing insurance policies or that
applicable insurance will be available to us in the future on economically reasonable terms or at all.
We are subject to 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. 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 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 prohibit these practices by our employees, consultants,
sales agents and distributors. However, we cannot guarantee our policies and controls will prevent all violations by our employees, consultants,
sales agents, or distributors who may engage in conduct for which we might be held responsible, even if we do 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. As a general matter, enforcement actions and sanctions could
harm our business, results of operations, and financial condition.
We may be subject to securities
litigation, class action and derivative lawsuits, which could result in substantial costs and could divert management attention away from
other business concerns.
The market price of our securities may be volatile and, in the
past, companies that have experienced volatility in the market price of their securities have been subject to securities class action
litigation. We have been in the past and may be in the future the target of this type of litigation. Additionally, securities class action
lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits
are without merit, defending against these claims can result in substantial costs and divert management time and resources from other
business concerns, which could seriously harm our business. An adverse judgment could result in monetary damages, which could have a negative
impact on our liquidity and financial condition. For example, on March 28, 2024, Sheadrick Richards, a purported stockholder of Collective
Growth Corporation, a Delaware corporation (“Collective Growth”), filed a lawsuit against Collective Growth’s directors
and affiliates in the Court of Chancery for the State of Delaware (the “Lawsuit”). The lawsuit alleges that Collective
Growth’s disclosures in connection with its Business Combination (defined herein) with Innoviz (completed in April 2021) were materially
incomplete and misleading, and that the directors breached their fiduciary duties.
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We have entered into indemnification agreements with each of
our current and former directors, certain of our current and former officers and certain third parties, and, in connection with the Business
Combination, agreed to indemnify certain former directors and officers of Collective Growth. Although we maintain insurance and run-off
coverages in amounts and with deductibles that we believe are appropriate for our operations, and our insurance and run-off coverages
may not cover all claims that have been or may be brought against us, and insurance coverage may not continue to be available to us at
a reasonable cost. As a result, we may be exposed to substantial uninsured liabilities, including pursuant to our indemnification obligations,
which could result in substantial costs and could divert management attention away from other business concerns.
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 requires us to determine, disclose and report whether our
products contain tin, tantalum, tungsten and gold, referred to as 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 as defined
in the Dodd-Frank Act or if we are unable to alter our products, processes or sources of supply to avoid use of such materials.
Increasing attention to,
and evolving expectations regarding, environmental, social and sustainability matters may impact our business and reputation.
Evolving and increased expectations regarding environmental,
social and sustainability initiatives and disclosures may result in increased costs, enhanced compliance or disclosure obligations, or
other impacts to our business, financial condition, or results of operations. Moreover, our environmental, social and sustainability initiatives
may be costly and may not have the desired effect, or we may ultimately be unable to complete certain initiatives or targets, either on
the timelines initially announced or at all, due to technological, legal, cost, or other constraints, which may be within or outside of
our control. Moreover, actions or statements that we may take based on expectations, assumptions, or third-party information that we currently
believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation. If we fail to, or are perceived
to fail to, comply with or advance certain environmental, social or sustainability initiatives, we may be subject to various adverse impacts,
including reputational damage, activism and potential stakeholder engagement and/or litigation. Additionally, many of our customers, business
partners, and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may
not be known to us.
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, the increasing interest rate, 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.
As a result of being a
public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure
to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value
of our ordinary shares.
Our business is subject to the reporting requirements of the
Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
the Sarbanes-Oxley Act of 2002 (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.
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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 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 U.S. Securities and Exchange Commission (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. We are also continuing to improve
our internal control over financial reporting.
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 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 amended and restated
articles of association (the “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, the
Israeli Companies Law, 5759-1999 (the “Companies 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 Item 10.E. “
Taxation – Taxation and Government
Programs – Israeli Tax Considerations and Government Programs
”.
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 titled “Staff Statement
on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the
“SEC Statement”).
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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
dated as of April 30, 2020,
between Continental Stock Transfer Trust Company and Collective Growth (the “Warrant Agreement”) governing our warrants.
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,
2024 contained elsewhere in this Annual Report are 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. Any future determination to pay dividends on our
ordinary shares will be at the discretion of our board of directors, subject to applicable law, and would depend on our financial condition,
results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
Consequently, you may be unable to realize a gain on your investment except by selling our 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 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”
in Exhibit 2.1 of this Annual Report for additional information.
Payment of dividends may also be subject to Israeli withholding taxes. See Item 10.E. “
Taxation
– Taxation and Government Programs – Israeli Tax Considerations and Government Programs
” for additional information.
Our failure to maintain
compliance with Nasdaq’s continued listing requirements could result in the delisting of our ordinary shares.
Our ordinary shares are currently listed for trading on Nasdaq.
We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum bid price requirement of $1.00
per ordinary share or risk delisting.
On July 30, 2024, we received a letter from the Listing Qualifications
Department indicating that for the thirty consecutive business days prior, the bid price for the ordinary shares had closed below the
minimum $1.00 per ordinary share requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5450(a)(1). In accordance with
Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until January 27, 2025, to regain compliance.
The letter stated that the Listing Qualifications Department staff will provide written notification that we have achieved compliance
with Rule 5450(a)(1) if at any time before January 27, 2025, the bid price of the ordinary shares closed at $1.00 per ordinary share or
more for a minimum of ten consecutive business days.
On January 2, 2025, we announced that we received formal written
confirmation from Nasdaq confirming that the Company regained compliance with Nasdaq’s minimum bid price requirement. The closing
bid price of the ordinary shares was at $1.00 per share or greater for 10 consecutive business days from December 16 to December 30, 2024.
Accordingly, Nasdaq Listing Qualifications Staff notified the Company that it determined that the Company regained compliance with Nasdaq
Listing Rule 5550(a)(2), and that the matter was closed.
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No assurance can be given that the price of the ordinary shares
will not again be in violation of Nasdaq’s minimum bid price requirement in the future. Our failure to meet this or other requirements
may result in our securities being delisted from Nasdaq. A delisting could substantially decrease trading in the ordinary shares, adversely
affect the market liquidity of the ordinary shares as a result of the loss of market efficiencies associated with Nasdaq and the loss
of federal preemption of state securities laws, adversely affect our ability to obtain financing on acceptable terms, if at all, and may
result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.
Additionally, the market price of the ordinary shares may decline further, and shareholders may lose some or all of their investment.
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;
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a reduced level of trading activity in the secondary trading market for our ordinary shares and warrants;
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a limited amount of news and analyst coverage for us;
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a decreased ability to issue additional securities or obtain additional financing in the future; and
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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.
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The market price and trading
volume of our ordinary shares and warrants may be volatile and could decline significantly.
Nasdaq, the stock market on which our ordinary shares and warrants
are listed under the symbols “INVZ,” and “INVZW,” respectively, have from time to time experienced significant
price and volume fluctuations. Even if an active, liquid and orderly trading market 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:
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the realization of any of the risk factors presented in this Annual Report;
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actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues including (NREs), operating
losses, results of operations, level of indebtedness, liquidity or financial condition;
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announcement of any material business development;
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availability of capital to fund our contracts and our growth;
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additions and departures of key personnel;
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failure to comply with the requirements of Nasdaq;
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failure to comply with the Sarbanes-Oxley Act or other laws or regulations;
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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 or exercise of warrants;
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publication of research reports about us;
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the performance and market valuations of other similar companies;
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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;
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the effects of the ongoing war and hostilities between Israel, Hamas, Hezbollah, the Houthi movement and Iran;
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the effects of the optimization of our operations;
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new laws, regulations, subsidies, or credits or new interpretations of existing laws applicable to us;
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commencement of, or involvement in, litigation involving us or any parties indemnified by us;
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broad disruptions in the financial markets, including sudden disruptions in the credit markets;
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speculation in the press or investment community;
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actual, potential or perceived control, accounting or reporting problems;
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changes in accounting principles, policies and guidelines; and
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other events or factors, including those resulting from infectious diseases, health epidemics and pandemics, natural disasters, war,
acts of terrorism or responses to these events.
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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.
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 the past, our sales were primarily to customers making purchases for research and development projects. Following our strategic transition
to become a Tier-1 automotive supplier, non-recurring engineering or application engineering services (“NRE”) became
another incremental source of revenue during the pre-production phase of the programs. Additionally, in connection with our BMW L3 Program,
we are selling components to Magna at lower average production sales prices. Therefore, our revenues from sales and NRE in any given
quarter can fluctuate based on the timing and success of our customers’ programs and the stage of the program. 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 or annual fluctuations include, without limitation, those listed below:
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the timing and magnitude of orders and shipments of our products in any quarter;
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the timing and magnitude of any NREs;
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pricing changes we may adopt to drive market adoption or in response to competitive pressure;
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our ability to attract and retain talent to develop, support, and promote our business across different functions and geographies;
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our ability to retain our existing customers and attract new customers;
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our ability to develop, introduce, manufacture and ship in a timely manner products that meet customer requirements;
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disruptions in our sales channels or termination of our relationship with important channel partners;
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delays in customers’ purchasing cycles or deferments of customers’ purchases in anticipation of new products or updates
from us or our competitors;
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fluctuations in demand pressures for our products;
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the timing and rate of broader market adoption of autonomous systems utilizing our solutions across the automotive and other market
sectors;
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market acceptance of LiDAR and further technological advancements by our competitors and other market participants;
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the ability of our customers to commercialize systems that incorporate our products;
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any change in the competitive dynamics of our markets, including consolidation of competitors, regulatory developments and new market
entrants;
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our ability to effectively manage our inventory;
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changes in the source, cost, availability of and regulations pertaining to materials we use;
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adverse litigation, judgments, settlements or other litigation-related costs, or claims that may give rise to such costs; and
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general economic, industry and market conditions, including trade disputes.
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If securities or industry
analysts 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, or if we fail to meet, or significantly exceed, the financial guidance we publicly announce
on a periodic basis, 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 relatively new public company, analysts who publish information about our ordinary
shares will have had relatively little experience with us, which could affect their ability to accurately forecast our results and could
make it more likely that we fail to meet their estimates. If any of the analysts who cover us issues an inaccurate or unfavorable opinion
regarding us, the price of our ordinary shares and warrants could 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 us 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.
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 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 from the consummation of the Business Combination, although circumstances could cause
us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 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.
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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.
We are a foreign private
issuer and, as a result, we are not 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 quarterly financial
information and 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, 2025. 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”, among others,
with respect to the Nasdaq rules for shareholder meeting quorums and Nasdaq rules requiring shareholder approval for certain corporate
actions. 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
The war in Israel and
other conditions in Israel could materially and adversely affect our business.
Most 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.
29
In October 2023, Hamas terrorists infiltrated Israel’s
southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Following the attacks,
Israel declared war against Hamas and a military campaign against the terrorist organization commenced.
In addition, Hezbollah has also launched attacks against Israeli
military sites and troops, and against Israeli towns in Israel. In response to these attacks, the Israel Defense Force (“IDF”)
has carried out a military operation in Lebanon, including raids on territories controlled by Hezbollah in Lebanon and strikes on sites
belonging to Hezbollah in Lebanon. On a separate border, Israel conducted preemptive military actions in Southern Syria in light of the
fall of the Assad regime and the takeover of Syria by the Syrian rebels.
Further, Israel faces threats from more distant territories,
in particular, Iran which conducted two direct attacks on Israel, and may be developing nuclear weapons and targeted cyber-attacks against
Israeli entities; and the Houthi movement, which controls parts of Yemen and launched, among others, a number of attacks on Israel and
marine vessels traversing the Red Sea. The Red Sea is a vital maritime route for international trade traveling to and from Israel. As
a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased cost of
freight, increased insurance costs, increased purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions
may result in delayed deliveries of our products and may also have adverse impact on economic conditions in Israel.
Further, many Israeli citizens are obligated by law to perform
up to several weeks of annual military reserve duty each year. Our operations could be disrupted by such call-ups, which may
include the call-up of members of our management. Since October 7, 2023, the IDF has called up hundreds of thousands
of its reserve forces to serve, many of them, for more prolonged periods. A number of our management and non-management employees are
currently subject to military service in the IDF and many of them have been called to serve. In addition, the family members of many of
our Israeli team members are currently serving in the IDF. Such disruption could materially and adversely affect our business, prospects,
financial condition, and results of operations.
Although certain ceasefire agreements have been reached with
Hamas and Lebanon (with respect to Hezbollah), and some Iranian proxies have declared a halt to their attacks, there is no assurance that
these agreements will be upheld, military activity and hostilities continue to exist at varying levels of intensity, and the situation
remains volatile, with the potential for escalation into a broader regional conflict involving additional terrorist organizations and
possibly other countries.
The intensity and duration of Israel’s current military
endeavors on multiple fronts are difficult to predict, as are the economic implications of the foregoing on our business and operations
in particular and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration
of Israel’s economic standing, that may involve an additional downgrade in Israel’s credit rating by rating agencies (such
as the downgrade of the credit rating of Israel by Moody’s, SP and Fitch), which may have a material adverse effect on our
company and its ability to effectively conduct its operations.
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.
Finally, prior to October 2023, the current elected government
in Israel pursued certain reforms to Israel’s judicial system and has recently renewed its efforts to effect such changes. Certain
financial, legal and commercial organizations and entities have claimed that such changes, if adopted, could adversely affect the macroeconomic
condition in which we operate. At this stage, the proposed legislation has not become effective, and its scope has not been fully determined;
we cannot assess the potential impacts of these changes and their likelihood on our business, prospects, financial condition, and results
of operation.
30
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 “Royalties 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 Royalties 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 Royalties 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 applicable 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 since 2018 is 23%. 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 Item 10.E. “
Taxation
– Taxation and Government Programs – Israeli Tax Considerations and Government Programs
”.
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.
31
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 a PFIC for our taxable year ending December 31, 2024. 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, 2025 or in future taxable years. Moreover, 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. This is an annual factual determination
that depends on, among other things, the composition of our income (including the relative size of our gross operating loss and our passive
income) and assets, and the market value of our shares and assets (including unbooked goodwill), including the composition of income 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.
Moreover, the value of our assets (including unbooked goodwill) for purposes of the PFIC determination may be determined by reference
to the trading value of our ordinary shares, which could fluctuate significantly. If we are a PFIC for any taxable year, a U.S. Holder
(as defined below under “
Taxation – United States Federal Income Taxation
”)
of our ordinary shares or warrants may be subject to adverse tax consequences and may incur certain information reporting obligations,
even if we cease to be a PFIC in the subsequent years. Under the generally applicable PFIC rules, a U.S. Holder generally would 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 or warrants, as applicable, as if
the excess distribution or gain had been recognized ratably over such U.S. Holder’s holding period of our ordinary shares or warrants,
as applicable. Certain elections (including a qualified electing fund or a mark-to-market election) may be 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 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/or warrants are strongly
encouraged to consult their own tax advisors regarding the potential application of these rules to us and the ownership of our ordinary
shares and/or our warrants.
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 us and any of our direct and indirect foreign affiliates (“Innoviz Group”) that is a “controlled foreign
corporation” as defined in Section 957 of the Code. Because the Innoviz Group includes one or more U.S. subsidiaries, certain of
our non-U.S. subsidiaries will be treated as controlled foreign corporations regardless of whether we are treated as a controlled foreign
corporation.
32
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 is 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.
U.S. Holders of our ordinary shares and/or warrants are strongly
encouraged to consult their own tax advisors regarding the potential application of these rules to us and the ownership of our ordinary
shares and/or warrants.
|
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 5 Uri Ariav St., Building C, 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
https://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 Innoviz, 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 that certain Business
Combination Agreement (the “Business Combination Agreement”) by and among Collective Growth, Perception Capital Partners,
LLC, a Delaware limited liability company (“Perception”), Antara Capital LP, a Delaware limited partnership and investment
manager acting on behalf of certain funds it manages and/or designees (“Antara Capital”), and Hatzata Merger Sub, Inc., a
Delaware corporation and wholly owned subsidiary of Innoviz (“Merger Sub”). Pursuant to the Business Combination Agreement,
on April 5, 2021, Merger Sub merged with and into Collective Growth, with Collective Growth surviving the merger as a wholly owned subsidiary
of us (the “Business Combination”).
For a description of our principal capital expenditures and divestitures
for the three years ended December 31, 2024, 2023 and 2022, see Item 5. “
Operating and Financial
Review and Prospects
.”
B. Business Overview
Company Overview
We are a leading Tier-1 direct supplier of high-performance,
automotive grade LiDAR sensors and perception software that feature technological breakthroughs across core components and 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 and trucks.
33
We were founded in 2016. From our founding, our culture drew
from our 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. In 2018, we achieved a design win to power BMW’s Level 3 autonomous platform,
a program which reached maturity during 2024 and with vehicles already being sold with our LiDARs and perception software.
Since 2021, we have funded the development of two production
path programs: the InnovizOne and InnovizTwo LiDAR sensor and perception software suites. With the InnovizOne program transitioned from
the development phase into full series production in 2024, we eliminated duplicative cost structures and significantly reduced spending
on InnovizOne development, while reinvesting a portion of the savings into the InnovizTwo sensor and perception software platform. All
quoting and bidding activity in our request for information and request for quotation pipeline is now focused on the InnovizTwo platform.
During 2022, we made the strategic decision to become a Tier-1
supplier of LiDAR and perception software to the automotive industry. This decision allows us to have direct technical discussions with
end customers and to improve pricing to automotive OEMs with the goal of continuing to strengthen our position in the automotive market.
This strategic decision has played a significant role in our subsequent major OEM program wins, as discussed below.
In 2022, following more than two years of extensive diligence
and qualification, we were selected by Volkswagen as its direct LiDAR supplier for automated vehicles within the Volkswagen brands with
our InnovizTwo next generation high-performance automotive-grade LiDAR sensor,
and
in 2023, we announced that Volkswagen aims to expand its use of our InnovizTwo LiDAR to its existing light commercial vehicle program,
the I.D Buzz.
In 2024, we announced that Mobileye will
use the InnovizTwo Long-Range and the new InnovizTwo Short- to Mid-Range LiDARs for the Mobileye Drive™ platform. The new InnovizTwo
Short- to Mid-Range leverages InnovizTwo Long-Range’s industrialization maturity and is designed to meet the requirements for light
commercial vehicles, shuttles, robotaxis, and can be customized to suit a wide array of vehicular design and functionality requirements.
We believe that the combination of our LiDARs and Mobileye’s platform is critical to enabling comprehensive sensing capabilities
for navigating complex urban environments and enhancing the overall safety and reliability of autonomous driving systems, and that this
partnership showcases the flexibility of our LiDARs to work across a variety of vehicle platforms to further testing and deployment of
autonomous vehicles. Our partners are leaders in deploying new technologies into the automotive industry. We believe that our close cooperation
with these partners and OEMs positions us well to make Level 3 and Level 4 autonomous driving a commercial reality.
