10-Q 1 iacb-20220630.htm 10-Q iacb-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-40048
____________________________
Innovid Corp.
(Exact name of registrant as specified in its charter)
____________________________
Delaware87-3769599
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
30 Irving Place, 12th Floor
New York, New York
10003
(Address of Principal Executive Offices)
(Zip Code)
+1 (212) 966-7555
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareCTVNew York Stock Exchange
Warrants to purchase one share of Common stock, each at an exercise price of $11.50 per shareCTVWSNew York Stock Exchange

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. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filer¨
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The registrant had outstanding 132,443,951 shares of common stock as of August 8, 2022.



TABLE OF CONTENTS
2


BASIS OF PRESENTATION
Unless otherwise stated in this prospectus or the context otherwise requires:
“Advertising Services” means ad serving, creative and measurement services;
“APAC” means Asia-Pacific region;
“acquisition date” means the completion of the acquisition of TVS on February 28, 2022;
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act;
“CEO” means Chief Executive Officer;
“CFO” means Chief Financial Officer;
“Closing” means the closing of the Transaction;
“common stock” means Innovid common stock, par value $0.0001 per share;
“Company,” “we,” “us” and “our” refers to Innovid Corp . and its subsidiaries;
“COVID-19” means the novel coronavirus which began in 2019;
“CTV” means connected TV;
“EMEA” means Europe, the Middle East and Africa region;
“Exchange Act” means the Securities Exchange Act of 1934, as amended;
“Flexibility Act” means the Paycheck Protection Program Flexibility Act;
“Forward Purchase Agreements” means the forward purchase agreements entered into, or amended and restated, by ION on January 26, 2021;
“US GAAP” means accounting principles generally accepted in the United States of America;
“Innovid” or “Innovid Corp.” means Innovid Corp., a Delaware corporation;
“Innovid Inc.” or “Legacy Innovid” means Innovid, Inc., a Delaware corporation;
“ION” means ION Acquisition Corp 2 Ltd. prior to the Transaction;
“ION IPO” means ION’s initial public offering that was consummated on February 16, 2021;
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012;
“LATAM” means Latin American region;
“Legacy Plan” means Legacy Innovid’s stock option plan.
“Merger Agreement” means the Agreement and Plan of Merger dated June 24, 2021 by and among ION, Innovid, Inc., Merger Sub 1 and Merger Sub 2;
“Merger Sub 1” means Inspire Merger Sub 1, Inc., a Delaware corporation and a direct wholly owned subsidiary of ION;
“Merger Sub 2” means Inspire Merger Sub 2, LLC, a Delaware Limited Liability Company and a direct wholly owned subsidiary of ION;
“Mergers” mean Merger 1 and Merger 2, collectively, of Merger Sub 1 and Merger Sub 2, respectively;
“NYSE” means the New York Stock Exchange;
3

“Nielsen Claim” a lawsuit filed in the United States District Court for the Western District of Texas on March 4, 2022, by Nielsen, LLC suit against TVS alleging infringement of US Patent No. 10,063,378.
“PIPE Financing” means the purchase of shares of our common stock pursuant to the Subscription Agreements, and the purchase of shares of our common stock and warrants pursuant to the Forward Purchase Agreements;
“PIPE Investment” means the issuance and sale of $200,000,000 of common stock in a private placement to the PIPE Investors pursuant to the Subscription Agreements;
“PIPE Investors” mean those certain investors participating in the PIPE Financing pursuant to the Subscription Agreements and the Forward Purchase Agreements;
“PPP Loan” means Paycheck Protection Program Loan;
“Private Placement Warrants” means warrants which were not transferable, assignable or salable until 30 days after the completion of the Transaction and exercisable on a cashless basis and non-redeemable so long as they are held by the initial purchaser or its permitted transferees.
“SEC” means the United States Securities and Exchange Commission;
“SSIG” means the Special Situations Investing Group II, LLC;
“SSP” means stand-alone selling price;
“Subscription Agreements” means the subscription agreements dated June 24, 2021 the “Initial Subscription Agreements” and October 18, 2021 the “Additional Subscription Agreements” pursuant to which (together with the Forward Purchase Agreements) the PIPE Financing will be consummated;
“SVB” means Silicon Valley Bank;
“Transaction” means the Mergers and the related transactions contemplated by the Merger Agreement;
“TVSquared” or “TVS” means TV Squared Limited;
“UK” means United Kingdom;
“US” means United States of America;
“warrants” means the redeemable warrants (including those that underlie the units) that were offered and sold by ION in its initial public offering and registered pursuant to the IPO registration statement or the redeemable warrants of Innovid Corp. issued as a matter of law upon the conversion thereof following the Transaction, as context requires;
4