The sustained cooperation with our customers provides our engineers
and other research and development personnel with a valuable competitive edge. These engineers and other research and development personnel
have been meticulously trained to design, operate, and verify our many ground-breaking innovations in accordance and in compliance with
the ISO26262 standard for Functional Safety in the automotive industry, and the IATF 16949:2016 certification for Quality Management
in the automotive industry. Compliance with these and other standards have been enforced by regular ongoing audits of Innoviz and rigorous
testing by our key suppliers, existing customers and prospective customers that thoroughly review 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 current demanding safety requirements for Level 2+ through Level 5 autonomous vehicles
at price points suitable for mass produced passenger vehicles.
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 4 (and Level 5 when applicable),
using both our long- and medium-range LiDARs. Our integrated custom design of advanced hardware and software components, which leverages
the multidisciplinary expertise and experience of our team, enables us to provide autonomous solutions that we believe will accelerate
widespread adoption across automakers at serial production scale. This means that we are positioned to penetrate the current market, which
is focused primarily on Level 2+, Level 3 and Level 4 production, and to continue to capture and extend our market share to 5 as
the market continues to mature.
We are currently expanding our third-party manufacturing capacity
through contract manufacturers to meet an anticipated increase in customer demand for our products.
34
Recent Developments
Entered into Multi-Year NRE Payment Plan with
Key Customers
On December 23, 2024, we announced a multi-year NRE (Non-Recurring
Engineering services) payment plan of approximately $80 million with key existing customers. NREs are expected to be paid between 2025
and 2027, of which over $40 million are expected to be paid in 2025 with further amounts expected in 2026 and 2027. These payments would
be incremental to revenues generated from ongoing sales of LiDAR products based on existing and expected new orders coming from new programs.
There can be no assurances, however, that we will enter into definitive agreements, orders or receive payments with respect to the NRE
payment plan.
Regained Compliance with Nasdaq’s Minimum
Bid Price Requirement
On January 2, 2025, we announced that we received formal written
confirmation from Nasdaq confirming that the Company has regained compliance with Nasdaq’s minimum bid price requirement. The closing
bid price of the ordinary shares was at $1.00 per share or greater for 10 consecutive business days from December 16 to December 30, 2024.
Accordingly, Nasdaq Listing Qualifications Staff notified the Company that it determined that the Company regained compliance with Nasdaq
Listing Rule 5550(a)(2), and that the matter was closed.
Integration of Perception Software with NVIDIA
DRIVE AGX Orin
On January 7, 2025, we announced our collaboration with NVIDIA
to allow our perception software to run seamlessly with the NVIDIA DRIVE AGX Orin platform, offering a range of software-driven features
designed to accelerate autonomous driving applications by allowing for real-time processing and advanced understanding of the vehicle’s
environment, enabling exceptional object detection, classification, and tracking capabilities.
Optimization of Operations
On February 4, 2025, we announced an optimization of our operations
to extend our cash runway and accelerate progress towards profitability and free cash flow generation, which includes a reduction in our
employee headcount by approximately 9% during the first quarter of 2025.
Registered Direct Offering
On February 10, 2025, we entered into a securities purchase agreement
(“Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”). Pursuant to the Securities
Purchase Agreement, we agreed to sell in a registered direct offering (the “Offering”) 28,776,978 units to the Purchasers
at a purchase price of $1.39 per unit, with each unit consisting of one ordinary share and eight tenths of a warrant to purchase one ordinary
share. The Offering was consummated on February 12, 2025. We received net proceeds of approximately $37.3 million, after deducting the
placement agent fees and offering expenses. The ordinary shares and warrants were issued separately. The warrants are exercisable at $1.69
per share and will expire on February 12, 2030. A holder of the warrants will not have the right to exercise any portion of its warrants
if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such
holder’s affiliates or any other persons whose beneficial ownership of ordinary shares would be aggregated with the holder’s
or any of the holder’s affiliates), would beneficially own ordinary shares in excess of 4.99% (or, at the election of the holder,
9.99%) of the number of the ordinary shares outstanding immediately after giving effect to such exercise.
Appointment of Ido Luski
Udy Gal-On, the Company’s Chief Operating Officer, will
transition into the role of Co-Chief Operating Officer during the second quarter of 2025. Ido Luski, currently the Company’s VP
Delivery, will assume the role of Co-Chief Operating Officer alongside Mr. Gal-On during the second quarter of 2025.
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. The technologies and products needed for autonomous driving require long development and validation
cycles and must ensure safety of the autonomous systems prior to commercial deployment.
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.
35
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, or Advanced Driver Assistance Systems, 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,
density of traffic and every other condition that affects driving decisions. Autonomous driving systems also require high-definition maps,
a highway or urban setting, and the ability for the system to make informed decisions independently, without the need for human supervision.
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.
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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. High performance LiDAR sensors were initially too expensive for mass market applications. However,
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.
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 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, 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 regard to location and timing, see all
around the vehicle and detect obstacles at various heights with minimal delay. In addition, localization is needed to locate the shuttle
or robotaxi precisely, to leverage high-definition maps.
Our 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.
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 and debris on the freeway, accident sites, traffic cones and other common highway occurrences. Development of fully autonomous
trucks is supported by our current LiDARs.
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, and the follower vehicles
are autonomous. For this application, LiDAR sensors are critical in maintaining distance between leader and follower(s). A gap will allow
other vehicles to cut-in, disturbing the truck platoon formation. Our high precision LiDARs range sensing allows a tight platoon
to drive at highway speed with safety.
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.
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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 does not mean 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, and its performance is limited
by challenging weather conditions such as rain.
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 fence next to it or a parked car along the way. It may also have issues distinguishing objects that are close
together and determining object size and shape.
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, which also causes the LiDAR to heat up considerably. This is a critical physical limitation,
especially when many new cars are electric cars. 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 utilizes 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:
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unique scanning mechanisms for improved scanner size and better collection of received light;
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silicon detectors for improved optical–electrical conversion of the received signal; and
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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.
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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.
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 features a unique technology that is distinct from
InnovizOne. The primary target market for InnovizTwo is automotive customers as it provides scalability and expansion to offer LiDAR capabilities
across different automotive segments, while building on lessons learned and synergistic advantages which Innoviz has gained through its
historical creation of products, including InnovizOne. In addition to its unique hardware solutions, Innoviz’s LiDAR solutions include
a unique perception 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. 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.
Competitive Strengths
We believe that the following strengths differentiate us from
our competitors 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-priced 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.
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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. In addition, we have
worked collaboratively with Volkswagen on several programs since 2022. These processes and programs have included extensive product-safety
auditing by our partners, 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 and Volkswagen 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.
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 planned for 2027-2029 are expected to be decided during 2025. 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 believe that our Tier-1 and OEM tested technology, together with our recently announced
collaboration with Mobileye, 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 leverage 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 research and development 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 research and development team to innovate in many
disciplines, across hardware, software, optics and others, provides us with a strong standing for future competition.
Flexible System Configuration and Powerful Perception Capabilities
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 can achieve up to uniform high resolution of 0.05°x0.05° across the FOV 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), 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 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 InnovizTwo features costs and pricing that are significantly
lower than those of 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 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 affected. 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 partnerships
.
We believe that our design win with Volkswagen and other automotive manufacturers, as well as our recently announced collaboration with
Mobileye, 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 Volkswagen supplier and as a Tier-1 direct supplier, can be leveraged
to penetrate and partner with other OEM customers. We believe that our existing partnerships with Volkswagen, BMW and Mobileye provide
evidence to potential partners and customers of the maturity, robustness, and automotive grade nature of our products, and we intend to
pursue partnerships with additional OEMs in order to grow our customer base.
Continue to invest in a strong
software suite
. Our advanced software suite turns our LiDAR products’
raw point cloud data into meaningful 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 suite leverages the rich data derived from Innoviz LiDARs, 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. Our unique software
suite is designed for autonomous driving functionality and therefore is validated in accordance with the highest automotive standards,
including data collected from staged scenes and open roads in various road and adverse weather conditions. We intend to continue to develop
and refine our software suite for InnovizTwo, in order to further complement our hardware offerings. In addition, Innoviz will continue
to collect data and annotate relevant information for the purposes of improved training and validation of our software suite. Innoviz
is also developing an edge-processing electronic control unit (ECU) for the purpose of point cloud processing, primarily for the software
suite application.
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 Levels 4, 3 and 2+ applications, which we expect to show
significant growth in the 2025-2030 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, delivery robot vehicles and other smart applications,
therefore, further to our operational realignment announced in early 2024, our development efforts are focused on the InnovizTwo Long-Range
and InnovizTwo Short- to Mid-Range. 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, as supported by our recently announced collaboration with Mobileye. The size, look,
feel and ease of integration of our products, together with automotive grade robustness for environmental performance quality, make our
products especially appealing to the Level 4 segment.
Products
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Innoviz One
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Innoviz Two Long-Range
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Innoviz Two Short- to Mid-Range
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Product size may differ according to specifications
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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:
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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.
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InnovizTwo Long-Range - announced in 2020, InnovizTwo Long-Range is a next generation high-performance automotive-grade LiDAR sensor
that is currently in development, and engineering samples have been produced for demonstrations and evaluations. InnovizTwo Long-Range
will offer a fully featured solution for all levels of autonomous driving. Featuring a major cost reduction compared to InnovizOne, InnovizTwo
Long-Range also includes 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 Long-Range will also offer the option to integrate the Perception Application
(described below) in the LiDAR sensor itself.
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InnovizTwo Short- to Mid-Range - Designed for L3 Consumer Vehicles, and L4 Shuttles and Robotaxis - announced in the second quarter
of 2024, InnovizTwo Short- to Mid-Range is a next generation high-performance automotive-grade LiDAR sensor designed to cover the short-
and medium-range (up to 100m) around the vehicle. It is currently in development, and engineering samples have been produced for demonstrations
and evaluations. InnovizTwo Short- Mid-Range will offer a fully featured solution for all levels of autonomous driving. InnovizTwo Short-
to Mid-Range is based on InnovizTwo platform technology and provides wide field of view, detection ranges from 0.2m up to 100m, which
enables coverage of the vehicle surrounding and vicinity by deploying multiple units around the vehicle. This is especially important
for shuttle and robotaxi that require detection of pedestrians, obstacles and objects near the vehicle.
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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 and
other Volkswagen brands’ programs. This approach has our business and research and development 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, Asia and
North America that define Level 2+, Level 3 and Level 4 programs and consider the adoption of InnovizTwo Long-Range and InnovizTwo
Short- to Mid-Range to such programs and thereby bring significant additional value to the ADAS+ and autonomous applications.
We are in discussions with a number of robotaxi, shuttle, truck
and delivery robots potential customers to incorporate InnovizTwo Long-Range and InnovizTwo Short- to Mid-Range into their upcoming builds.
We believe 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.
Other Segments
:
leveraging our products 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.
Sales and Marketing
We currently market and sell our LiDAR solutions through a direct
sales organization as well as through our distribution channels. 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 seeks to leverage our existing relationships as well as new commercial agreements, to expand our market to
other industries.
Research and Development
We have invested a significant amount of time and expense into
research and development of LiDAR-based technologies. Our research and development team is the largest department in the company and,
as of December 31, 2024, was comprised of 340 employees. Our ability to maintain a leadership position in the industry depends to a great
degree on our ongoing research and development activities. Our research and development 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.
Creating an automotive-grade, 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, complex IC packaging, algorithms, neural networks, systems
engineering and software architecture and engineering.
43
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 registered
patents, registered trademarks, registered designs, confidential technical information, and expertise in the development of LiDAR technology
and software for, among others, 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, 2024, we owned 66 issued patents and
had 128 pending patent applications. The portfolio includes U.S. and foreign patent applications filed in Israel, Europe (including Germany,
France and the United Kingdom), China, Japan and Korea. In addition, our company has registered U.S. and foreign trademarks. 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, receivers, optical devices, 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.
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.
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, and design wins with leading OEMs,
have established barriers to those who follow. We expect that our technology and continuing innovation, our longstanding cooperation with
leading OEMs as well as our recent collaboration with Mobileye, a leader in ADAS and autonomous driving technology, will support our position
as a leader in advancing LiDAR technology in the market based on several market differentiators.
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, 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.
44
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.
InnovizOne is manufactured at Magna’s automotive grade
facility in Holly, Michigan to meet demand for our LiDAR product. In this context, please see reference herein to the Magna Agreement
(as defined herein). Currently, our InnovizTwo samples are manufactured at our headquarters; however, we are also ramping-up manufacturing
activities for the InnovizTwo at our new contract manufacturing mass-production site in Asia. The first InnovizTwo samples are expected
to be manufactured at the new site during 2025.
Although manufacturing of some 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.
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
We are a global company focused on creating a positive social impact
by promoting the future of mobility and increasing road-traffic safety and welfare, all through the values of excellence, education, creation
and innovation. As such, we recognize the importance of creating shared values for our different stakeholders and translating those values
into measurable goals in order to guide our long-term success. We also have a responsibility to meet high standards of quality, safety
and sustainability as a service provider to the automotive industry.
In June 2024, we published our first Impact Report, which covers
the company’s initiatives and activities for 2022 to 2023. The report demonstrates our ongoing efforts to creating a positive impact
for our stakeholders through our business, products and operations. The report relates both to the unique impact of our products and technology,
aiming to redefine the landscape of automotive safety, as well as to our efforts to implement sustainable, inclusive and safe business
practices in our operations.
Our operations and day-to-day business activities take place under
the supervision of our dedicated nominating, environmental, social and governance committee of the board of directors, and with the assistance
of a reputable independent ESG consulting firm.
Our Impact Report is available on our website at
https://innoviz.tech/esg
.
Neither the report nor the content of our website are incorporated by reference into this Annual Report.
Regulation
Autonomous vehicles are subject to emerging regulatory frameworks
in the United States at the federal and state levels. In general, at both the federal and state level, the United States has supported
testing and development of autonomous functionality through open information exchange. For example, in January 2021, NHTSA expanded its
AV TEST Initiative from a pilot to a full program, and through this Initiative a variety of stakeholders provide documentation covering
specific topics, 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. NHTSA has been utilizing this
information to impose additional regulatory obligations on ADAS and autonomous driving systems. In particular, NHTSA has been engaged
in rulemaking to update certain FMVSS to address ambiguities and other issues created by the application of FMVSS to innovative, non-conventional
vehicle designs utilized, or anticipated to be utilized, in certain ADAS and autonomous driving vehicles. In 2023, NHTSA promulgated the
“Occupant Protection for Vehicles with Automated Driving Systems” final rule to update several FMVSS to account for vehicles
that are equipped with ADAS and do not have traditional manual controls associated with human drivers. It also jointly proposed a rule
with FMCSA regarding AEB test devices for heavy vehicles. In 2024, NHTSA finalized rules to update FMVSS for crash avoidance, safety messaging
and passengerless vehicles as well as a rule to require AEB by 2029 in all passenger and light duty vehicles. On January 15, 2025, NHTSA
proposed a voluntary national framework for the evaluation and oversight of certain vehicles equipped with automated driving systems.
The proposed framework, called AV STEP, that would remove the 2,500 cap on driverless vehicles allowed on the roadways and expand as well
as streamline the program for exemption from FVMSS for ADS-equipped vehicles, but would impose additional data reporting requirements
on all vehicles participating in AV STEP. Although we do not anticipate any near-term impediments to our technology and products, the
situation is an evolving one with some uncertainties and elements beyond our control. Many states in the U.S. have long imposed various
requirements on autonomous vehicle development and testing, including operational, registration and financial assurance requirements for
certain autonomous vehicle functions and activities. For example, California has been regulating autonomous vehicles in some fashion since
2012 through various restrictions and appears poised to continue to do so, as in December 2022, California introduced new legislation
that would prohibit full self-driving marketing claims. It is possible that restrictions at the state level in the U.S. will ease or be
removed as the data and experience supporting the safety of autonomous functionality continues to grow, but we cannot predict when or
whether that might happen.
45
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 autonomous
vehicles. Much of the emerging regulatory and legislative activity around autonomous vehicles in the EU has been focused on data privacy
and security, given the volume and types of data collected, stored and transmitted by autonomous vehicles. 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
NHTSA, which is part of USDOT. Currently, NHTSA’s TREAD reporting process, as well as its strict recall and reporting requirements
for any defects related to vehicle safety or any FMVSS non-compliance provide the principal legal framework for identifying and addressing
safety issues. Similar reporting and recall requirements may apply in other markets outside of the U.S.
However, the regulatory landscape in the U.S. and elsewhere is
an evolving one. To date, NHTSA’s guidance to industry generally has been supportive of AV technology development, testing and implementation.
More generally, NHTSA 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. More specifically, NHTSA has been granting exemptions from FMVSS compliance for
ADAS-equipped and AVs where it is satisfied that the non-compliance will not impose public safety issues and as a tool for encouraging
technology development, testing and innovation. At the same time, NHTSA is actively reviewing other potential regulatory barriers to AV
development as it proceeds to promulgate new regulations and to update certain FMVSS to address ambiguities and other issues created by
the application of FMVSS to innovative, non-conventional vehicle designs utilized, or anticipated to be utilized, in certain ADAS and
autonomous driving vehicles. In 2023, NHTSA promulgated the “Occupant Protection for Vehicles with Automated Driving Systems”
final rule to update several FMVSS to account for vehicles that are equipped with ADAS and do not have traditional manual controls associated
with human drivers. NHTSA also proposed rules to update FMVSS for crash avoidance, safety messaging and passengerless vehicles as well
as jointly proposed a rule with FMCSA regarding AEB test devices for heavy vehicles.
As noted above, many states have instituted restrictions and
requirements for autonomous vehicle technologies. At least 29 states and the District of Columbia have enacted some type of autonomous
vehicle regulations, and a number of state governors have also issued executive orders. These efforts largely focus on safety and regulate
commercial activity through permitting and reporting regimes.
Overall, the regulatory landscape is still evolving rapidly,
and uncertainties exist in the U.S. due to the recent change in Presidential Administration. As legal frameworks around autonomous vehicles
continue to develop and change in the U.S. and elsewhere, we may become subject to additional regulatory schemes and requirements.
46
As a LiDAR technology company, we also are subject to the laws
and regulations beyond those specific to vehicle safety standards and highway safety. For example, our products are governed by the Electronic
Product Radiation Control Program administered by the FDA. This Program establishes performance standards and imposes requirements for
registration, labelling, testing and reporting. Failure to comply with the Program may result a variety of 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 radiation control licensing and other requirements.
Similarly, as a global company deploying cutting-edge technology,
we are also subject to trade, export controls, customs product classification, hazard labelling and warning, and other sourcing and product
regulations. Our operations also are subject to various federal, state and local laws and regulations pertaining to our employees, such
as wage and hour, worker’s compensation and occupational health and safety regulations.
Like all companies operating in similar industries, we are subject
to a wide range of environmental laws and regulation at the federal and state level pertaining to matters such as emissions to air and
water, manufacture, processing, use, storage and distribution of chemical substances, hazardous waste generation and disposal, and 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 currently not a party to any material
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. See Note 9 of our consolidated financial
statements included elsewhere in this Annual Report, which is incorporated by reference in this Item 4.B., for additional information
regarding the Lawsuit.
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 four wholly owned subsidiaries: Innoviz Technologies Inc., which is incorporated
in the United States; Innoviz Technologies GmbH, which is incorporated under the laws of Germany; Innoviz Software Centre Bucharest S.R.L,
which is incorporated under the laws of Romania; and Innoviz Technologies Trading Shanghai Co., Ltd., which is incorporated under the
laws of the People’s Republic of China.
Innoviz Technologies BY LLC, formerly a wholly owned subsidiary
incorporated under the laws of Belarus, was liquidated in November 2024 following the cessation of its operations in 2022.
D. Property, Plant and Equipment
Our corporate headquarters are located in Rosh HaAin, Israel,
where we currently lease an office with approximately 16,350 square meters pursuant to a lease agreement dated November 1, 2021 (the “Lease
Agreement”) (incorporated by reference to Exhibit 4.14 to the Company’s Annual Report on Form 20-F for the Year Ended December
31, 2021 filed with the SEC on March 30, 2022). This facility contains engineering, research and development, testing, product, sales
and administrative functions. The initial term under the Lease Agreement is for 67 months and expires on January 31, 2028. We have an
option under the Lease Agreement to renew the lease for additional 60 months, which will be exercised automatically unless we inform the
lessor in advance. We also lease a small office space in Santa Clara, California, pursuant to a lease agreement that is in effect until
July 31, 2025, and a small office in Munich, Germany, pursuant to a lease agreement that is in effect until November 15, 2027.
Unless otherwise stated, all our facilities are 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.
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Item 4A
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Unresolved Staff
Comments
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None.
47
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Item 5
.
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Operating and Financial
Review and Prospects
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You should read the following discussion
and analysis of our financial condition and results of operations together with the 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. “Key Information—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 Tier-1 direct supplier of high-performance,
automotive grade LiDAR sensors and perception software that feature technological breakthroughs across core components and bring enhanced
vision and superior performance to enable safe autonomous driving at a mass scale. We believe that we provide a 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 and trucks.
We were founded in 2016. From our founding, our culture drew
from our 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. In 2018, we achieved a design win to power BMW’s Level 3 autonomous platform,
a program which reached maturity during 2024 and with vehicles already being sold with our LiDARs and perception software.
Since 2021, we have funded the development of two production
path programs: the InnovizOne and InnovizTwo LiDAR sensor and perception software suites. With the InnovizOne program transitioned from
the development phase into full series production in 2024, we eliminated duplicative cost structures and reduced spending on InnovizOne
development, while reinvesting a portion of the savings into the InnovizTwo sensor and perception software platform. All quoting and bidding
activity in our request for information and request for quotation pipeline is now focused on the InnovizTwo platform.
During 2022, we made the strategic decision to become a Tier-1
supplier of LiDAR and perception software to the automotive industry. This decision allows us to have direct technical discussions with
end customers and to improve pricing to automotive OEMs with the goal of continuing to strengthen our position in the automotive market.
This strategic decision has played a significant role in our subsequent major OEM program wins, as discussed below.
In 2022, following more than two years of extensive diligence
and qualification, we were selected by Volkswagen as its direct LiDAR supplier for automated vehicles within the Volkswagen brands with
our InnovizTwo next generation high-performance automotive-grade LiDAR sensor,
and
in 2023, we announced that Volkswagen aims to expand its use of our InnovizTwo LiDAR to its existing light commercial vehicle program,
the I.D Buzz.
In 2024, we announced that Mobileye will
use the InnovizTwo Long-Range and the new InnovizTwo Short- to Mid-Range LiDARs for the Mobileye Drive™ platform. The new InnovizTwo
Short- to Mid-Range leverages InnovizTwo Long-Range’s maturity and is designed to meet the requirements for light commercial vehicles,
shuttles, robotaxis, and can be customized to suit a wide array of vehicular design and functionality requirements. We believe that the
combination of our LiDARs and Mobileye’s platform is critical to enabling comprehensive sensing capabilities for navigating complex
urban environments and enhancing the overall safety and reliability of autonomous driving systems, and that this partnership showcases
the flexibility of our LiDARs to work across a variety of vehicle platforms to further testing and deployment of autonomous vehicles.
Our partners are leaders in deploying new technologies into the automotive industry. We believe that our close cooperation with these
partners and OEMs positions us well to make Level 3 and Level 4 autonomous driving a commercial reality.
48
The sustained cooperation with our customers provides our engineers
and other research and development personnel with a valuable competitive edge. These engineers and other research and development personnel
have been meticulously trained to design, operate, and verify our many ground-breaking innovations in accordance and in compliance with
the ISO26262 standard for Functional Safety in the automotive industry, and the IATF 16949:2016 certification for Quality Management
in the automotive industry. Compliance with these and other standards have been enforced by regular ongoing audits of Innoviz and rigorous
testing by our key suppliers, existing customers and prospective customers that thoroughly review 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 current demanding safety requirements for Level 2+ through Level 5 autonomous vehicles
at price points suitable for mass produced passenger vehicles.
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 4 (and Level 5 when applicable),
using both our long- and medium-range LiDARs. Our integrated custom design of advanced hardware and software components, which leverages
the multidisciplinary expertise and experience of our team, enables us to provide autonomous solutions that we believe will accelerate
widespread adoption across automakers at serial production scale. This means that we are positioned to penetrate the current market, which
is focused primarily on Level 2+, Level 3 and Level 4 production, and to continue to capture and extend our market share to 5 as
the market continues to mature.
We are currently expanding our third-party manufacturing capacity
through contract manufacturers to meet an anticipated increase in customer demand for our products.
Recent Developments
Entered into Multi-Year NRE Payment Plan with
Key Customers
On December 23, 2024, we announced a multi-year NRE payment plan
of approximately $80 million with key existing customers. NREs are expected to be paid between 2025 and 2027, of which over $40 million
are expected to be paid in 2025 with further amounts expected in 2026 and 2027. These payments would be incremental to revenues generated
from ongoing sales of LiDAR products based on existing and expected new orders coming from new programs. There can be no assurances, however,
that we will enter into definitive agreements, orders or receive payments with respect to the NRE payment plan.
Regained Compliance with Nasdaq’s Minimum
Bid Price Requirement
On January 2, 2025, we announced that we received formal written
confirmation from Nasdaq confirming that the Company has regained compliance with Nasdaq’s minimum bid price requirement. The closing
bid price of the ordinary shares was at $1.00 per share or greater for 10 consecutive business days from December 16 to December 30, 2024.
Accordingly, Nasdaq Listing Qualifications Staff notified the Company that it determined that the Company regained compliance with Nasdaq
Listing Rule 5550(a)(2), and that the matter was closed.
Integration of Perception Software with NVIDIA
DRIVE AGX Orin
On January 7, 2025, we announced our collaboration with NVIDIA
to allow our perception software to run seamlessly with the NVIDIA DRIVE AGX Orin platform, offering a range of software-driven features
designed to accelerate autonomous driving applications by allowing for real-time processing and advanced understanding of the vehicle’s
environment, enabling exceptional object detection, classification, and tracking capabilities.
Optimization of Operations
On February 4, 2025, we announced an optimization of our operations
to extend our cash runway and accelerate progress towards profitability and free cash flow generation, which includes a reduction in our
employee headcount by approximately 9% during the first quarter of 2025.
49
Registered Direct Offering
On February 10, 2025, we entered into the Securities Purchase
Agreement with the Purchasers. Pursuant to the Securities Purchase Agreement, we agreed to sell in the Offering 28,776,978 units to the
Purchasers at a purchase price of $1.39 per unit, with each unit consisting of one ordinary share and eight tenths of a warrant to purchase
one ordinary share. The Offering was consummated on February 12, 2025. We received net proceeds of approximately $37.3 million, after
deducting the placement agent fees and offering expenses. The ordinary shares and warrants were issued separately. The warrants are exercisable
at $1.69 per share and will expire on February 12, 2030. A holder of the warrants will not have the right to exercise any portion of its
warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any
of such holder’s affiliates or any other persons whose beneficial ownership of ordinary shares would be aggregated with the holder’s
or any of the holder’s affiliates), would beneficially own ordinary shares in excess of 4.99% (or, at the election of the holder,
9.99%) of the number of the ordinary shares outstanding immediately after giving effect to such exercise.
Appointment of Ido Luski
Udy Gal-On, the Company’s Chief Operating Officer, will
transition into the role of Co-Chief Operating Officer during the second quarter of 2025. Ido Luski, currently the Company’s VP
Delivery, will assume the role of Co-Chief Operating Officer alongside Mr. Gal-On during the second quarter of 2025.
Key Factors Affecting Innoviz’s Operating Results
We believe that our 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 Item 3.D.
”Key Information—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 have commenced the commercialization of 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 focus of the consumer
automotive market on Level 4, 3 and 2+ segments, we expect these verticals to continue to grow over the short to medium term,
we are aligning our focus and efforts on these segments, 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 4 and 3 segments
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 target markets such as robotaxis, shuttles, delivery
vehicles, trucks and, potentially, others. 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.
Design Wins
Our solutions are designed to be key enabling technologies 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 products and our ability to improve gross margins on the basis of volume and manufacturing
efficiencies.
InnovizTwo platform is based on an improved design, which allows:
(i) lower bill of materials, and (ii) more efficient manufacturing process, which together may allow for a significant cost reduction
and improved gross margins.
50
Continued Investment and Innovation
Our unique LiDAR and perception solutions feature technological
breakthroughs across core components and allow us to act as one of the leading suppliers 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 research
and development investments and our ability to attract and retain highly qualified and experienced research and development personnel.
These are necessary to both continue the work required on our current products and future products to full commercialization, and 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 research and development investments
may not be recovered.
Components of Results of Operations
Revenues
Our revenues derive primarily from sales of LiDAR sensors, critical
components and NRE 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.
NRE 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 at a point
in time upon customer acceptance.
Cost of Revenues
Cost of revenues include the manufacturing cost of LiDAR sensors,
which primarily consists of components costs, sub-assembly costs and personnel-related costs, and amounts paid to third-party contract
manufacturers and vendors. Cost of revenues also includes depreciation, costs of providing NRE, 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 research and development efforts are focused on enhancing
and developing cost efficient LiDAR solutions and the accompanying software suite.
Research and development expenses include:
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personnel-related expenses, including salaries, benefits, and stock-based compensation expense for personnel in research and engineering
functions;
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expenses related to materials, software licenses, depreciation, supplies and third-party services;
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prototype expenses; and
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an allocated portion of facility and IT costs.
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We expense research and development 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 research and development expenses will continue to be significant for the foreseeable future as we invest
in research and development activities to improve and enhance our product portfolio.
Sales and Marketing
Sales and marketing expenses include:
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personnel-related expenses, including salaries, benefits, and stock-based compensation expense for personnel in sales and marketing;
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sales and marketing activities, including the cost of sales commissions, marketing programs, trade shows, consulting services, promotional
materials and demonstration equipment, among other costs; and
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an allocated portion of facility and IT costs.
|
We expect our sales and marketing expenses to be similar as we focus our marketing activities
in the automotive market.
51
General and Administrative
General and administrative expenses include:
|
|
• |
personnel-related expenses, including salaries, benefits, and stock-based compensation expense for personnel in corporate, executive,
finance and other administrative functions;
|
|
|
• |
general and administration activities, including expenses relating to outside professional services, including legal, investors relations
and audit and accounting services; and
|
|
|
• |
the relevant portion of expenses for facilities, depreciation and IT costs that was not allocated to other operating expenses.
|
We expect our general and administrative expenses to be similar.
Financial Income, Net
Financial income, net consists primarily of interest on cash
and cash equivalents deposited in our bank account, exchange rate differences arising from our ILS denominated lease liabilities under
ASC 842, marketable securities remeasurement and private placement warrants 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 at time of purchase. 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 ILS 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.
A. Results of Operations
For a discussion of our results of operations for the year ended
December 31, 2022, including a year-to-year comparison between the years ended December 31, 2023 and December 31, 2022, as well as a discussion
of our liquidity and capital resources for the year ended December 31, 2022, refer to Item 5. “
Operating
and Financial Review and Prospects
” in our Annual Report on Form 20-F for the year ended December 31, 2023, filed with the
SEC on March 12, 2024.
52
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,
|
|||||||
|
|
2024
|
2023
|
||||||
|
|
(In thousands, except share and per share data)
|
|||||||
|
Revenues
|
$
|
24,268
|
$
|
20,876
|
||||
|
Cost of revenues
|
(25,429
|
)
|
(32,490
|
)
|
||||
|
Gross loss
|
(1,161
|
)
|
(11,614
|
)
|
||||
|
Operating expenses:
|
||||||||
|
Research and development
|
73,817
|
92,676
|
||||||
|
Sales and marketing
|
7,474
|
8,777
|
||||||
|
General and administrative
|
19,466
|
19,535
|
||||||
|
Total operating expenses
|
100,757
|
120,988
|
||||||
|
Operating loss
|
(101,918
|
)
|
(132,602
|
)
|
||||
|
Financial income, net
|
7,328
|
9,790
|
||||||
|
Loss before taxes on income
|
(94,590
|
)
|
(122,812
|
)
|
||||
|
Taxes on income
|
(167
|
)
|
(642
|
)
|
||||
|
Net loss
|
$
|
(94,757
|
)
|
$
|
(123,454
|
)
|
||
|
|
||||||||
|
Basic and diluted net loss per ordinary share
|
$
|
(0.57
|
)
|
$
|
(0.84
|
)
|
||
|
Weighted average number of ordinary shares used in computing
basic and diluted net loss per ordinary share
|
167,216,070
|
147,480,521
|
||||||
Comparison of the Years Ended December 31, 2024 and 2023
Revenues
|
|
Year ended December 31,
|
Change
|
Change
|
|||||||||||||
|
|
2024
|
2023
|
$
|
%
|
||||||||||||
|
|
(In thousands)
|
(In thousands)
|
(In thousands)
|
|||||||||||||
|
Revenues
|
$
|
24,268
|
$
|
20,876
|
$
|
3,392
|
16
|
%
|
||||||||
Revenues increased by approximately $3.4 million, or 16%, to approximately
$24.3 million for the year ended December 31, 2024, from approximately $20.9 million for the year ended December 31, 2023.
The increase in revenues was primarily due to increased sales of
NRE, which contributed $18.0 million in revenues during the year ended December 31, 2024 compared to $15.2 million in revenues during
the year ended December 31, 2023, as well as increased sales of LiDAR sensors and critical components.
53
Cost of Revenues and Gross Margin
|
|
Year ended December 31,
|
Change
|
Change
|
|||||||||||||
|
|
2024
|
2023
|
$
|
%
|
||||||||||||
|
|
(In thousands except percentages)
|
(In thousands)
|
||||||||||||||
|
Cost of revenues
|
$
|
25,429
|
$
|
32,490
|
$
|
(7,061
|
)
|
(22
|
)%
|
|||||||
|
Gross margin
|
(5
|
)%
|
(56
|
)%
|
||||||||||||
Cost of revenues decreased by approximately $7.1 million, or 22%,
to approximately $25.4 million for the year ended December 31, 2024, from approximately $32.5 million for the year ended December
31, 2023.
The decrease in cost of revenues was primarily due to decreased production inefficiencies
of InnovizOne, decreased excess and obsolete inventory and decreased machinery depreciation. The decrease in cost of revenues was partially
offset by an increase in cost related to sales of NRE. Gross margin increased to approximately (5)% for the year ended December 31, 2024,
from approximately (56)% for the year ended December 31, 2023, primarily due to increased sales of NRE, as well as the same
factors that resulted in the decrease in cost of revenues.
Operating Expenses
|
|
Year ended December 31,
|
Change
|
Change
|
|||||||||||||
|
|
2024
|
2023
|
$
|
%
|
||||||||||||
|
|
(In thousands)
|
(In thousands)
|
(In thousands)
|
|||||||||||||
|
Research and development
|
$
|
73,817
|
$
|
92,676
|
$
|
(18,859
|
)
|
(20
|
)%
|
|||||||
|
Sales and marketing
|
7,474
|
8,777
|
(1,303
|
)
|
(15
|
)%
|
||||||||||
|
General and administrative
|
19,466
|
19,535
|
(69
|
)
|
(0
|
)%
|
||||||||||
|
Total operating expenses
|
$
|
100,757
|
$
|
120,988
|
$
|
(20,231
|
)
|
(17
|
)%
|
|||||||
Research and Development
Research and development expenses decreased by approximately $18.9
million, or 20%, to approximately $73.8 million for the year ended December 31, 2024, from approximately $92.7 million for the year ended
December 31, 2023.
The decrease was primarily attributable to decreased payroll of
$8.7 million (primarily related to allocation of direct costs related to sales of NRE and decreased personnel expenses), decreased materials
purchases and prototype expenses of $3.7 million, decreased third-party consulting services and software expenses of $3.6 million and
decreased stock-based compensation of $2.5 million.
Sales and Marketing
Sales and marketing expenses decreased by approximately $1.3 million,
or 15%, to approximately $7.5 million for the year ended December 31, 2024, from approximately $8.8 million for the year ended December
31, 2023.
The decrease was primarily attributable to decreased payroll of
$0.8 million (primarily attributed to a decrease in headcount), decreased consulting services expenses of $0.2 million and decreased stock-based
compensation of $0.2 million.
General and Administrative
General and administrative expenses were approximately $19.5 million
for the year ended December 31, 2024, compared to General and administrative expenses of approximately $19.5 million for the year ended
December 31, 2023.
The
difference was primarily related to decreased stock-based compensation of $1.1 million, offset by increased consulting services (primarily
legal) of $0.9 million and increased payroll of $0.2 million.