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements include, without limitation, statements relating to expectations for future financial performance, business strategies or expectations for our business. These statements are based on the beliefs and assumptions of the management of Innovid. Although Innovid believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, it cannot assure you that it will achieve or realize these plans, intentions or expectations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Form 10-Q, words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “strive,” “target,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
Should one or more of a number of known and unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should therefore not place undue reliance on these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:
• our public securities’ potential liquidity and trading;
• our ability to raise financing in the future;
• our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
• changes in applicable laws or regulations;
• our ability to maintain and expand relationships with advertisers;
• decreases and/or changes in CTV audience viewership behavior;
• Innovid’s ability to make the right investment decisions and to innovate and develop new solutions;
• the accuracy of Innovid’s estimates of market opportunity, forecasts of market growth and projections of future financial performance;
• the extent of investment required in Innovid’s sales and marketing efforts;
• Innovid’s ability to effectively manage its growth;
• sustained overall demand for advertising;
• the impact of the COVID-19, related supply chain issues and an increased rate of inflation;
• the continued acceptance of digital advertising by consumers and the impact of opt-in, opt-out or ad-blocking technologies;
• Innovid’s ability to scale its platform and infrastructure to support anticipated growth and transaction volume;
• the impact of increasing competition in the digital advertising space, including with competitors who have significantly more resources;
• other risks and uncertainties indicated in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on March 18, 2022 (the “2021 Annual Report”), including those set forth under the section titled “Risk Factors.”
These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.


Part I
Item 1. Financial Statements
INNOVID, CORP. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except stock and per stock data)




June 30, 2022

December 31, 2021
(Unaudited)
ASSETS


CURRENT ASSETS:


Cash and cash equivalents
$44,024 $156,696 
Trade receivables, net (allowance for doubtful accounts of $69 and $81 at June 30, 2022 and December 31 2021, respectively)
43,553 35,422 
Prepaid expenses and other current assets
5,247 3,131 
Total current assets
92,824 195,249 
NON-CURRENT ASSETS:
Long-term deposit
312 310 
Long-term restricted deposits
411 462 
Property and equipment, net
8,862 4,840 
Goodwill
114,608 4,555 
Intangible assets, net35,135  
Operating lease right of use asset3,069  
Other non-current assets625 116 
Total non-current assets
163,022 10,283 
TOTAL ASSETS
$255,846 $205,532 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables3,661 5,026 
Employees and payroll accruals9,499 7,742 
Accrued expenses and other current liabilities4,662 3,082 
Current portion of long-term debt15,000 6,000 
Lease liabilities - current portion1,685  
Total current liabilities
34,507 21,850 
NON-CURRENT LIABILITIES:
Lease liabilities - non-current portion2,464  
Other non-current liabilities3,831 3,455 
Warrants liability3,026 18,972 
Total non-current liabilities
9,321 22,427 
TOTAL LIABILITIES
43,828 44,277 
COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)
STOCKHOLDERS’ EQUITY:
Common stock of $0.0001 par value - Authorized: 500,000,000 and 500,000,000 at June 30, 2022 and December 31, 2021, respectively; Issued and outstanding: 132,411,715 and 119,017,380 at June 30, 2022 and December 31, 2021, respectively
13 12 
Additional paid-in capital347,630 293,719 
Accumulated deficit(135,625)(132,476)
Total stockholders’ equity212,018 161,255 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$255,846 $205,532 
The accompanying notes are an integral part of the condensed consolidated financial statements.
6


INNOVID, CORP. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except stock and per stock data)