54
Financial Income, net
|
|
Year ended December 31
|
Change
|
Change
|
|||||||||||||
|
|
2024
|
2023
|
$
|
%
|
||||||||||||
|
|
(In thousands)
|
(In thousands)
|
(In thousands)
|
|||||||||||||
|
Financial income, net
|
$
|
7,328
|
$
|
9,790
|
$
|
(2,462
|
)
|
(25
|
)
%
|
|||||||
Financial income, net was approximately $7.3 million for the
year ended December 31, 2024, compared to financial income, net of approximately $9.8 million for the year ended December 31, 2023.
The decrease was primarily related to decreased bank deposit interest
income of $1.1 million, decreased net gain related to marketable securities of $0.8 million, warrants liability revaluation of $0.3 million
as well as
foreign currency exchange differences (also including differences arising
from our ILS denominated lease liabilities under ASC 842) of $0.2 million.
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.
55
Foreign Currency Risk
Our financial results are reported in USD, and changes in the exchange
rate between USD and local currencies in the countries in which we operate (primarily ILS) may affect the results of our operations. In
the year ended December 31, 2024, approximately 92% of our revenues were denominated in USD. The USD cost of our operations in countries
other than the United States may be negatively influenced by devaluation of the USD against other currencies.
During the year ended December 31, 2024, the value of the USD appreciated
against the value of the ILS by approximately 0.6%. Our most significant foreign currency exposures are related to our operations in Israel.
We hedge our anticipated exposure by exchanging USD into ILS in amounts sufficient to fund up to three months of operations and monitoring
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 bank deposits and marketable securities, primarily in USD.
Our cash and cash equivalents are exposed to market risk related
to changes in interest rates, 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, bank
deposits and restricted 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. We do not intend to invest more than 5% of our investment
portfolio in a single security at time of purchase.
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, 2024 and 2023.
B. Liquidity and Capital Resources
Sources of Liquidity
During the years ended December 31, 2024 and 2023, we funded our operations primarily
from the approximately $370 million in proceeds we received in connection with the Business Combination (completed in April 2021) and,
to a lesser extent, from the approximately $61.4 million in net proceeds we received from our August 2023 underwritten equity offering
and the revenues generated from the sale of goods and services.
As of December 31, 2024, we had approximately $68.0 million
in cash and cash equivalents, short term bank deposits, short term restricted cash and marketable securities. Cash equivalents and marketable
securities are invested in accordance with our investment policy.
Cash Flow Summary
The following table summarizes our cash flows for the periods
presented:
|
|
Year ended December 31,
|
|||||||
|
|
2024
|
2023
|
||||||
|
|
(In thousands)
|
(In thousands)
|
||||||
|
Net cash used in operating activities
|
$
|
(76,955
|
)
|
$
|
(93,053
|
)
|
||
|
Net cash provided by investing activities
|
75,468
|
1,064
|
||||||
|
Net cash provided by financing activities
|
224
|
61,856
|
||||||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
308
|
515
|
||||||
|
Net decrease in cash, cash equivalents and restricted cash
|
$
|
(955
|
)
|
$
|
(29,618
|
)
|
||
56
Operating Activities
During the year ended December 31, 2024, operating activities used
approximately $77.0 million. The primary factors affecting operating cash flows during the year ended December 31, 2024 were the
net loss of approximately $94.8 million, impacted by non-cash charges of approximately $17.8 million consisting of stock-based
compensation of approximately $19.7 million, depreciation and amortization of approximately $7.8 million, remeasurement of private
warrants of approximately $(0.2) million and an increase in working capital of approximately $(9.5) million.
During the year ended December 31, 2023, operating activities used
approximately $93.1 million. The primary factors affecting operating cash flows during the year ended December 31, 2023, were the net
loss of approximately $123.5 million, impacted by non-cash charges of approximately $30.4 million consisting of stock-based compensation
of approximately $22.3 million, depreciation and amortization of approximately $9.2 million, remeasurement of private warrants
of approximately $(0.5)
million and an increase in working capital of approximately $(0.6)
million.
Investing Activities
During the year ended December 31, 2024, cash provided by investing
activities was approximately $75.5 million, which primarily resulted from withdrawal of bank deposits of approximately $127.3 million
and proceeds from sales and maturities of marketable securities of approximately $62.2 million, partially offset by
investment
in marketable securities of approximately $55.5 million, investment in bank deposits of approximately $54.1 million and purchase of property
and equipment of approximately $4.4 million.
During the year ended December 31, 2023, cash provided by investing
activities was approximately $1.1 million, which primarily resulted from the withdrawal of bank deposits of approximately $141.5
million, proceeds from sales and maturities of marketable securities of approximately $83.5 million, partially offset by investments in
bank deposits of approximately $165.6 million, investment in marketable securities of approximately $51.7 million and
purchases
of property, plant, and equipment of approximately $6.6 million.
Financing Activities
During the year ended December 31, 2024, cash provided by financing
activities was approximately $0.2 million resulting from the exercise of employee stock options.
During the year ended December 31, 2023, cash provided by financing
activities was approximately $61.9 million resulting from $61.4 million in net proceeds from underwritten public offering and $0.5
million from the exercise of employee stock options.
Funding Requirements
We expect to continue to invest substantially in our research and
development activities and incur commercialization expenses related to product sales, marketing, manufacturing and distribution. As we
achieve further commercial success, we may need to obtain additional funding to support our continuing operations. In addition, our financial
stability is reviewed by existing and potential customers from time to time and we believe that a stronger cash position provides us additional
time to execute our growth strategy and is perceived positively by such customers and may also provide us with higher grading in such
customers’ diligence processes. If we are unable to obtain 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, 2024, we had cash and cash equivalents, short term bank deposits,
short term restricted cash and marketable securities of approximately $68.0 million. We expect those funds to be sufficient to continue
to execute our business plan for at least the next 12 months.
Additionally, we intend to fund our operations
from revenues generated from the sale of goods and services, together with funds received under the registered direct offering and savings
pursuant to optimization of our operations (both of which took place early in 2025).
We also expect our losses to be similar
or lower in future periods as we:
|
|
• |
anticipate additional inflows of NRE payments from various programs to balance some of our losses;
|
|
|
• |
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;
|
|
|
• |
continue to invest in research and development;
|
|
|
• |
increase our test and validation activities as part of our Tier-1 responsibilities;
|
57
|
|
• |
produce an inventory of our LiDAR solutions; and
|
|
|
• |
continue to invest in sales and marketing activities and develop our distribution infrastructure.
|
Because we will incur costs and expenses from
these efforts and the incremental revenue
will not be sufficient to cover these
costs and expenses, 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
Our remaining performance obligations are comprised of application
engineering services not yet rendered. As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance
obligations was $15.3 million, which we expect to recognize as revenues within the next 12 months.
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.
C. Research and Development, Patents and Licenses, etc.
Research and Development
We have invested a significant amount of time and expense into
research and development of LiDAR-based technologies. Our research and development team is the largest department in the company and,
as of December 31, 2024, was comprised of 340 employees. Our ability to maintain a leadership position in the industry depends to a great
degree on our ongoing research and development activities. Our research and development 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.
Creating an automotive-grade, eye-safe and cost efficient
~905nm wavelength LiDAR solution and the accompanying software suite 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 registered
patents, registered trademarks, registered designs, confidential technical information, and expertise in the development of LiDAR technology
and software for, among others, 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.
D. Trend Information
Supply Chain
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.
58
E. Critical Accounting Policies and Use of Estimates
Our 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 U.S. 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.
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 ASC 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 ASC 606, we assess the goods or services promised within the contract and determine those that are performance
obligations and assess whether each promised good or service is distinct.
We evaluate each performance obligation to determine if it is satisfied
at a point in time or over time.
Inventory Reserves
Our inventory are stated at the lower of cost or estimated net
realizable value. Cost of inventory is determined as follows:
|
|
• |
Raw materials and work in process - based on weighted average cost.
|
|
|
• |
Finished goods - mainly based on weighted average standard cost method.
|
We charge cost of revenue for write-downs of inventory 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.
Losses expected to arise from firm non-cancellable commitments
for future purchases of inventory are charged to cost of revenues unless the losses are recoverable through firm sales contracts or other
means.
Useful Lives of Property, Plant, and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and impairment. The estimated useful lives of property and equipment are determined when those assets are initially recognized and are
routinely reviewed for the remaining estimated useful lives. When useful life is reassessed for an asset, the remaining carrying amount
of the asset is accounted for prospectively and depreciated over the revised estimated useful life.
59
|
Item 6.
|
Directors, Senior
Management and Employees
|
A. Directors and Senior Management
The following table provides information about our directors and
executive officers as of March 1, 2025. The address for each of the directors and executive officers is 5 Uri Ariav Street, Building C,
Rosh HaAin, Israel 4809202.
|
Name
|
|
Age
|
|
Position(s)
|
|
Omer Keilaf
|
|
45
|
|
Chief Executive Officer, Co-Founder and Director
|
|
Eldar Cegla
|
|
55
|
|
Chief Financial Officer
|
|
Avishay Moscovici
|
|
57
|
|
Chief Research Development Officer
|
|
Elad Hofstetter
|
|
43
|
|
Chief Business Officer
|
|
Udy Gal-On
|
|
56
|
|
Co-Chief Operating Officer
|
|
Ido Luski
|
|
50
|
|
Co-Chief Operating Officer
|
|
Amichai Steimberg
|
|
62
|
|
Chairperson of the Board of Directors
|
|
Aharon Aharon
|
|
70
|
|
Director
|
|
Dan Falk
|
|
80
|
|
Director
|
|
Stefan Jacoby
|
|
67
|
|
Director
|
|
Ronit Maor
|
|
54
|
|
Director
|
|
James Sheridan
|
|
57
|
|
Director
|
|
Orit Stav
|
|
54
|
|
Director
|
|
Alexander von Witzleben
|
|
61
|
|
Director
|
Executive Officers
Omer David Keilaf, Chief Executive Officer,
Co-Founder 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 IDF, where he served as
the System and Product Team Manager, research and development 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.
Avishay Moscovici, Chief Research Development
Officer
Avishay Moscovici
has
served as our Chief Research Development Officer since February 2024. He previously served as our VP Software Engineering from 2019
to 2024 and as our Director of Software Engineering from 2017 to 2019. Prior to joining Innoviz, Mr. Moscovici served as VP of Research
Development at Rachip Ltd. from 2016 to 2017. Before joining Rachip Ltd., Mr. Moscovici served in a number of roles in Motorola
Semiconductor/Freescale Semiconductor Israel from 2000-2016, including Director of Engineering, overseeing its software and hardware activities.
Mr. Moscovici holds a BSc and an MSc in Electronic Engineering, and an MBA in Information Systems from Tel-Aviv University, Israel, all
Magna Cum Laude.
60
Elad Hofstetter, Chief Business Officer
Elad Hofstetter
has
served as our Chief Business Officer since September 2023. He previously served as our VP Product Management from 2021 to 2023 and as
our Product and Program Manager from 2018 to 2021. Prior to joining Innoviz, Mr. Hofstetter served in a number of roles at LifeBEAM Technologies
Ltd., including Engineering Manager from 2017-2018. Before joining LifeBEAM Technologies Ltd., Mr. Hofstetter was a QA investigator
in Teva Pharmaceutical Industries Ltd., and a commander and medic in the IDF Commando Unit. Mr. Hofstetter holds a BSc and an MSc in Bio-Medical
Engineering from Tel Aviv University, Israel.
Udy Gal-On, Co-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 the Technion-Israel Institute of Technology. In the second quarter of 2025, Mr. Gal-On will transition into the role of
Co-Chief Operating Officer aside Mr. Luski.
Ido Luski, Co-Chief Operating Officer
Ido Luski
will
assume the role of Co-Chief Operating Officer aside Mr. Gal-On in the second quarter of 2025. He previously served as our VP Delivery
from 2021 to 2025 and as our Director of Project Management from 2019 to 2021. Prior to joining Innoviz, Mr. Luski served as Director
of System Engineering at Intel Corporation’s (Nasdaq: INTC) RealSense group and managed system engineering groups at Elbit Systems
Ltd. (TASE: ESLT). Mr. Luski holds a BSc in Software Engineering from the Academic College of Tel Aviv-Yaffo, Israel, and an MBA from
Tel-Aviv University, Israel.
Directors
Amichai Steimberg, Chairperson of the Board
of Directors
Amichai Steimberg
has
served on our board of directors since April 2021 and currently serves as the chairperson of the board of directors. 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 and non-profit organizations. Mr. Steimberg holds a BSc in Agricultural Economics and an MBA from the Hebrew University
in Jerusalem.
Aharon Aharon, Director
Aharon Aharon
has
served on our board of directors since April 2021. 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 and as
a director of the Center of Educational Technology (CTE) and E4E – Education for Excellence, both are Israeli non-governmental organizations.
From 2017 to 2021, Mr. Aharon served as the Chief Executive Officer of the Israel Innovation Authority (the “IIA”), an
independent public entity that operates for the benefit of the Israeli innovation ecosystem and Israeli economy as a whole. Prior to joining
the IIA, 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 Technion-Israel Institute of
Technology.
Dan Falk, Director
Dan Falk
has served
on our board of directors since April 2021. Mr. Falk currently serves as a member of the board of directors of the following companies:
Nice Ltd. (Nasdaq: NICE) and Evogene (Nasdaq: EVGN). From 1999 to 2001, 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. (acquired by KLA Corporation
(NYSE: KLAC)), 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. (acquired by QlikTech International AB), Orbotech Ltd.
(NYSE: KLAC) and Ormat Technologies Inc. (NYSE: ORA). Mr. Falk holds a B.A. degree in Economics and Political Science and an MBA,
both from the Hebrew University.
61
Stefan Jacoby, Director
Stefan Jacoby
has
served on our board of directors since January 2024. Mr. Jacoby currently serves as a member of the board of directors of the
following companies: Sion Power Corporation and Openlane Inc. (NYSE:KAR). Mr. Jacoby also serves as a member of the compensation and nomination
committee of Openlane Inc. His prior experience includes roles as executive vice-president of General Motors Company, global chief executive
officer and president of Volvo Car Corporation, Sweden and chief executive officer and president of Volkswagen Group of America. Mr. Jacoby
also holds a degree in Business Administration from the University of Cologne.
Ronit Maor, Director
Ronit Maor
has
served on our board of directors since April 2021. 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.
James Sheridan, Director
James Sheridan
has
served on our board of directors since April 2021. Mr. Sheridan is a senior operating executive with over 25 years of experience
and deep experience in the automotive industry. Since 2020, Mr. Sheridan has served as President of Perception Capital Partners. Mr. Sheridan
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 Inc., Senior Expert at McKinsey, CPO at Champion, and a variety of roles with Ford
Motor. Mr. Sheridan earned a B.A. from the College of the Holy Cross and MBA 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
has
served on our board of directors since April 2021. Ms. Stav is a seasoned investment manager with 20 years of experience in the technology,
venture capital, and private equity sectors. Ms. Stav currently serves as a member of the board of directors of: Menora Mivtachim Holdings
Ltd., Camtek Ltd., Doral Renewable Energy Resources Ltd., and Effi Capital Nadlan. 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 an MBA from Hertfordshire University, UK.
Alexander Von Witzleben, Director
Alexander
von
Witzleben
has served on our board of directors since December 2023.
Mr. von Witzleben served in different executive positions in Arbonia AG since 2015 and currently serves as executive chairperson of its
board and a member of its nomination, compensation and audit committees. In addition, Mr. von Witzleben currently serves as the chairperson
of the board of directors of Feintool International Holding, AG, chairperson of the supervisory board of PVA TePla AG and VERBIO Vereinigte
BioEnergie AG, and serves as a board member and supervisory board member for several private companies. Mr. von Witzleben holds a degree
in economics and business administration from the University of Passau, Germany.
62
B. Compensation of Directors and Executive Officers
The table below reflects the Company’s compensation costs
related to the employment of our five most highly compensated office holders (as defined in Israel’s Companies Law) with respect
to the year ended December 31, 2024. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”
For purposes of the table below, “compensation” includes amounts accrued or paid in connection with salary, bonuses, equity-based
compensation, retirement or termination payments, benefits and perquisites (such as car and phone), social benefits and any undertaking
to provide such compensation. All amounts reported in the table are in terms of cost to the Company (in USD), as recognized in our financial
statements for the year ended December 31, 2024, including compensation paid to such Covered Executives following the end of the year
in respect of services provided during the year. Each of the Covered Executives was covered by our directors’ and officers’
liability insurance policy in accordance with applicable law and our Articles.
|
Name and Principal Position
(1)
|
Salary and benefits
(2)
|
Bonus
|
Equity-Based Compensation
(3)
|
Total
|
||||||||||||
|
Omer Keilaf (
Chief Executive Officer
)
|
$
|
436,982
|
$
|
0
|
$
|
1,267,497
|
$
|
1,704,479
|
||||||||
|
Oren Buskila (
former Chief Research Development Officer)
|
$
|
167,362
|
$
|
0
|
$
|
429,631
|
$
|
596,994
|
||||||||
|
Udy Gal-On (
Co
-
Chief Operating
Officer
)
|
$
|
266,813
|
$
|
0
|
$
|
443,859
|
$
|
710,672
|
||||||||
|
Eldar Cegla (
Chief Financial Officer
)
|
$
|
295,970
|
$
|
0
|
$
|
334,691
|
$
|
630,661
|
||||||||
|
Avishay Moscovici (
Chief Research Development Officer
)
|
$
|
283,718
|
$
|
0
|
$
|
260,814
|
$
|
544,532
|
||||||||
| (1) |
All Covered Executives were employed on a full time (100%) basis during 2024. Mr. Buskila resigned from his position as Chief Research
Development Officer on February 28, 2024.
|
| (2) |
Includes the Covered Executive’s gross salary and benefits and perquisites, including those mandated by applicable law. Such
benefits and perquisites may include, to the extent applicable to the Covered Executives, payments, contributions and/or allocations for
savings funds (e.g., Managers’ Life Insurance Policy), education funds (referred to in Hebrew as “keren hishtalmut”),
pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurance (e.g., life, disability, accident),
telephone, convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent with the
Company’s policies.
|
| (3) |
Represents the equity-based compensation expenses recorded in the Company’s consolidated financial statements for the year
ended December 31, 2024, based on the equity fair value on the grant date, calculated in accordance with accounting guidance for equity-based
compensation. For a discussion on the assumptions used in reaching this valuation, see Note 11 to our consolidated financial statements
included in this Annual Report.
|
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.
|
We do not have any written agreement with any director providing
for benefits upon the termination of such director’s relationship with our 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.
63
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.
Aggregate Compensation of Office Holders
The aggregate compensation, including stock-based compensation,
paid by our company to its executive officers and directors as a group for the year ended December 31, 2024, was approximately $6.4
million (including one executive officer who left the Company during 2024). Such 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.
As of December 31, 2024, options to purchase 3,453,214 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 $8.01 per ordinary share.
In addition, 2,211,642 RSUs granted to our executive officers
and directors, were outstanding under our equity incentive plans as of December 31, 2024.
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, environmental, social and governance committee: $50,000, $45,000 and $42,500, respectively; members of the audit committee,
compensation committee and nominating, environmental, social and governance committee: $42,500, $40,000 and $38,750, respectively; and
each other non-employee director: $35,000. Such compensation is not cumulative and the non-employee directors receive the highest level
of compensation to which they are entitled. Additionally, we grant the chairperson of the board of directors an annual grant in a value
of up to $300,000, and each of our non-employee directors annual grants in a value of up to $100,000 each. We also 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, 2024, a total of 4,726,401 options to purchase ordinary shares were outstanding under
the 2016 Plan, with a weighted average exercise price of $0.85 per ordinary share. Our board of directors, or a duly authorized committee
of our board of directors, administers the 2016 Plan.
64
2021 Share Incentive Plan
In 2021, we adopted 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 consummation of the Business Combination,
we ceased to grant any awards under the 2016 Plan, though previously granted options under the 2016 Plan remain outstanding and governed
by the 2016 Plan. As of December 31, 2024, options to purchase 6,130,886 of our ordinary shares and 16,859,323 RSUs were outstanding under
the 2021 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, that 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, ordinary 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. On January 1, 2025,
the number of ordinary shares reserved for the 2021 Plan increased by 7,187,592. The total number of ordinary shares reserved and available
for future equity grants under the 2021 Plan, as of February 18, 2025 was 8,838,166.
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.
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, performance restricted
share units and other stock-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.
Clawback Policy
In 2023, we adopted a Clawback Policy in compliance with the
SEC rules and Nasdaq listing standards to recover any excess incentive-based compensation from current and former executive officers after
an accounting restatement. A copy of the Clawback Policy is filed as Exhibit 97 to this Annual Report.
65
C. Board Practices
Board of Directors
Under the Companies Law and our 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 has the right to appoint one director to our board of directors (the “Perception 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.
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 Orit Stav, Aharon Aharon and Stefan Jacoby and their terms expire at our annual general meeting to
be held in 2027;
|
|
|
• |
the Class II directors are Dan Falk and Ronit Maor and their terms expire at our annual general meeting to be held in 2025;
and
|
|
|
• |
the Class III directors are Amichai Steimberg, Omer Keilaf and Alexander von Witzleben and their terms expire at our annual
general meeting to be held in 2026.
|
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, environmental, social and governance 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, environmental,
social and governance 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, environmental, social and governance 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.
66
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 our company, (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 seven independent directors.
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.
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 Nasdaq. 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 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 with limited exceptions. We rely on this “home country practice exemption” with
respect to (a) the quorum requirement for shareholder meetings and (b) obtaining shareholder approval for certain corporation actions.
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 corporate
governance rules.
67
We will seek shareholder approval for all corporate actions requiring
such approval under the requirements of the Companies Law, rather than seeking approval for corporate actions in accordance with Nasdaq
Listing Rule 5635. In particular, under the Nasdaq Listing Rule, shareholder approval is generally required for: (i) an acquisition of
shares/assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director,
officer or 5% shareholder has greater than a 5% interest (or such persons collectively have a 10% or greater interest) in the target company
or the assets to be acquired or the consideration to be received and the present or potential issuance of ordinary shares, or securities
convertible into or exercisable for ordinary shares, could result in an increase in outstanding common shares or voting power of 5% or
more; (ii) the issuance of shares leading to a change of control; (iii) adoption/amendment of a stock option or purchase plan or other
equity compensation arrangements, pursuant to which stock may be acquired by officers, directors, employees or consultants (with certain
limited exception); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable
for, equity) of a listed company via a private placement (and/or via sales by directors/officers/5% shareholders) if such equity is issued
(or sold) at below the greater of the book or market value of shares. We will seek shareholder approval for all actions requiring such
under the Companies Law. Under the Companies Law, the adoption of, and material changes to, equity-based compensation plans generally
require the approval of the board of directors.
We otherwise comply with and intend to continue to comply with
the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may in the future, however, decide to use other
foreign private issuer exemptions with respect to some or all the other Nasdaq listing rules. Following our home country governance practices
may provide less protection than is accorded to investors under the Nasdaq listing rules applicable to domestic issuers.
Chairperson of the Board
Our Articles provide that the chairperson of the board of directors
is appointed by the members of the board of directors and serves as chairperson of the board of directors 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:
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• |
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
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• |
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 of directors may
not be vested with authorities that are granted to those subordinated to the chief executive officer; and the chairperson of the board
of directors 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, environmental, social and governance 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, environmental, social and governance 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, environmental, social and governance committee.
68
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:
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• |
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;
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• |
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;
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• |
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;
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• |
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
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• |
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://ir.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:
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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;
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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;
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• |
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
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• |
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://ir.innoviz.tech
.
69
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.
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 public company’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:
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• |
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
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• |
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.
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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:
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the education, skills, experience, expertise and accomplishments of the relevant office holder;
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• |
the office holder’s position, responsibilities and prior compensation agreements with him or her;
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• |
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;
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• |
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
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• |
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 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:
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• |
with regard to variable components of compensation:
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• |
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
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70
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• |
the ratio between variable and fixed components, as well as the limit on the values of variable components at the time of their grant.
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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;
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• |
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
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• |
a limit on retirement grants.
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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.
71
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,
restricted share units and performance share units, in accordance with our share incentive plan then in place. All equity-based incentives
granted to executive officers are subject to vesting periods and/or performance milestones 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 in April 2021.
Nominating, Environmental, Social and Governance
Committee
The members of the nominating, environmental, social and governance
committee are Orit Stav and Aharon Aharon. Orit Stav serves as the chairperson of the nominating, environmental, social and governance
committee. The nominating, environmental, social and governance committee is responsible, among other things, for:
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|
• |
identify, review and evaluate candidates to serve as members of our board of directors, recommend to our board of directors nominees
for election as directors of the Company, and review and evaluate incumbent members of the board of directors;
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• |
make recommendations to our board of directors regarding corporate governance guidelines and matters;
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• |
oversee all aspects of the Company’s corporate governance functions and ethical conduct; and
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• |
oversee the Company’s programs and strategies related to environmental, social and governance matters.
|
The charter of the nominating, environmental, social and governance committee is available
without charge at
https://ir.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:
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• |
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;
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• |
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;
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72
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• |
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
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• |
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”).
|
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:
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• |
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;
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• |
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;
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a financial liability imposed on the office holder in favor of a third-party;
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a financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding;
and
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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.
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An Israeli company may not indemnify or insure an office holder
against any of the following:
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• |
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;
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a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the
office holder;
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an act or omission committed with intent to derive illegal personal benefit; or
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a fine, monetary sanction or forfeit levied against the office holder.
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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 to the fullest extent permitted under applicable law. Our office holders are currently covered by a directors and
officers’ liability insurance policy.
We have entered into
agreements with certain 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.
73
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 on a consolidated basis 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. Notwithstanding the foregoing, in connection with the consummation of the Business Combination,
we agreed to indemnify certain former directors and officers of Collective Growth. On March 28, 2024, Sheadrick Richards, a purported
stockholder of Collective Growth, filed the Lawsuit. The Lawsuit alleges that Collective Growth’s disclosures in connection
with the Business Combination (completed in April 2021) were materially incomplete and misleading, and that the directors breached their
fiduciary duties. Although we maintain insurance and run-off coverages in amounts and with deductibles that we believe are appropriate
for our operations, our insurance and run-off coverages may not cover all claims that have been or may be brought against us, and insurance
coverage may not continue to be available to us at a reasonable cost.
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.
Ms. Sharon Cohen, CPA from Deloitte IL Co, a
firm in the Deloitte Global Network served as our internal auditor for the year ended December 31, 2024.
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,
2024, we had 415 employees.
On January 31, 2024, we announced a strategic realignment of
our operations to expand our cash runway and optimize our path towards profitability and free cash flow generation, which included a reduction
in the company’s headcount by approximately 13% during the first quarter of 2024.
In addition, on February 4, 2025, we announced an optimization
of our operations to extend our cash runway and accelerate progress towards profitability and free cash flow generation, which includes
a reduction in our employee headcount by approximately 9% during the first quarter of 2025.
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 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 government 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. “
Directors, Senior Management and
Employees—Compensation of Directors and Executive Officers —Share Option Plans
.”
F. Disclosure of a registrant’s action to recover erroneously
awarded compensation
None.
74
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Item 7.
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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 March 1, 2025, by:
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• |
each person or entity known by us to own beneficially more than 5% of our outstanding shares;
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each of our directors and executive officers individually; and
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all of our executive officers and directors as a group.
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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
as of March 1, 2025, and restricted share units that shall vest within 60 days of March 1, 2025, 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 198,961,957 ordinary shares outstanding as of March 1, 2025.
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 5 Uri
Ariav Street, Building C, Rosh HaAin 4809202, Israel.
A description of any material relationship that our principal shareholders have had
with us or any of our affiliates since January 1, 2024, is included under Item 7.B. “
Major
Shareholders and Related Party Transactions—Related Party Transactions
.”
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Name of Beneficial Owner
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Number
|
%
|
||||||
|
Five Percent or More Holders
|
||||||||
|
CVI Investments, Inc. (1)
|
14,388,489
|
7.2
|
|
|||||
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|
||||||||
|
Directors and Executive Officers
|
||||||||
|
Omer Keilaf (2)
|
4,765,206
|
2.4
|
|
|||||
|
Eldar Cegla (3)
|
554,616
|
*
|
||||||
|
Elad Hofstetter (4)
|
169,088
|
*
|
||||||
|
Avishay Moscovici (5)
|
334,649
|
*
|
||||||
|
Udy Gal-On (6)
|
258,700
|
*
|
||||||
|
Ido Luski (7)
|
259,736
|
*
|
||||||
|
Amichai Steimberg (8)
|
402,484
|
*
|
||||||
|
Aharon Aharon (9)
|
127,246
|
*
|
||||||
|
Dan Falk (9)
|
127,246
|
*
|
||||||
|
Ronit Maor (9)
|
127,246
|
*
|
||||||
|
Orit Stav (9)
|
127,246
|
*
|
||||||
|
James Sheridan (10)
|
3,257,315
|
1.6
|
|
|||||
|
Alexander von Witzleben (11)
|
79,017
|
*
|
||||||
|
Stefan Jacoby (12)
|
74,243
|
*
|
||||||
|
All executive officers and directors as a
group (14 persons)
|
10,664,038
|
5.2 |
|
|||||
| * |
less than 1%
|
| (1) |
Based on information reported on Schedule 13G filed with the SEC on February 18, 2025, each of CVI Investments, Inc., and Heights
Capital Management, Inc., has the shared power to vote or direct to vote 14,388,489 ordinary shares and the shared power to dispose or
to direct the disposition of 14,388,489 ordinary shares. The address of the principal business office of CVI Investments, Inc. is P.O.
Box 309GT Ugland House South Church Street George Town Grand Cayman KY1-1104 Cayman Islands, and the address of the principal business
office of Heights Capital Management, Inc. is 101 California Street, Suite 3250 San Francisco, California 94111.
|
| (2) |
Consists of
2,917,510 ordinary shares and 1,847,696 ordinary shares issuable
upon vesting of RSUs or exercise of options or warrants that are exercisable as of or within 60 days of March 1, 2025.
|
| (3) |
Consists of
219,215 ordinary shares and 335,401 ordinary shares issuable upon
vesting of RSUs or exercise of options that are exercisable as of or within 60 days of March 1, 2025.
|
| (4) |
Consists of
46,698 ordinary shares and 122,390 ordinary shares issuable upon
vesting of RSUs or exercise of options that are exercisable as of or within 60 days of March 1, 2025.
|
| (5) |
Consists of
110,107 ordinary shares and 224,542 ordinary shares issuable upon
vesting of RSUs or exercise of options that are exercisable as of or within 60 days of March 1, 2025.
|
| (6) |
Consists of
87,790 ordinary shares and 170,910 ordinary shares issuable upon
vesting of RSUs or exercise of options that are exercisable within 60 days of March 1, 2025.
|
| (7) |
Consists of
89,087 ordinary shares and 170,649 ordinary shares issuable upon
vesting of RSUs or exercise of options that are exercisable within 60 days of March 1, 2025.
|
| (8) |
Consists of
211,255 ordinary shares and 191,229 ordinary shares issuable
upon vesting of RSUs that vest within 60 days of March 1, 2025.
|
| (9) |
Consists of
63,503 ordinary shares and 63,743 ordinary shares issuable
upon vesting of RSUs that vest within 60 days of March 1, 2025.
|
| (10) |
Consists of
63,503 ordinary shares and 63,743 ordinary shares issuable
upon vesting of RSUs that vest within 60 days as of March 1, 2025. In addition, Perception Capital Partners, LLC directly holds 82,400
ordinary shares and 3,047,669 warrants to purchase ordinary shares at a price of $11.50 per share. Mr. Sheridan is the Perception Director
and may be deemed to be the beneficial owner of the securities held by Perception Capital Partners, LLC.
|
| (11) |
Consists of 15,274 ordinary shares and
63,743 issuable upon vesting of
RSUs that vest within 60 days of March 1, 2025.
|
| (12) |
Consists of
10,500 ordinary shares and 63,743 issuable upon vesting of
RSUs that vest within 60 days of March 1, 2025.
|
75
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, 2022. 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 substantially all our shares are held in book-entry form,
we are not aware of the identity of all of our shareholders. As of
March 1, 2025,
we had 75,504 ordinary shares held by 4 U.S. resident shareholders of record.
B. Related Party Transactions
The following is a description of our related party transactions
since January 1, 2024.
Registration Rights Agreement
In December 2020, 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
In December 2020, Innoviz and Antara entered into the Put Option
Agreement (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 (as defined in the Put Option Agreement), 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 312,296 ordinary shares in the event that earnout shares
are issued to Perception Capital Partners, LLC (“Perception”).
76
Agreements with Directors and Officers
Options, restricted share units
and performance share units
. Since our inception, we have granted restricted
share units, performance share units and 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
.
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 1,513,874 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.
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.
|
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 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 material
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. See Note 9 of our consolidated financial
statements included elsewhere in this Annual Report, which is incorporated by reference in this Item 8.A, for additional information regarding
the Lawsuit.
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. “
Operating and Financial Review and Prospects.
”
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.
77
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.
|
Item 10.
|
Additional Information
|
A. Share Capital
Not applicable.
78
B. Memorandum and Articles of Association
A copy of our Articles is incorporated by reference to Exhibit
3.1 to the Company’s Registration Statement on Form F-3 (File No. 333‑265170) filed with the SEC on May 24, 2022. 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, 2024, we had 169,397,030 ordinary shares and
16,231,141 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, shareholders are not permitted to take action by way of written consent in lieu of a meeting.
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/A (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.
|
79
|
|
• |
Compensation Policy for Directors and Officers (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement
on Form F-4/A (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/A (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. (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report
on Form 20-F filed with the SEC on March 30, 2022). 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 (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, 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.B. “
Major
Shareholders and Related Party Transactions—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.B. “
Major Shareholders and Related Party Transactions—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 incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement
on Form F-4 (File No. 333-252023) filed with the SEC on January 11, 2021) 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 GmbH Co. OHG (incorporated by reference to Exhibit 10.16 to the Company’s Registration
Statement on Form F-4 (File No. 333-252023) filed with the SEC on January 11, 2021) 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 (incorporated
by reference to Exhibit 10.17 to the Company’s Registration Statement on Form F-4 (File No. 333-252023) filed with the SEC on January
11, 2021), 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.
80
|
|
• |
Magna Manufacturing MOU
|
In October 2020, Innoviz signed a memorandum of understanding
with Magna Electronics Technology, Inc. (the “Magna MOU”) (incorporated by reference to Exhibit 10.18 to the Company’s
Registration Statement on Form F-4 (File No. 333-252023) filed with the SEC on January 11, 2021) for high-volume manufacturing of Innoviz
LiDARs at Magna’s automotive grade facility in Holly, Michigan. The Magna MOU contemplates Magna’s manufacturing of our LiDAR
solution for the BMW program. The MOU has been in effect since October 2020 and has been periodically extended until replaced by the Magna
Agreement, as set forth below.
|
|
• |
Lease Agreement
|
Our corporate headquarters are located in Rosh HaAin, Israel,
where we currently lease an office with approximately 16,350 square meters pursuant to the Lease Agreement (incorporated by reference
to Exhibit 4.14 to the Company’s Annual Report on Form 20-F filed with the SEC on March 30, 2022). This facility contains engineering,
research and development, testing, product, sales and administrative functions. The initial term under the Lease Agreement is for 67 months
and expires on January 31, 2028. We have an option under the Lease Agreement to renew the lease for additional 60 months, which will be
exercised automatically unless we inform the lessor in advance.
|
|
• |
Electronic Nomination Agreement with Cariad SE (a Volkswagen group company)
|
In December 2022, Innoviz and Cariad SE executed an electronic
nomination agreement (the “eNA”) (incorporated by reference to Exhibit 4.15 to the Company’s Annual Report on Form 20-F
filed with the SEC on March 9, 2023) pursuant to which Cariad commissioned Innoviz to develop, manufacture and deliver InnovizTwo LiDARs.
Cariad has the right to terminate the eNA under certain circumstances,
including (a) if Innoviz does not meet the prerequisites for series production of the products that are the subject matter of the eNA,
and (b) if Innoviz enters into insolvency proceedings.
|
|
• |
Agreement with Magna regarding Manufacturing of InnovizOne for the BMW Program
|
In December 2023, Innoviz signed an agreement with Magna Electronics
Technology, Inc., and Magna Electronics Europe GmbH Co. OHG (the “Magna Agreement”), addressing the high-volume manufacturing
of Innoviz LiDARs at Magna’s automotive grade facility in Holly, Michigan, for the BMW program.
|
|
• |
Term Sheet with Mobileye
|
In 2024, Innoviz signed a term sheet with Mobileye Vision Technologies
Ltd., for the supply of Innoviz LiDARs for Mobileye programs (the “Mobileye TS”).
|
|
• |
Letter of Intent with existing customer
|
In December 2024, Innoviz signed a letter of intent with existing
customer with respect to fees to be paid to Innoviz as NRE payments for certain projects (the “LOI”). This LOI includes detailed
milestones.
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.