Three months ended June 30,
Six months ended June 30,

2022202120222021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenues$33,088 $22,842 $58,950 $40,855 
Cost of revenues (1)7,351 3,968 13,277 7,811 
Research and development (1)9,710 6,131 16,964 11,356 
Sales and marketing (1)14,320 8,105 24,671 14,677 
General and administrative (1)9,955 4,200 21,410 6,579 
Depreciation and amortization926 149 1,599 331 
Operating (loss) profit(9,174)289 (18,971)101 
Finance expenses (income), net(13,306)1,602 (15,617)3,171 
Profit (loss) before taxes
4,132 (1,313)(3,354)(3,070)
Taxes on income (tax benefit)(168)346 (205)525 
Net profit (loss)4,300 (1,659)(3,149)(3,595)
Accretion of preferred stock to redemption value (21,076) (44,804)
Net loss attributable to common stockholders$4,300 $(22,735)$(3,149)$(48,399)
Net loss per stock attributable to common stockholders (2)
Basic$0.03 $(1.33)$(0.02)$(2.85)
Diluted$0.03 $(1.33)$(0.02)$(2.85)
Weighted-average number of stock used in computing net loss per stock attributable to common stockholders (2)
Basic132,152,652 17,116,586 128,220,893 16,956,139 
Diluted139,988,123 17,116,586 128,220,893 16,956,139 
The accompanying notes are an integral part of the condensed consolidated financial statements.
(1) Exclusive of depreciation and amortization presented separately.
(2) Prior period results have been adjusted to reflect the exchange of Innovid Inc’s common stock for Innovid Corp’s common stock at an exchange ratio of approximately 1.337 as a result of the Transaction. See Note 3 for further details.
7


INNOVID, CORP. AND ITS SUBSIDIARIES CONDENSED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except stock data)




Temporary equity
Common stock
Treasury stock
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity (deficit)
Number
Amount
Number
Amount
Number
Amount
Balance as of December 31, 2020
73,690,340 $86,997 16,275,609 $2 1,914,328 $(1,629)$10 $(48,113)$(49,730)
Accretion of preferred stock to redemption value— 23,728— —   (586)(23,142)(23,728)
Stock-based compensation— — — —   280 — 280 
Stock options exercised— — 761,697 —   306 — 306 
Net loss— — — —   — (1,936)(1,936)
Balance as of March 31, 2021 (unaudited)73,690,340 110,725 17,037,306 2 1,914,328 (1,629)10 (73,191)(74,808)
Accretion of preferred stock to redemption value— 21,076— —   $(1,500)$(19,576)(21,076)
Stock-based compensation— — —    $1,440 $— 1,440 
Stock options exercised— — 1,281,999 —   $61 $— 61 
Net loss— — —   $— $— $(1,659)(1,659)
Balance as of June 30, 2021 (unaudited)
73,690,340 131,801 18,319,305 $2 1,914,328 (1,629)$11 $(94,426)$(96,042)
Temporary equity
Common stock
Treasury stock
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Number
Amount
Number
Amount
Number
Amount
Balance as of December 31, 2021
  119,017,380 $12   $293,719 $(132,476)$161,255 
Common stock and equity awards issued for acquisition of TVS— — 11,549,465 1 — — 47,151 — 47,152 
Stock-based compensation— — — — — — 1,496 — 1,496 
Stock options exercised— — 1,521,927 — — — 462 — 462 
Net loss— — — — — — — (7,449)(7,449)
Balance as of March 31, 2022 (unaudited)  132,088,772 13   342,828 (139,925)202,916 
Stock-based compensation— — — — — — 4,628 — 4,628 
Stock options exercised— — 322,943 — — — 174 — 174 
Net profit— — — — — — — 4,300 4,300 
Balance as of June 30, 2022 (unaudited)
  132,411,715 $13   $347,630 $(135,625)$212,018 
The accompanying notes are an integral part of the condensed consolidated financial statements.