81
Material Israeli Tax Considerations
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 purchase, 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 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 income
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, onwards. However, the effective tax rate payable by a company that derives income from an
Approved Enterprise, a Preferred Enterprise, a Special Preferred Enterprise, a Benefited Enterprise, a Preferred Technological Enterprise
or Special Preferred Technological Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company
are generally subject to the corporate income tax rate.
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 and the regulations promulgated
thereunder provide that an “Industrial Company” is an Israeli resident-company, of which 90% or more of its income in any
tax year, other than income from certain government loans, capital gains, dividends and interest and linkage differentials, 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 patents, 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 the Industrial Company began to
use them;
|
|
|
• |
Under limited conditions, an election to file consolidated tax returns with controlled Israeli Industrial Companies; and
|
|
|
• |
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 commencing in the year of the payment of such expenses.
82
From time to time we may apply to the IIA 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 cancelled 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.
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) – if a valid certificate is obtained in advance from the Israel Tax Authority (“ITA”)
- 20% under the Investment Law or a reduced tax rate under the provisions of any applicable double tax treaty – if such a valid
certificate is not obtained then the applicable withholding tax rate shall be 25% or 30%.
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 Benefited 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 “Technological Enterprises,” as described below, and is
in addition to the other existing tax beneficial programs under the Investment Law. In addition, the 2017 Amendment also changed the definition
of the term “preferred income,” which is the income eligible for benefits according to the 2011 Amendment.
83
The 2017 Amendment provides that a technological company satisfying
certain conditions will qualify as a “Preferred Technological Enterprise” and will thereby enjoy a reduced corporate tax rate
of 12% on income that qualifies as “Preferred Technological Income”, as defined in the Investment Law. The tax rate is further
reduced to 7.5% for a Preferred Technological Enterprise located in development zone “A”. In addition, a Preferred Technological
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 ILS 200 million, and the sale receives prior approval from the IIA.
The 2017 Amendment further provides that a technological company
satisfying certain conditions (including,
inter
alia, having group consolidated revenues of at
least ILS 10 billion) will qualify as a “Special Preferred Technological Enterprise” and will thereby enjoy a reduced
corporate tax rate of 6% on “Preferred Technological Income” regardless of the company’s geographic location within
Israel. In addition, a Special Preferred Technological 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 Technological Enterprise or acquired from a foreign company on or after January 1, 2017,
and the sale received prior approval from the IIA. A Special Preferred Technological Enterprise that acquires Benefitted Intangible Assets
from a foreign company for more than ILS 500 million will be eligible for these benefits for at least 10 years, subject to certain
approvals as specified in the Investment Law.
Dividends distributed to Israeli shareholders by a Preferred
Technological Enterprise or a Special Preferred Technological Enterprise, paid out of Preferred Technological Income, are generally subject
to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholder - subject to the receipt in advance of a valid
certificate from the ITA allowing for such reduced tax rate, 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% (in either case, subject to the receipt
in advance of a valid certificate from the ITA allowing for such 4% rate or lower treaty tax rate).
We believe that we may be eligible to receive the tax benefits
under the 2017 Amendment but there is no assurance that we will meet all the terms and conditions required under the Investment Law that
will allow us to enjoy any tax benefits under the Investment Law. It should be noted that the proportion of income that may be considered
Preferred Technological 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 intellectual property compared to overall expenditures.
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 ordinary shares in an Israeli resident company that were purchased after December 31, 2008, should be exempt
from Israeli tax unless, among other requirements, the ordinary 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 income tax rate (23% in 2025), 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 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 relatives 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 (corporate income tax rate for a corporation (23% in 2025) and a marginal
tax rate of up to 47% for an individual in 2025 (excluding surtax 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
of 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 ordinary shares are deemed to be business income.
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Additionally, a sale of ordinary shares 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 ordinary shares by a shareholder who is a United
States resident (for purposes of the treaty) holding the ordinary shares as a capital asset and is entitled to claim the benefits afforded
to such a resident by the United States-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 sale, exchange or 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. a valid withholding tax certificate issued by the ITA, residency certificate or other documentation may be required).
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 withholding tax 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 12 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 ordinary 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 withholding tax 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 Benefited Enterprise and 20% if the dividend is distributed from income attributed to a Preferred Enterprise,
a Special Preferred Enterprise, Preferred Technological Enterprise or Special Preferred Technological 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 an Approved Enterprise, Benefited Enterprise, Preferred Enterprise, Special
Preferred Enterprise, Preferred Technological Enterprise or Special Preferred Technological Enterprise, that are paid to a U.S. 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, Benefited
Enterprise, Preferred Enterprise, Special Preferred Enterprise, Preferred Technological Enterprise or Special Preferred Technological
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 holdings and to our gross income for the previous year
(as set forth in the previous sentence) are 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, Preferred Enterprise, Special Preferred Enterprise, Preferred Technological
Enterprise or Special Preferred Technological 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.
A non-Israeli resident who receives dividends from which all
taxes due were withheld at source according to applicable provisions of the Ordinance and the regulations promulgated thereunder 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 surtax (as further explained below).
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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 ILS 721,560 for 2025, which amount is generally linked to the annual change in the Israeli consumer
price index. In addition,
the portion of an individual’s annual income from
capital sources (e.g., capital gains, real estate appreciation, dividends, interest, CPI linkage differentials, rental income, passive
royalties, etc.) exceeding a certain threshold (ILS 721,560 in 2025) is subject to an additional surtax of 2%. It should be emphasized
that with respect to non-Israeli residents, these surtaxes apply to Israeli source income (unless such income is exempt under Israeli
domestic law or an applicable tax treaty), whereas with respect to Israeli residents, these surtaxes apply to worldwide income.
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, the alternative minimum 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:
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banks, financial institutions or insurance companies;
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real estate investment trusts or regulated investment companies;
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dealers or brokers;
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traders that elect to mark to market;
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tax exempt entities or organizations;
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“individual retirement accounts” and other tax deferred accounts;
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certain former citizens or long term residents of the United States;
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persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States;
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persons that acquired our ordinary shares or warrants pursuant to the exercise of any employee share option or otherwise as compensation
for the performance of services;
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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;
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partnerships or other pass-through entities and persons holding ordinary shares or warrants through partnerships or other pass through
entities; or
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holders that own directly, indirectly or through attribution 10% or more of the total voting power or value of all of our outstanding
shares.
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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:
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an individual who is a citizen or resident of the United States;
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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;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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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.
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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. An election to deduct creditable foreign taxes instead of claiming foreign
tax credits would generally apply to all such foreign taxes paid or accrued in such taxable year. 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 subject to significant limitations. 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 would be entitled to this credit.
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. 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.
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In addition, pursuant to applicable United States Treasury regulations,
if a U.S. Holder is not eligible for the benefits of an applicable income tax treaty or does not elect to apply such treaty, then such
holder may not be able to claim a foreign tax credit arising from any foreign tax imposed on the disposition of our ordinary shares or
warrants, depending on the nature of such foreign tax. However, the Department of the Treasury and the IRS are considering amendments
to these regulations. In addition, notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements
to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current foreign tax
credit regulations which imposed such additional requirements) for taxable years ending before the date that a notice or other guidance
withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). The rules governing
the treatment of foreign taxes imposed on a U.S. Holder and foreign tax credits are complex, and U.S. Holders should consult
their tax advisors as to whether the Israeli tax on gains may be creditable or deductible in light of their particular circumstances,
including their eligibility for benefits under an applicable income tax treaty and the potential impact of applicable United States Treasury
regulations.
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 the number
of 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. Under that treatment, subject to the discussion under “Passive Foreign Investment Company Considerations”
below, 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, generally be treated as receiving
a constructive distribution from us if the adjustment increases such 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). 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 in our assets or earnings and profits.
Passive Foreign Investment Company Considerations
In general, a non-U.S. corporation will be classified as a 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.
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We believe we were a PFIC for our taxable year ending December
31, 2024. 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, 2025 or in future taxable years. Moreover, 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 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. The value of our assets (including unbooked
goodwill) for purposes of the PFIC determination may be determined by reference to the trading value of our ordinary shares, which could
fluctuate significantly.
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:
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any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or warrants (or shares of any of our
subsidiaries that are Lower-Tier PFICs, as defined and discussed below); and
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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) and certain distributions received on shares of any of our subsidiaries that are Lower-Tier PFICs, as defined and
discussed below.
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Under these rules,
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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;
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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;
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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
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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.
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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.
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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
tax 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).
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. If we determine we were a PFIC for a given taxable year, we will
reasonably endeavor to provide a PFIC Annual Information Statement to a U.S. Holder upon request. 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 our 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.
90
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.
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 are a PFIC and 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. Because a mark-to-market election cannot be made for any Lower-Tier PFICs that we may own, you
will generally continue to be subject to the adverse U.S. federal income tax consequences discussed above with respect to your indirect
interest in any such Lower-Tier PFIC even if you make a mark-to-market election with respect to our ordinary shares
. 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
Distributions 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 distributions 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.
91
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
https://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.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
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, 2024 and 2023, 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 currently exposed to a significant market risk related to changes in foreign currency
exchange rates, as we pay most of our salaries in ILS and we contract with vendors located in the UK, 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, 2024 and 2023.
Foreign Currency Risk
Our financial results are reported in USD, and changes in the
exchange rate between USD and local currencies in the countries in which we operate (primarily the ILS) may affect the results of our
operations. In the year ended December 31, 2024, approximately 92% of our revenues were denominated in USD. 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 the year ended December 31, 2024, the value of the USD
appreciated against the value of the ILS by approximately 0.6%. Our most significant foreign currency exposures are related to our operations
in Israel. The company hedges its anticipated exposure by exchanging USD into ILS in amounts sufficient to fund up to three months of
operations and monitoring foreign currency exchange rates over time.
92
|
Item 12.
|
Description of Securities Other than Equity Securities
|
Not applicable.
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 Exchange Act) that are designed to ensure that information required to be disclosed
in our 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, 2024. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that, as of December 31, 2024, 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, 2024, 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 as we are an emerging growth company and 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,
chairperson of our audit committee, 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.
93
|
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 executives, principal financials 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 Form 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
https://ir.innoviz.tech
. The information
contained on or through our website, or any other website referred to herein, is not incorporated by reference in this Annual Report.
|
Item 16C
.
|
Principal Accounting Fees and Services
|
The consolidated financial statements of Innoviz Technologies Ltd. as of December 31,
2024 and 2023 and for the two years then ended, appearing in this Annual Report have been audited by Kesselman Kesselman, a member
firm of PricewaterhouseCoopers International Limited (“PwC”), an independent registered public accounting firm, as set forth
in their report thereon appearing elsewhere herein. The current address of PwC is 146 Derech Menachem Begin St., Tel Aviv 6492103, Israel.
The consolidated financial statements of Innoviz Technologies
Ltd. for the year ended December 31, 2022, appearing in this Annual Report have been audited by Kost Forer Gabbay Kasierer,
a member of Ernst Young Global (“EY”), 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 EY 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 PWC and EY
for services performed in the years ended December 31, 2024 and 2023, and breaks down these amounts by category of service:
|
|
2024
|
2023
|
||||||
|
|
(in thousands)
|
|||||||
|
Audit Fees
|
$
|
452
|
$
|
508
|
||||
|
Audit Related Fees
|
—
|
—
|
||||||
|
Tax Fees
|
34
|
53
|
||||||
|
All Other Fees
|
2
|
—
|
||||||
|
Total
|
$
|
488
|
$
|
561
|
||||
Audit Fees
Audit fees for the years ended December 31, 2024 and 2023
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.
Audit Related Fees
None.
Tax Fees
Tax fees for the years ended December 31, 2024 and 2023
were related to ongoing tax advisory, tax compliance and tax planning services.
All Other Fees
All other fees for the year ended December 31, 2024 include
license fees for the use of an accounting research tool.
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.
|
Item 16D.
|
Exemptions from the Listing Standards for Audit Committees
|
Not applicable.
94
|
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 Nasdaq. 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 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 with limited exceptions. We rely on this “home country practice exemption” with
respect to (a) the quorum requirement for shareholder meetings and (b) obtaining shareholder approval for certain corporation actions.
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 corporate
governance rules.
We will seek shareholder approval for all corporate actions requiring
such approval under the requirements of the Companies Law, rather than seeking approval for corporate actions in accordance with Nasdaq
Listing Rule 5635. In particular, under the Nasdaq Listing Rule, shareholder approval is generally required for: (i) an acquisition of
shares/assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director,
officer or 5% shareholder has greater than a 5% interest (or such persons collectively have a 10% or greater interest) in the target company
or the assets to be acquired or the consideration to be received and the present or potential issuance of ordinary shares, or securities
convertible into or exercisable for ordinary shares, could result in an increase in outstanding common shares or voting power of 5% or
more; (ii) the issuance of shares leading to a change of control; (iii) adoption/amendment of a stock option or purchase plan or other
equity compensation arrangements, pursuant to which stock may be acquired by officers, directors, employees or consultants (with certain
limited exception); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable
for, equity) of a listed company via a private placement (and/or via sales by directors/officers/5% shareholders) if such equity is issued
(or sold) at below the greater of the book or market value of shares. We will seek shareholder approval for all actions requiring such
under the Companies Law. Under the Companies Law, the adoption of, and material changes to, equity-based compensation plans generally
require the approval of the board of directors.
We otherwise comply with and intend to continue to comply with
the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may in the future, however, decide to use other
foreign private issuer exemptions with respect to some or all the other Nasdaq listing rules. Following our home country governance practices
may provide less protection than is accorded to investors under the Nasdaq listing rules applicable to domestic issuers.
|
Item 16H
.
|
Mine Safety Disclosure
|
Not applicable.
|
Item 16I
.
|
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
|
Not applicable.
95
Item
16J. Insider Trading Policies
We
have
adopted
an insider trading policy governing the purchase, sale, and other dispositions of our securities by directors, senior management, and
employees. Our insider trading policy aims to promote compliance with applicable insider trading laws, rules and regulations, and Nasdaq
listing standards. A copy of our insider trading policy is filed as Exhibit 11.1 to this Annual Report.
Item
16K. Cybersecurity
Cybersecurity
Risk Management and Strategy
We
design and assess our program based on the NIST Cybersecurity Framework (CSF). This does not imply that we meet any particular technical
standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity
risks relevant to our business or can affect us.
Our
cybersecurity risk management program is integrated into our overall risk management program, and shares common methodologies, reporting
channels and governance processes that apply across the risk management program to other legal, compliance, strategic, operational, and
financial risk areas.
Key
elements of our cybersecurity risk management program include but are not limited to the following:
|
•
|
suppliers
risk assessments and scan designed to identify material risks from cybersecurity threats from third parties to our critical systems and
information;
|
|
•
|
an
in-house security team principally responsible for managing (i) our cybersecurity risk assessment processes, (ii) our security controls,
and (iii) our response to cybersecurity incidents from external entities;
|
|
•
|
the
use and risks of external service providers, where appropriate, to assess, test or otherwise assist to minimize and mitigate the risk
with aspects of our security processes from external entities;
|
|
•
|
cybersecurity
awareness training of our employees, including related to risks from external contractors or entities, incident response personnel, and
senior management to intervene in case needed;
|
|
•
|
a
cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents from external entities; and
|
|
•
|
|
Cybersecurity
Governance
96
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 reports of Kesselman Kesselman, a member firm of PricewaterhouseCoopers International Limited, an independent
registered public accounting firm, and Kost Forer Gabbay Kasierer, a member of EY Global, an independent registered public accounting
firm, are included herein preceding the audited consolidated financial statements.
97
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 |
|
F-3
|
333-265170
|
3.1
|
May
24, 2022
|
|||
|
20-F
|
001-40310
|
2.1
|
April
21, 2021
|
|||
|
F-4/A
|
333-252023
|
10.12
|
February
12, 2021
|
|||
|
F-4/A
|
333-252023
|
10.13
|
February
12, 2021
|
|||
|
F-4
|
333-252023
|
10.10
|
January
11, 2021
|
|||
|
20-F
|
001-40310
|
4.4
|
March
30, 2022
|
|||
|
F-4
|
333-252023
|
10.15
|
January
11, 2021
|
|||
|
F-4
|
333-252023
|
10.16
|
January
11, 2021
|
|||
|
F-4
|
333-252023
|
10.17
|
January
11, 2021
|
|||
|
F-4
|
333-252023
|
10.18
|
January
11, 2021
|
|||
|
F-4
|
333-252023
|
10.19
|
January
11, 2021
|
|||
|
F-4
|
333-252023
|
4.4
|
January
11, 2021
|
|||
98
|
20-F
|
001-40310
|
4.11
|
April
21, 2021
|
|||
|
F-4
|
333-252023
|
4.8
|
January
11, 2021
|
|||
|
F-4
|
333-252023
|
10.7
|
January
11, 2021
|
|||
|
20-F
|
001-40310
|
4.14
|
March
30, 2022
|
|||
|
20-F
|
001-40310
|
4.15
|
March
9, 2023
|
|||
|
20-F
|
001-40310
|
4.16
|
March
12, 2024
|
|||
|
*
|
||||||
|
*
|
||||||
|
6-K
|
001-40310
|
4.1
|
February
12, 2025
|
|||
|
6-K
|
001-40310
|
10.1
|
February
12, 2025
|
|||
|
*
|
||||||
|
*
|
||||||
|
*
|
||||||
|
*
|
||||||
|
**
|
||||||
|
**
|
||||||
|
*
|
||||||
|
*
|
||||||
|
20-F
|
001-40310
|
97
|
March
12, 2024
|
|||
|
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
|
*
|
||||
|
104
|
Cover
Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
*
|
| * |
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.