8


INNOVID, CORP. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except stock and per stock data)
Six months ended June 30,
2022

2021
Cash flows from operating activities:
(Unaudited)
(Unaudited)
Net loss$(3,149)$(3,595)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,599 331 
Stock-based compensation5,634 1,720 
Change in fair value of warrants(15,946)2,728 
Changes in operating assets and liabilities
(Increase)/ decrease in trade receivables, net(4,624)2,605 
Increase in prepaid expenses and other operating assets(747)(623)
Increase/ (decrease) in trade payables(321)238 
Decrease in operating lease right of use assets872  
Increase in employees and payroll accruals1,044 184 
Decrease in operating lease liabilities(1,208) 
Increase in accrued expenses and other operating liabilities945 759 
Net cash (used in)/ provided by operating activities
(15,901)4,347 
Cash flows from investing activities:
Acquisition of business, net of cash acquired(99,568) 
Internal use software capitalization(3,516) 
Purchase of property and equipment(221)(284)
Founders' note receivable (459)
Decrease in deposits32 (24)
Net cash used in investing activities
(103,273)(767)
Cash flows from financing activities:
Repayment of acquisition liability (126)
Proceeds from loans9,000  
Repayment of loans (3,033)
Payment of SPAC merger transaction costs(3,185) 
Proceeds from exercise of options636 367 
Net cash (used in)/ provided by financing activities
6,451 (2,792)
Increase/ (decrease) in cash, cash equivalents and restricted cash(112,723)788 
Cash, cash equivalents and restricted cash at the beginning of the period157,158 16,092 
Cash, cash equivalents and restricted cash at the end of the period $44,435 $16,880 
Supplemental disclosure of cash flows activities:
(1) Cash paid during the period for:
Income taxes paid, net of tax refunds$363 $80 
Interest$137 $128 
(2) Non-cash transactions:
Business combination consideration paid in stock$47,152 $ 
Accretion of preferred stock to redemption value $44,804 
Deferred offering cost included in accrued liabilities $1,640 
Reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position
Cash and cash equivalents44,024 16,441 
Long-term restricted deposits411 439 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$44,435 $16,880 
The accompanying notes are an integral part of the condensed consolidated financial statements.
9

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)

NOTE 1:- OVERVIEW
Innovid Corp. together with its consolidated subsidiaries, the “Company” or “Innovid” is a leading independent software platform that provides ad serving and creative services for the creation, delivery, and measurement of TV ads across connected TV (“CTV”), mobile TV and desktop TV environments to advertisers, publishers and media agencies.
Innovid Corp. was originally incorporated as ION Acquisition Corp. 2 Ltd. (“ION”), a special purpose acquisition company, in Cayman Islands on November 23, 2020.
On November 30, 2021 ION and Innovid Inc. (“Legacy Innovid”) closed the transaction as described below (the “Transaction”). Through several merges and name change Innovid Corp. was established and continues Legacy Innovid operating activity.
On November 30, 2021, ION consummated a series of merger transactions (the “Mergers”), whereby it acquired the business of Legacy Innovid. Immediately following the Mergers, ION changed its name to “Innovid Corp.” In addition, ION entered into certain subscription agreements (“PIPE Investment”). Further, in connection with the Closing, PIPE investors purchased equity securities of Legacy Innovid Stockholders (the “Secondary Sale Transaction”) for an aggregate purchase price of $68,855 (the “Secondary Sale Amount”). See Note 3 for further details.
On February 28, 2022, the Company completed the acquisition of all outstanding shares of TVSquared (“TVS”), an independent global measurement and attribution platform for converged TV and a private company limited by shares incorporated under the laws of the Scotland. The Company acquired all of the equity of TVSquared for an aggregate amount of $100,000 in cash, 11,549,465 shares of the Company common stock at fair value of $3.80 per share, and the issuance of 949,893 fully vested stock option of the Company at weighted average fair value of $3.49, subject to certain adjustments as defined in the Stock Purchase Agreement. See Note 3 for further details.
The Company common stock and warrants commenced trading on the NYSE under the symbols “CTV” and “CTVWS,” respectively, on December 1, 2021.
Innovid Corp. has subsidiaries in the US, Israel, Argentina, the UK, Germany and Australia.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Basis of presentation:
The unaudited interim condensed consolidated financial statements have been prepared in accordance with US GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative US GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation have been included. The Company’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.
The condensed consolidated balance sheet at December 31, 2021, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s 2021 Annual Report on Form 10-K.
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2021, have been applied consistently in these unaudited interim condensed consolidated financial statements, unless otherwise stated.
10