99
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 12, 2025
|
By:
|
/s/
Eldar Cegla
|
|
|
|
Name:
Eldar Cegla
|
|
|
|
Title:
Chief Financial Officer
|
100
INNOVIZ
TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2024
INDEX
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm
(PCAOB ID
|
F-2
|
|
Report
of Independent Registered Public Accounting Firm
(PCAOB ID
|
F-3
|
|
F-4
- F-5
|
|
|
F-6
|
|
|
F-7
|
|
|
F-8
- F-9
|
|
|
F-10
- F-35
|
-
-
-
-
-
-
-
-
-
-
-
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Shareholders 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, 2024 and 2023, and the related consolidated statements of operations, of changes in shareholders’ equity and
of cash flows for the years then ended, including 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
as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control 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/
|
|
March
12, 2025
|
Certified
Public Accountants (Isr.)
|
|
A
member firm of PricewaterhouseCoopers International Limited
|
We
have served as the Company’s auditor since 2023.
|
|
|
Kesselman
Kesselman, 146 Derech Menachem Begin St. Tel-Aviv 6492103, Israel,
P.O Box 7187 Tel-Aviv 6107120, Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il |
F
- 2
|
Kost
Forer Gabbay Kasierer
144 Menachem Begin Road,
Building A
Tel-Aviv 6492102, Israel
|
Tel:
+972-3-6232525
Fax:
+972-3-5622555
ey.com
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of
INNOVIZ
TECHNOLOGIES LTD.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated statements of operations, changes in shareholders’ equity and cash flows of Innoviz Technologies
Ltd. and its subsidiaries (the “Company”) for the year ended December 31, 2022, 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 results of the Company’s operations and its cash flows for the year ended December 31, 2022, 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 audit. 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 audit 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 control over financial reporting. As part
of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit 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 audit 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 audit provides a reasonable basis for our opinion.
|
/s/
|
|
A
Member of EY Global
|
| We have served as the Company’s auditor from 2016 to 2023. |
| Tel-Aviv, Israel |
|
March
9, 2023
|
F
- 3
INNOVIZ
TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands (except share and per share data)
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$
|
|
$
|
|
||||
|
Short-term
restricted cash
|
|
|
||||||
|
Bank
deposits
|
|
|
||||||
|
Marketable
securities
|
|
|
||||||
|
Trade
receivables, net
|
|
|
||||||
|
Inventory
|
|
|
||||||
|
Prepaid
expenses and other current assets
|
|
|
||||||
|
Total
current assets
|
|
|
||||||
|
LONG-TERM
ASSETS:
|
||||||||
|
Marketable
securities
|
|
|
||||||
|
Restricted
deposits
|
|
|
||||||
|
Property
and equipment, net
|
|
|
||||||
|
Operating
lease right-of-use assets, net
|
|
|
||||||
|
Other
long-term assets
|
|
|
||||||
|
Total
long-term assets
|
|
|
||||||
|
Total
assets
|
$
|
|
$
|
|
||||
The
accompanying notes are an integral part of the consolidated financial statements.
F - 4
INNOVIZ
TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S.
dollars in thousands (except share and per share data)
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Trade
payables
|
$
|
|
$
|
|
||||
|
Deferred
revenues
|
|
|
||||||
|
Employees
and payroll accruals
|
|
|
||||||
|
Accrued
expenses and other current liabilities
|
|
|
||||||
|
Operating
lease liabilities
|
|
|
||||||
|
Total
current liabilities
|
|
|
||||||
|
LONG-TERM
LIABILITIES:
|
||||||||
|
Operating
lease liabilities
|
|
|
||||||
|
Warrants
liability
|
|
|
||||||
|
Total
long-term liabilities
|
|
|
||||||
|
SHAREHOLDERS’
EQUITY:
|
||||||||
|
Ordinary
Shares of no-par value: Authorized:
|
|
|
||||||
|
Additional
paid-in capital
|
|
|
||||||
|
Accumulated
deficit
|
(
|
)
|
(
|
)
|
||||
|
Total
shareholders’ equity
|
|
|
||||||
|
Total
liabilities and shareholders’ equity
|
$
|
|
$
|
|
||||
The
accompanying notes are an integral part of the consolidated financial statements.
F - 5
INNOVIZ
TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
U.S.
dollars in thousands (except share and per share data)
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Revenues
|
$
|
|
$
|
|
$
|
|
||||||
|
Cost
of revenues
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Gross
loss
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Operating
expenses:
|
||||||||||||
|
Research
and development
|
|
|
|
|||||||||
|
Sales
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 - 6
INNOVIZ
TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
U.S.
dollars in thousands (except share and per share data)
|
|
Ordinary
Shares
|
Additional
|
Accumulated |
Total Shareholders’ |
||||||||||||||||
|
|
Number
|
Amount
|
Capital
|
Deficit
|
Equity
|
|||||||||||||||
|
Balance
as of January 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Reclassification
of warrants liability to equity
|
-
|
|
|
|
|
|||||||||||||||
|
Exercise
of shares options
|
|
|
|
|
|
|||||||||||||||
|
Exercise
of public warrants
|
|
|
|
|
|
|||||||||||||||
|
Vesting
of RSUs
|
|
|
|
|
|
|||||||||||||||
|
Share-based
compensation
|
-
|
|
|
|
|
|||||||||||||||
|
Net
Loss
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
|
||||||||||||||||||||
|
Balance
as of December 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Issuance
of ordinary shares, net of issuance costs
|
|
|
|
|
|
|||||||||||||||
|
Reclassification
of warrants liability to equity
|
-
|
|
|
|
|
|||||||||||||||
|
Exercise
of shares options
|
|
|
|
|
|
|||||||||||||||
|
Vesting
of RSUs
|
|
|
|
|
|
|||||||||||||||
|
Share-based
compensation
|
-
|
|
|
|
|
|||||||||||||||
|
Net
Loss
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
|
||||||||||||||||||||
|
Balance
as of December 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Exercise
of shares options
|
|
|
|
|
|
|||||||||||||||
|
Vesting
of RSUs
|
|
|
|
|
|
|||||||||||||||
|
Share-based
compensation
|
-
|
|
|
|
|
|||||||||||||||
|
Net
Loss
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
|
||||||||||||||||||||
|
Balance
as of December 31, 2024
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
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
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Change
in accrued interest on bank deposits
|
|
(
|
)
|
(
|
)
|
|||||||
|
Change
in marketable securities
|
(
|
)
|
(
|
)
|
|
|||||||
|
Share-based
compensation
|
|
|
|
|||||||||
|
Capital
gain, net
|
(
|
)
|
|
(
|
)
|
|||||||
|
Foreign
exchange loss (gain), net
|
(
|
)
|
(
|
)
|
|
|||||||
|
Change
in prepaid expenses and other assets
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Change
in trade receivables, net
|
|
(
|
)
|
(
|
)
|
|||||||
|
Change
in inventory
|
(
|
)
|
|
|
||||||||
|
Change
in operating lease assets and liabilities, net
|
(
|
)
|
|
|
||||||||
|
Change
in trade payables
|
(
|
)
|
|
|
||||||||
|
Change
in accrued expenses and other liabilities
|
(
|
)
|
|
|
||||||||
|
Change
in employees and payroll accruals
|
(
|
)
|
|
(
|
)
|
|||||||
|
Change
in 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
|
|
|
|
|||||||||
|
Investment
in bank deposits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Withdrawal
of bank deposits
|
|
|
|
|||||||||
|
Investment
in restricted deposits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Investment
in marketable securities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds
from sales and maturities of marketable securities
|
|
|
|
|||||||||
|
Net
cash provided by investing activities
|
$
|
|
$
|
|
$
|
|
||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F - 8
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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Issuance
of ordinary shares, net of issuance cost
|
|
|
|
|||||||||
|
Proceeds
from exercise of options
|
|
|
|
|||||||||
|
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 the beginning of the year
|
|
|
|
|||||||||
|
Cash,
cash equivalents and restricted cash at the end of the year
|
$
|
|
$
|
|
$
|
|
||||||
|
Supplementary
disclosure of cash flows activities:
|
||||||||||||
|
(1)
Cash paid during the year for:
|
||||||||||||
|
Income
taxes
|
$
|
|
$
|
|
$
|
|
||||||
|
(2)
Non-cash transactions:
|
||||||||||||
|
Purchase
of property and equipment
|
$
|
|
$
|
|
$
|
|
||||||
|
Reclassification
of warrants liability to equity
|
$ |
|
$
|
|
$
|
|
||||||
|
Exercise
of options
|
$
|
|
$
|
|
$
|
|
||||||
|
Right-of-use
assets recognized with corresponding lease liabilities
|
$
|
|
$
|
|
$
|
|
||||||
|
(3)
Cash, cash equivalents and restricted cash at the end of the year:
|
||||||||||||
|
Cash
and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Short-term
restricted cash
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
The
accompanying notes are an integral part of the consolidated financial statements.
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
|
|
|
a. |
Innoviz
Technologies Ltd. and its subsidiaries (the “Company” or “Innoviz”) is a Tier-1 direct supplier of high-performance,
automotive grade LiDAR sensors and perception solutions that feature technological breakthroughs across core components and 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 passenger cars and other relevant markets,
such as robotaxis, shuttles, delivery vehicles and trucks.
|
| b. |
The
Company was incorporated on January 18, 2016, under the laws of the state of Israel.
|
|
|
c. |
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”). | ||
| The Company’s ordinary shares and public warrants were listed on the Nasdaq Stock Market LLC under the trading symbols “INVZ” and “INVZW”, respectively, on April 5, 2021. |
|
|
d. |
As
of December 31, 2024, the Company’s principal source of liquidity includes its cash and cash equivalents in the amount of $
|
|
|
e. |
In
October 2023, Israel was attacked by a terrorist organization and entered a state of war. As of the date of these consolidated financial
statements, the war is ongoing and continues to evolve.
The intensity and duration of the war
is difficult to predict, as such are the war’s economic implications on the Company’s operational and financial performance.
The Company considered the impact of the war and determined that there were no material adverse impacts on the consolidated financial
statements, including related significant estimates made by management, for the period ended December 31, 2024.
|
| 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. |
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.
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.)
|
Significant
items subject to such estimates and assumptions include inventory reserves 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.
| b. |
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.
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.
| c. |
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.
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.)
|
| d. |
Cash
and cash equivalents, restricted cash and restricted deposits:
|
The
Company considers all highly liquid short-term deposits with original maturities of three months or less from the investment date to be
cash equivalents. Cash equivalents consist primarily of amounts invested in short term deposits. Restricted cash and restricted deposits
consist deposits that serve as collateral mainly for lease agreements at the Company’s financial institutions.
| e. |
Inventory:
|
Inventory
is stated at the lower of cost or estimated net realizable value.
Cost
of inventory is determined as follows:
Raw
materials and work in process - based on weighted average cost.
Finished
goods - based mainly on weighted average standard cost method.
The
Company charges cost of revenues for write-downs of inventory 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.
Losses
expected to arise from firm non-cancelable commitments for future purchases of inventory are charged to cost of revenues unless the losses
are recoverable through firm sales contracts or other means.
| f. |
Property
and equipment, net:
|
Property
and equipment are stated at cost, net of accumulated depreciation and impairment. The estimated useful lives of property and equipment
are determined when those assets are initially recognized and are routinely reviewed for the remaining estimated useful lives. When useful
life is reassessed for an asset, the remaining carrying amount of the asset is accounted for prospectively and depreciated over the revised
estimated useful life. 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
|
|
|
Machinery
and lab equipment
|
|
|
Leasehold
improvements
|
|
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.)
|
| g. |
Impairment
of long-lived assets:
|
Long-lived
assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” (“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,
2024, 2023 and 2022, the Company recorded impairment losses in the amount of $
542
,
$
1,997
and $
362
,
respectively.
| h. |
Revenue
recognition:
|
According
to Accounting Standards Codification 606, Revenue from Contracts with Customers, and all the related amendments (“ASC 606”),
a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods and services
that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is
created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or
together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service
to the customer is separately identifiable from other promises in the contract.
The
Company derives its revenues mainly from sales of LiDAR sensors, critical components and application engineering services for its customers.
As such, the Company contracts with its customers, may contain the following main performance obligations: (i) sales of LiDAR sensors;
(ii) sales of critical components; (iii) application engineering services. The Company evaluates each performance obligation to determine
if it is satisfied at a point in time or over time.
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. During the years ended December 31, 2024, 2023 and 2022, the Company recognized revenue at a point in time for
LiDAR sensors and critical components, after transferring the control of the goods to the customer of $
6,311
,
$
5,651
and $
6,026
,
respectively.
Application
engineering 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 at a point in time upon customer acceptance. During the years ended December
31, 2024, 2023 and 2022, the Company recognized revenue at a point in time for application engineering services, after receiving customer
acceptance of $
17,957
,
$
15,225
and $
0
,
respectively.
The
Company capitalizes costs of fulfilling application engineering services contracts, to the extent recoverable, that relate directly to
contracts for which revenue recognition has yet to commence. These assets are amortized to cost of revenues consistently with the pattern
of the revenue recognition of application engineering services.
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.)
|
|
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.
For
each contract which includes prepayment terms, the Company evaluates whether the contract includes a significant financing component.
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
Revenues
Deferred
revenues in the Company’s consolidated balance sheets, which represent contract liabilities, include mainly billings in excess of
revenues recognized related to product sales and obligations under application engineering service agreements with OEMs and are recognized
as revenues when the Company performs its obligations under the contract.
During
the year ended December 31, 2024, the Company recognized $
6,865
that was included in deferred revenues balance at December 31, 2023.
During
the year ended December 31, 2023, the Company recognized $
3,096
that was included in deferred revenues balance at December 31, 2022.
Remaining
Performance Obligation
The
Company’s remaining performance obligations are comprised of application engineering services revenues not yet rendered. As of December 31,
2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $
15,415
(out of which $
107
is recorded as deferred revenues), which the Company expects to recognize as revenues within the next 12 months
.
| i. |
Cost of
revenues:
Cost
of revenues include the manufacturing cost of LiDAR sensors, which primarily consists of components costs, sub-assembly costs and personnel-related
costs, and amounts paid to third-party contract manufacturers and vendors. Cost of revenues also includes depreciation, costs of providing
application engineering services (mainly personnel related costs), an allocated portion of overhead, warranty costs, excess and obsolete
inventory and shipping costs.
|
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.)
|
| 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,
|
||||||||
|
2024
|
2023
|
|||||||
|
Balance
at the beginning of the year
|
$
|
|
$
|
|
||||
|
Warranty
provision
|
|
|
||||||
|
Warranty
claims settled
|
(
|
)
|
|
(
|
) | |||
|
Balance
at the end of the year
|
$
|
|
$
|
|
||||
| k. |
Research
and development expenses:
|
Research
and development costs include mainly 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.
| m. |
Leases
|
The
Company applies ASU No. 2016-02, “Leases” Topic 842 (“ASC 842”) for its leases. The Company elected to not recognize
a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less. Lease payments on short-term
leases are recognized as an expense on a straight-line basis over the lease term, not included in lease liabilities. Lastly, the Company
also elected the practical expedient to not separate lease and non-lease components for its leases.
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.)
|
The
Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves
the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the
use of the asset throughout the period, and (3) whether the Company has a right to direct how and for what purpose the identified asset
is used throughout the period of use.
ROU
assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum
lease payments arising from the lease.
Leases
are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria
are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that
is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, the present value
of the lease payments equals or exceeds substantially all of the fair value of the asset, or the underlying asset is of such a specialized
nature that it is expected to have no alternative use to the lessor at the end of lease term. A lease is classified as an operating lease
if it does not meet any one of these criteria. Since all of the Company’s lease contracts do not meet any of the criteria above,
the Company concluded that all of its lease contracts should be classified as operating leases.
ROU
assets and liabilities are recognized on the commencement date based on the present value of remaining lease payments over the lease term.
For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available on the commencement
date in determining the present value of lease payments. All ROU assets are reviewed for impairment. The lease terms may include options
to extend or terminate the lease when it is reasonably certain that the Company will exercise an extension option or not exercise a termination
option.
For
further information on the Company’s leasing activities see Note 6.
| n. |
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.
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.)
|
| o. |
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
8.33
%
of their monthly salary, made on their behalf to their insurance funds. Payments in accordance with Section 14 release the Company from
any future severance payments in respect of those employees. As a result, the Company does not recognize any liability for severance pay
due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balance sheet.
Severance
pay expenses under Section 14 for the years ended December 31, 2024, 2023 and 2022, amounted to $
3,537
,
$
3,723
and $
3,586
,
respectively.
| p. |
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.
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.)
|
| q. |
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, bank deposits and restricted deposits.
The
majority of the Company’s cash and cash equivalents and short-term bank deposits are invested with major banks in Israel. The Company
believes that the financial institutions that hold the Company’s cash deposits are financially sound and, accordingly, bear minimal
risk.
Trade
receivables 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
5
%
of its investment portfolio in a single security at time of purchase.
| r. |
Trade
receivables, net:
|
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, in addition to current and expected payment patterns. The allowance of doubtful accounts was not material for
the periods presented.
| s. |
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 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.
| t. |
Ordinary
Share Warrants
|
|
|
The
Company’s private warrants (see Note 12) include provisions that provide for potential changes to the settlement amounts that are
dependent on the characteristics of the holder of the warrant, under ASC 815-40. Therefore, those warrants are not indexed to the Company’s
ordinary shares in the manner contemplated by that Subtopic, so long as they are held by the initial purchasers or their permitted transferees.
Thus, the private warrants were classified as a liability, initially and subsequently measured at fair value through earnings.
Conversely, since the public warrants are indexed to the Company’s own share, they qualify for equity classification under Subtopic 815-40. |
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.)
|
| u. |
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.
The
carrying values of cash and cash equivalents, short-term and restricted deposits, trade receivables, 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.
The
estimated fair value of private warrants has been determined by the Company using available market information and valuation methodologies
(see also Note 7). Considerable judgment is required in estimating fair values. Accordingly, the estimates may not be indicative of the
amounts the Company could realize in a current market exchange.
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.)
|
| v. |
Loss
per share:
|
The
Company computes basic loss per share in accordance with ASC Topic 260, “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 awards granted under share-based compensation plans and equity-classified
instruments using the treasury stock method. Impact of liability-classified instruments on diluted loss per share is considered using
the if-converted method. Diluted loss per share excludes all dilutive potential ordinary shares if their effect is anti-dilutive.
| w. |
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.
| x. |
Recently
adopted accounting pronouncement:
|
In
2024 the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updated reportable
segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.
For
further information on the Company’s segment reporting see Note 15.
| y. |
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 December
2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes
paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related
disclosures. The ASU will be effective for the Company for fiscal years beginning after December 15, 2025, and allows adoption on a prospective
basis, with a retrospective option. The Company is currently evaluating the effect that ASU 2023-09 will have on its related disclosures.
|
|
|
2. |
In
November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures
(Subtopic 220-40). The ASU improves the disclosures about a public business entity’s expenses and provides more detailed information
about the types of expenses in commonly presented expense captions. The amendments require that at each interim and annual reporting period
an entity will, inter alia, disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included
in each relevant expense caption (such as cost of revenues, research and development, sales and marketing and general and administrative).
The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December
15, 2027. Early adoption is permitted. The amendments may be applied either: (1) prospectively to financial statements issued for
reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements.