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
(b)Prior period reclassification:
During the second quarter of 2022, we presented depreciation and amortization expenses as a separate line item on our condensed consolidated statements of operations and all prior periods have been adjusted. Depreciation and amortization expenses were previously included in cost of sales and other operating expenses depending on the underlying asset’s function. Additionally, we no longer present gross profit as a subtotal on our condensed consolidated statements of operations.
The reclassification is to better reflect the financial performance of transactions with customers as our business has evolved and include our most recent acquisition. The change provides more clarity about changes in cost of revenue and other operating expenses exclusive of depreciation and amortization, and better align with how our peers and competitors present their financial statements.
In accordance with US GAAP, all periods presented below have been retrospectively adjusted to reflect the reclassification of cost of revenue and other operating expenses exclusive of depreciation and amortization. There was no net impact to loss from operations, net loss attributable to common stockholders or net loss per stock for any periods presented. The condensed consolidated balance sheets, condensed statements of changes in temporary equity and stockholders’ equity (deficit), and the condensed consolidated statements of cash flows are not affected by this reclassification. The effect of the change is as follows:

Three months ended June 30, 2022Three months ended June 30, 2021
UnauditedUnaudited
Under previous classificationEffect of changeAs reportedPreviously reportedEffect of changeAs adjusted
Cost of revenues$7,933 $(582)$7,351 $3,987 $(19)$3,968 
Operating expenses:
Research and development9,782 (72)9,710 6,209 (78)6,131 
Sales and marketing14,489 (169)14,320 8,148 (43)8,105 
General and administrative10,058 (103)9,955 4,209 (9)4,200 
Depreciation and amortization$ $926 $926 $ $149 $149 

Six months ended June 30, 2022Six months ended June 30, 2021
UnauditedUnaudited
Under previous classificationEffect of changeAs reportedPreviously reportedEffect of changeAs adjusted
Cost of revenues$14,277 $(1,000)$13,277 $7,849 $(38)$7,811 
Operating expenses:
Research and development17,111 (147)16,964 11,506 (150)11,356 
Sales and marketing25,009 (338)24,671 14,799 (122)14,677 
General and administrative21,524 (114)21,410 6,600 (21)6,579 
Depreciation and amortization$ $1,599 $1,599 $ $331 $331 
(c)Use of estimates:
The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
11

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
The COVID-19 pandemic created, and continues to create significant uncertainty in macroeconomic conditions, including supply chain disruptions and labor shortages. Further, other global events such as the war in the Ukraine and the current macro-economic inflationary environment could have an impact on our customers. Based on public reporting and our observations, some advertisers in certain industries decreased and may continue to decrease their short-term advertising spending in light of some or all of these factors. This in turn could negatively impact our revenues from such advertisers.
The Company has considered the impact of COVID-19 and other global events on its estimates and assumptions and determined that there were no material adverse impacts on the unaudited interim condensed consolidated financial statements for the three and six-month period ended June 30, 2022. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
The Company obtained an unsecured loan of $3,516 in April 2020 due to uncertainties related to COVID-19. The loan was obtained through SVB under the PPP Loan pursuant to the CARES Act and Flexibility Act. The Company fully repaid the PPP Loan in June 2021. See Note 6 for further details.
(d)Software development costs:
Software development costs, which are included in property and equipment, net, consists of capitalized costs related to purchase and develop internal-use software. The Company uses such software to provide services to its customers. The costs to purchase and develop internal-use software are capitalized from the time that the preliminary project stage is completed, and it is considered probable that the software will be used to perform the function intended. These costs include personnel and personnel-related employee benefits for employees directly associated with the software development and external costs of the materials or services consumed in developing or obtaining the software.
Any costs incurred for upgrades and functionality enhancements of the software are also capitalized. Once this software is ready for use in providing the Company's services, these costs are amortized on a straight-line basis over the estimated useful life of the software, which is three years. The amortization will be presented within depreciation and amortization in the condensed consolidated statements of operations. During the three and six-month period ended June 30, 2022, the Company capitalized $2,335 and $4,006, respectively, related to internal-use software cost. The Company did not capitalize software development costs in 2021 in the same period.
(e)Business combinations:
The Company accounts for business combinations by applying the provisions of ASC 805, “Business Combination” (“ASC 805”) and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.
Acquisition-related expenses are expensed as incurred.
(f)Goodwill and intangible assets:
Goodwill and certain other purchased intangible assets have been recorded in the Company's condensed consolidated financial statements as a result of acquisitions. Goodwill represents the excess of the purchase price in a business combination over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but rather is subject to an impairment test.
The Company allocates goodwill to reporting units based on the expected benefit from the business combination. Reporting units are evaluated when changes in the Company’s operating structure occur, and if necessary, goodwill is reassigned using a relative fair value allocation approach.
12