The Company is currently evaluating the effect that ASU 2024-03 will have on its consolidated financial statements and related disclosures.
|
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 3: - |
INVENTORY
|
| a. |
Inventory
is comprised of the following:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Raw
materials
|
$
|
|
$
|
|
||||
|
Work
in process
|
|
|
||||||
|
Finished
goods
|
|
|
||||||
|
|
||||||||
|
$
|
|
$
|
|
|||||
| b. |
During
the years ended December 31, 2024, 2023 and 2022, 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,
|
||||||||
|
2024
|
2023
|
|||||||
|
Government
authorities
|
$
|
|
$
|
|
||||
|
Prepaid
expenses
|
|
|
||||||
|
Deferred
contract costs
|
|
|
||||||
|
Other
receivables
|
|
|
||||||
|
|
||||||||
|
$
|
|
$
|
|
|||||
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 5: - |
PROPERTY
AND EQUIPMENT, NET
|
| a. |
Property
and equipment, net consist of the following:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Cost:
|
||||||||
|
Computers
and software
|
$ |
|
$ |
|
||||
|
Office
furniture and equipment
|
|
|
||||||
|
Machinery
and lab equipment
|
|
|
||||||
|
Leasehold
improvements
|
|
|
||||||
|
$ |
|
$ |
|
|||||
|
Accumulated
depreciation
|
|
|
||||||
|
|
||||||||
|
$
|
|
$
|
|
|||||
| b. |
Depreciation
expenses for the years ended December 31, 2024, 2023 and 2022, amounted to $
|
| NOTE 6: - |
LEASES
|
The
Company has entered into several non-cancelable operating lease agreements, mostly for office spaces.
The
Company’s main lease agreement is of an office building located in Rosh Ha’Ayin, Israel (“Premises”). This lease
agreement includes 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 Company currently estimates it is reasonably certain that it will exercise this option. The lease payments for
the Premises are based on an estimation of the Premises’ size in square meters taken prior to construction and may be updated according
to the agreement of the parties on the measurement of the Premises taken after construction. Payments are adjusted periodically to the
Israeli consumer price index (CPI). The ROU asset and lease liability were calculated using the CPI in effect at lease commencement and
will not be subsequently adjusted. The company also leases additional office spaces, mainly in Germany.
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 6: - |
LEASES
(Cont.)
|
Below
is a summary of the Company operating right-of-use assets, net and operating lease liabilities:
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Operating
lease right-of-use assets, net
|
$
|
|
$
|
|
||||
|
|
||||||||
|
Operating
lease liabilities, current
|
$
|
|
$
|
|
||||
|
Operating
lease liabilities, non-current
|
|
|
||||||
|
|
||||||||
|
Total
operating lease liabilities
|
$
|
|
$
|
|
||||
|
Weighted
average remaining lease term (years)
|
|
|
||||||
|
Weighted
average discount rate of operating leases
|
|
%
|
|
%
|
||||
Additional
information regarding the Company’s operating leases:
|
Year
ended
December
31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Operating
lease costs
|
$
|
|
$
|
|
$
|
|
||||||
|
Variable
lease payments
|
$
|
|
$
|
|
$
|
|
||||||
|
Short
term lease costs
|
$
|
|
$
|
|
$
|
|
||||||
|
Cash
paid for operating leases, net of operating cash flows from lease incentives received
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||
Minimum
lease payments over the remaining lease periods as of December 31, 2024, are as follows:
|
Year
ended December 31,
|
||||
|
2025
|
$
|
|
||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
and thereafter
|
|
|||
|
|
||||
|
Total
undiscounted lease payments
|
$
|
|
||
|
|
||||
|
Less:
interest
|
|
|||
|
|
||||
|
Present
value of lease liabilities
|
$
|
|
||
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 7: - |
FAIR
VALUE MEASUREMENTS
|
The
below table sets forth the Company’s assets and liabilities that were measured at fair value as of December 31, 2024 by level within
the fair value hierarchy:
|
December
31, 2024
|
||||||||||||||||
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
||||||||||||
|
Assets
:
|
||||||||||||||||
|
Marketable
securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
||||||||||||||||
|
Total
financial assets
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Liabilities
:
|
||||||||||||||||
|
Warrants
(1)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Total
financial liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The
below table sets forth the Company’s assets and liabilities that were measured at fair value as of December 31, 2023 by level within
the fair value hierarchy:
|
December
31, 2023
|
||||||||||||||||
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
||||||||||||
|
Assets
:
|
||||||||||||||||
|
Marketable
securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
||||||||||||||||
|
Total
financial assets
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Liabilities
:
|
||||||||||||||||
|
Warrants
(1)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Total
financial liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
(1) |
As
part of the Transactions, the Company assumed a derivative warrants liability related to previously issued private placement warrants
in connection with Collective Growth’s initial public offering (see Note 12). 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 years ended December 31, 2024, 2023 and 2022 is summarized as follows:
|
|
Year
ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Balance
at the beginning of the period
|
$
|
|
$
|
|
$
|
|
||||||
|
Change
in fair value of warrants liability
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Reclassification
of warrants liability to equity
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance
at the end of the year
|
$
|
|
$
|
|
$
|
|
||||||
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 7: - |
FAIR
VALUE MEASUREMENTS (Cont.)
|
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 of their
measurement dates:
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Fair
value determined per warrant
|
$
|
|
$
|
|
||||
|
Expected
volatility
|
|
%
|
|
%
|
||||
|
Expected
annual dividend yield
|
|
%
|
|
%
|
||||
|
Expected
term (years)
|
|
|
||||||
|
Risk-free
rate
|
|
%
|
|
%
|
||||
| NOTE 8: - |
ACCRUED
EXPENSES AND OTHER CURRENT LIABILITIES
|
Accrued
expenses and other current liabilities consisted of the following:
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Warranty
provision
|
$
|
|
$
|
|
||||
|
Accrued
expenses
|
|
|
||||||
|
Fixed
assets creditors
|
|
|
||||||
|
Others
|
|
|
||||||
|
|
||||||||
|
$
|
|
$
|
|
|||||
| NOTE 9: - |
COMMITMENTS
AND CONTINGENCIES
|
Legal
proceedings:
On
March 28, 2024, a putative class action lawsuit was filed in the Delaware Court of Chancery against several former officers and directors
of Collective Growth
(the “Defendants”) which relates to events preceding the Transactions.
Under the Transactions agreements, the Company may be required to honor all rights to indemnification or exculpation existing in favor
of the directors and officers of Collective Growth, as were in effect prior to the Closing Date, solely with respect to any matters occurring
on or prior to the Closing Date.
The lawsuit generally alleges that the Defendants impaired
Collective Growth’s public stockholders’ ability to exercise their redemption on an informed basis in connection with the
Transactions, by failing to disclose material information in the proxy statement concerning the Defendants’ interests relating to
the Transactions and the net cash per share that Collective Growth could contribute to the Transactions. The lawsuit asserts claims for
breach of fiduciary duty and unjust enrichment.
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 9: - |
COMMITMENTS
AND CONTINGENCIES (Cont.)
|
On
June 21, 2024, the Defendants’ legal counsel filed a motion to dismiss.
On August 9,
2024, an amended complaint was filed, and in response, on August 23, 2024, the Defendants’ legal counsel submitted an amended motion
to dismiss. Briefing on the amended motion to dismiss was completed on December 20, 2024. The court scheduled oral argument on the Defendants’
motion to dismiss for May 5, 2025. The Defendants intend to vigorously defend against the claim.
As
of the date hereof, the Company, with advice of its legal counsel, is unable to estimate the likelihood of an outcome, favorable or unfavorable
to the Company. Hence, an estimated liability has not been recorded in the consolidated financial statements.
Other
than noted above, 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 quarterly 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: - |
SHAREHOLDERS’
EQUITY
|
| a. |
Composition
of share capital:
|
|
December
31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Authorized
|
Issued
and outstanding
|
Authorized
|
Issued
and outstanding
|
|||||
|
Number
of Shares
|
Number
of Shares
|
|||||||
|
Ordinary
Shares of no-par value (1)
|
|
|
|
|
||||
| (1) |
Ordinary
Shares confer upon the holders the right to vote in annual and special meetings of the Company, and to participate in the distribution
of the surplus assets of the Company upon liquidation of the Company.
|
| b. |
On
August 14, 2023 and on September 12, 2023, the Company issued a total of
|
|
| c. |
For
issuance of shares and warrants after the reporting date see Note 16.
|
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 11: - |
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, 2024, a total of
|
|
|
b. |
Options
granted:
The
fair value of the Company’s share options granted for the years ended December 31, 2024, 2023 and 2022, was estimated using the
following weighted average assumptions:
|
|
Year
ended December 31,
|
||||||
|
2024
|
2023
|
2022
|
||||
|
Expected
term, in years
|
|
|
|
|||
|
Expected
volatility
|
|
|
|
|||
|
Risk-Free
interest rate
|
|
|
|
|||
|
Expected
dividend yield
|
|
|
|
|||
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 11: - |
SHARE-BASED
COMPENSATION (Cont.)
|
|
A
summary of option balances as of December 31, 2024, 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, 2024
|
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
$
|
|
|||||||||||||
|
Exercised
|
|
$
|
|
$
|
|
|||||||||||
|
Forfeited
|
|
$
|
|
|||||||||||||
|
Expired
|
|
$
|
|
|||||||||||||
|
Outstanding
at December 31, 2024
|
|
$
|
|
|
$
|
|
||||||||||
|
Exercisable
at December 31, 2024
|
|
$
|
|
|
$
|
|
||||||||||
|
|
|
The
weighted-average grant date fair value of options granted during the years ended December 31, 2024, 2023 and 2022, was $
Exercise
price -
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.
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
|
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 11: - |
SHARE-BASED
COMPENSATION (Cont.)
|
| c. |
RSUs granted:
A
summary of RSUs activity for the year ended December 31, 2024, is as follows:
|
|
Number
of shares
|
Weighted
average grant date fair value per share
|
|||||||
|
Unvested
as of December 31, 2023
|
|
$
|
|
|||||
|
Granted
|
|
$
|
|
|||||
|
Vested
|
|
$
|
|
|||||
|
Forfeited
|
|
$
|
|
|||||
|
Unvested
as of December 31, 2024
|
|
$
|
|
|||||
|
|
d. |
Earn-out
shares:
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 Capital Partners (“Perception”) shall be entitled to
receive up to
|
| 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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Cost
of revenues
|
$
|
|
$
|
|
$
|
|
||||||
|
Research
and development
|
|
|
|
|||||||||
|
Sales
and marketing
|
|
|
|
|||||||||
|
General
and administrative
|
|
|
|
|||||||||
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
|
As
of December 31, 2024, unrecognized compensation cost related to share options and RSUs was $
|
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 12: - |
WARRANTS
OVER ORDINARY SHARES
|
|
|
|
Upon
the closing of the Transactions,
Each
warrant entitles the holder to purchase one Company Ordinary Share at a price of $
As
of December 31, 2024,
|
| NOTE 13: - |
TAXES
ON INCOME
|
|
|
a. |
Corporate
tax rates in Israel:
The
corporate tax rate in Israel is
|
|
|
b. |
Income
taxes of non-Israeli subsidiaries:
Non-Israeli
subsidiaries are taxed according to the tax laws in their respective countries of residence.
|
|
|
c. |
Carryforward
tax losses and credits:
As
of December 31, 2024, the Company had operating loss carry forwards for Israeli income tax purposes of approximately $
|
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 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,
|
||||||||
|
2024
|
2023
|
|||||||
|
Deferred
tax assets:
|
||||||||
|
Net
operating loss carryforward
|
$
|
|
$
|
|
||||
|
Research
and development costs carryforward
|
|
|
||||||
|
Capital
loss carryforward
|
|
|
||||||
|
Inventory
provision
|
|
|
||||||
|
Accrued
expenses
|
|
|
||||||
|
Property
and equipment
|
|
|
||||||
|
Lease
liabilities
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total
deferred tax assets
|
|
|
||||||
|
Valuation
allowance
|
(
|
)
|
(
|
)
|
||||
|
Deferred
tax liabilities:
|
||||||||
|
Right-of-use
assets
|
(
|
)
|
(
|
)
|
||||
|
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, 2024, and 2023, 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 - 31
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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Domestic
(Israel)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
|
Foreign
|
|
|
|
|||||||||
|
|
||||||||||||
|
Loss
before taxes on income
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
| f. |
Income
taxes are comprised as follows:
|
|
Year
ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Current
|
$
|
|
$
|
|
$
|
|
||||||
|
Domestic
(Israel)
|
|
|
|
|||||||||
|
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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Israel
tax provision at statutory rate
|
|
%
|
|
%
|
|
%
|
||||||
|
Non-deductible
share-based compensation
|
(
|
)%
|
(
|
)%
|
(
|
)%
|
||||||
|
Effect
of other permanent differences
|
(
|
)%
|
(
|
)%
|
|
%
|
||||||
|
Change
in valuation allowance
|
(
|
)%
|
(
|
)%
|
(
|
)%
|
||||||
|
Issuance
costs
|
|
%
|
|
%
|
|
%
|
||||||
|
Provision
to return
|
|
|
%
|
(
|
)%
|
|||||||
|
Capital
losses
|
|
%
|
|
%
|
|
|||||||
|
Other
adjustments
|
(
|
)%
|
|
%
|
|
%
|
||||||
|
|
||||||||||||
|
Effective
tax rate
|
(
|
)%
|
(
|
)%
|
(
|
)%
|
||||||
|
|
h. |
Tax
assessments:
The Company’s
tax assessments through 2018 are considered final.
As of December
31, 2024, the tax returns of the Company are still subject to audits by the tax authorities for the tax years 2019 onwards.
|
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 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, 2024 and 2023, 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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Numerator:
|
||||||||||||
|
Net
loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
|
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. |
|
| NOTE 15: - |
SEGMENT
INFORMATION
|
|
|
a. |
The Company
operates as a single operating segment in the LiDAR Sensors market. The Company's CODM is its Chief Executive Officer (CEO). The CODM
makes decisions on resource allocation, assesses performance of the business and monitors budget versus actual results on a consolidated
basis. As such, the segment’s profit (loss) is the Company’s consolidated net income (loss) and the segment’s assets
are the Company’s consolidated assets.
|
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 15: - |
SEGMENT
INFORMATION (Cont.)
|
|
|
b. |
Segment
information:
|
|
Year ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Revenues
from external customers
|
$
|
|
$
|
|
$
|
|
||||||
|
Less:
|
||||||||||||
|
Cost
of revenues
|
|
|
|
|||||||||
|
Research
and development expenses
|
|
|
|
|||||||||
|
Sales
and marketing expenses
|
|
|
|
|||||||||
|
General
and administrative expenses
|
|
|
|
|||||||||
|
Financial
income, net
|
|
|
|
|||||||||
|
Taxes
on income
|
|
|
|
|||||||||
|
Segment
loss
|
$
|
|
$
|
|
$
|
|
||||||
|
Other
segment disclosures:
|
||||||||||||
|
Depreciation
and amortization expenses
|
$
|
|
$
|
|
$
|
|
||||||
|
Share-based
compensation expenses
|
$
|
|
$
|
|
$
|
|
||||||
|
Interest
income
|
$
|
|
$
|
|
$
|
|
||||||
|
Assets:
|
||||||||||||
|
Segment
assets
|
$
|
|
$
|
|
$
|
|
||||||
|
Expenditures
for segment assets
|
$
|
|
$
|
|
$
|
|
||||||
|
|
c. |
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,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Europe, Middle East and
Africa (*)
|
$
|
|
$
|
|
$
|
|
||||||
|
Israel
|
|
|
|
|||||||||
|
Asia Pacific
|
|
|
|
|||||||||
|
North America (**)
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
| (*) |
Includes
revenues from Germany in the amount of $
|
| (**) |
Includes
revenues from United States only.
|
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 15: - |
SEGMENT
INFORMATION (Cont.)
|
|
|
d. |
The Company’s
long-lived assets (property and equipment, net and operating lease right-of-use assets, net) are located as follows:
|
|
Year ended
December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Israel
|
$
|
|
$
|
|
||||
|
United States
|
|
|
||||||
|
Germany
|
|
|
||||||
|
Others
|
|
|
||||||
|
$
|
|
$
|
|
|||||
|
|
e. |
Customers
accounted for over 10% of revenues:
For
the year ended 2024, Customer A and Customer B accounted for
For
the year ended 2023, Customer A and Customer C accounted for
For
the year ended 2022, Customer C accounted for
|
|
|
f. |
Concentration
of credit risk from major customers:
As
of December 31, 2024, Customer A and Customer D accounted for approximately
As
of December 31, 2023, Customer C accounted for approximately
|
| NOTE 16: - |
SUBSEQUESNT
EVENTS AFTER THE REPORTING DATE
|
On
February 12, 2025, the Company issued a total of
28,776,978
ordinary shares of no par value and
23,021,582
warrants to purchase one ordinary share, at an offering price of $
1.39
per unit (each unit consisting of one ordinary share and eight tenths of a warrant), for a total consideration of $
37.3
million, net of placement agent fees and other issuance costs of $
2.7
million. The warrants will be immediately exercisable at $
1.69
per share and will expire
five
years
from the date of issuance.
F
- 35
TABLE OF CONTENTS
Part IItem 1. Identity Of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on The CompanyItem 4A. Unresolved Staff CommentsItem 5. Operating and Financial Review and ProspectsItem 6. Directors, Senior Management and EmployeesItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures About Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesPart IIItem 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15. Controls and ProceduresItem 16A. Audit Committee Financial ExpertItem 16B. Code Of EthicsItem 16C. Principal Accounting Fees and ServicesItem 16D. Exemptions From The Listing Standards For Audit CommitteesItem 16E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersItem 16F. Change in Registrant S Certifying AccountantItem 16G. Corporate GovernanceItem 16H. Mine Safety DisclosureItem 16I. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsItem 16J. Insider Trading PoliciesItem 16K. CybersecurityPart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. ExhibitsNote 1: - GeneralNote 2: - Significant Accounting PoliciesNote 2: - Significant Accounting Policies (cont.)Note 3: - InventoryNote 4: - Prepaid Expenses and Other Current AssetsNote 5: - Property and Equipment, NetNote 6: - LeasesNote 6: - Leases (cont.)Note 7: - Fair Value MeasurementsNote 7: - Fair Value Measurements (cont.)Note 8: - Accrued Expenses and Other Current LiabilitiesNote 9: - Commitments and ContingenciesNote 9: - Commitments and Contingencies (cont.)Note 10: - Shareholders EquityNote 10: -Note 11: - Share-based CompensationNote 11: -Note 11: - Share-based Compensation (cont.)Note 12: - Warrants Over Ordinary SharesNote 12: -Note 13: - Taxes on IncomeNote 13: -Note 13: - Taxes on Income (cont.)Note 14: - Basic and Diluted Net Loss Per ShareNote 14: -Note 15: - Segment InformationNote 15: -Note 15: - Segment Information (cont.)Note 16: - Subsequesnt Events After The Reporting DateNote 16: -