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
ASC 350, Intangibles—Goodwill and other (“ASC 350”) requires goodwill to be tested for impairment at least annually and, in certain circumstances, between annual tests. The accounting guidance gives the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment considers events and circumstances that might indicate that a reporting unit's fair value is less than its carrying amount. If it is determined, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test is performed. The Company elects to perform an annual impairment test of goodwill as of October 1 of each year, or more frequently if impairment indicators are present. For the three and six months ended June 30, 2022 and 2021, no impairments of goodwill were recorded.
Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date.
Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. For the three and six months ended June 30, 2022 and 2021, no impairments of intangible assets were recorded.
Technology and trade name are being amortized over the estimated useful life of approximately 6 and 8 years, respectively, using straight-line amortization method.
The amortization of trade name, customer relationships and technology will be presented within depreciation and amortization in the condensed consolidated statement of operations.
(g)Fair value of financial instruments:
The Company applies a fair value framework in order to measure and disclose its financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The Company’s financial instruments consist of cash and cash equivalents, restricted deposits, trade receivables, net, trade payables, employees and payroll accruals, accrued expenses and other current liabilities and current portion of long-term debts. Their historical carrying amounts are approximate fair values due to the short-term maturities of these instruments.
The Company measures its investments in money market funds classified as cash equivalents and warrants liability at fair value.
The following table present information about the Company’s financial instruments that are measured at fair value on a recurring basis:

June 30, 2022
(Unaudited)

Level 1
Level 2
Level 3
Assets:
Money market funds$29,651 $ $ 
Liabilities:
Warrants liability$696 $ $2,330 
13

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)

December 31, 2021

Level 1
Level 2
Level 3
Assets:
Money market funds$4,515 $ $ 
Liabilities:
Warrants liability$3,510 $ $15,462 
The change in the fair value of the Level 3 warrant liability is summarized below:

June 30,
December 31,
June 30,

2022

20212021
(Unaudited)(Unaudited)
Beginning of the period
$15,462 $499 $499 
Additions* 18,427  
Change in fair value(13,132)1,616 2,728 
Conversion of Legacy Innovid Warrants on the Closing of the Transaction (5,080) 
End of the period$2,330 $15,462 $3,227 
* Additions during the year ended December 31, 2021 represent Company Warrant liability assumed in the Transaction. See Note 5 for further details.
As of June 30, 2022, the Company’s warrant liability includes warrants that were originally issued in connection with the ION IPO, which were transferred to the Company as part of the Closing. The Company Warrants are recorded on the balance sheet at fair value with changes in fair value recognized through earnings. The Company has determined that the fair value of the Public Warrants at a specific date is determined by the closing price of the Company’s Public Warrants, traded under the symbol “CTVWS” and within Level 1 of the fair value hierarchy. The closing quoted price of the Public Warrants was $0.22 and $1.11 as of June 30, 2022 (unaudited) and December 31, 2021, respectively. The fair value of the Public Warrants was $696 and $3,510 as of June 30, 2022 (unaudited) and December 31, 2021, respectively. Gains and losses from the remeasurement of the warrants liability are recognized in “Finance expenses, net” in the condensed consolidated statements of operations.
The Private Placement Warrants are classified as Level 3 as of June 30, 2022 and continue to be valued using the Black-Scholes option pricing model. The fair value of the Private Placement Warrants was $2,330 and $15,462 as of June 30, 2022 (unaudited) and December 31, 2021, respectively. Gains and losses from the remeasurement of the warrants liability are recognized in “Finance expenses, net” in the condensed consolidated statements of operations.
The key inputs into the Black-Scholes model for the Private Placement Warrants were as follows:

June 30,
December 31,

20222021
(Unaudited)
Risk-free interest rate
2.98 %1.24 %
Expected dividends % %
Expected term (years)
4.44.9
Expected volatility75 %55 %
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
14

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
(h)Concentrations of credit risks:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, deposits and trade receivables, net.
The majority of the Company’s cash and cash equivalents are invested in deposits with major banks in America and Israel. Generally, these investments may be redeemed upon demand and, therefore, bear minimal risk.
The Company’s trade receivables, net are mainly derived from sales to customers located in the APAC, EMEA, and LATAM. The Company mitigates its credit risks by performing an ongoing credit evaluations of its customers’ financial conditions.
The Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
One of the Company’s customers accounted for more than 10% of the Company’s total revenues during the three months ended June 30, 2021.

Three months ended June 30,
Six months ended June 30,

2022

20212022

2021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Customer A
*)10 %*)*)
*) less than 10%
(i)Warrants:
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480 and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.
Warrants that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Warrants that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter. The liability-classified warrants are recorded under non-current liabilities. Changes in the estimated fair value of the warrants are recognized in “Financial expenses, net” in the condensed consolidated statements of operations.
(j)Revenue recognition:
The Company generates revenues from providing Advertising Services to advertisers, publishers and media agencies. The services focus on standard, interactive and data driven digital video advertising. The Company’s revenue streams are ad serving, creative and measurement services. Ad serving services relate to utilizing Innovid’s platform to serve advertising impressions to various digital publishers across CTV, mobile TV, desktop TV, display, and other channels. Creative services relate to the design and development of interactive data-driven and dynamic ad formats by adding data, interactivity and dynamic features to standard ad units. The Company also provides measurement services through access to a measurement application in real time or by delivery of a report. Measurement services relate to analytics of advertisements and campaigns.
15

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
The Company recognizes revenue when its customer obtains control of promised services in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company recognizes revenue in accordance with ASC Topic 606, Revenue from contracts with customers (“ASC 606”) and determines revenue recognition through the following steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.
For arrangements with multiple performance obligations, which represent promises within an arrangement that are capable of being distinct and are separately identifiable, the Company allocates the contract consideration to all distinct performance obligations based on their relative stand-alone selling price (“SSP”). SSP is typically estimated based on observable transactions when these services are sold on a standalone basis and expected cost plus a margin approach.
Revenues related to ad serving services are recognized when impressions are delivered. The Company recognizes revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. Impressions are considered delivered when an ad is displayed to users.
Revenues related to creative services are recognized at a point in time, when the Company delivers an ad unit. Creative services projects are usually delivered within a week.
Revenues related to measurement services reports are recognized at a point in time, when the Company delivers the measurement report.
Revenues related to the measurement services platform are recognized over time, since the customer simultaneously receives and consumes the benefits provided by the Company’s performance. Revenues for these measurement services are recognized over the service period.
The Company’s accounts receivable, consist primarily of receivables related to providing ad serving, creative and measurement services, for which the Company’s contracted performance obligations have been satisfied, the amount has been billed and the Company has an unconditional right to payment. The Company typically bills customers on a monthly basis based on actual delivery. The payment terms vary, mainly with terms of 60 days or less.
The typical contract term is 12 months or less for ASC 606 purposes. Some of the Company’s contracts can be cancelled without a cause. The Company has the unconditional right to payment for the services provided as of the date of the termination of the contracts.
The Company applies the practical expedient in ASC 606 and does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Ad serving and creative services were 78.4% and 98.5% of the Company’s revenues for the three months ended June 30, 2022 (unaudited) and 2021 (unaudited), respectively, and were 83.2% and 98.5% of the Company’s revenues for the six months ended June 30, 2022 (unaudited) and 2021 (unaudited). Measurement services were 21.6% and 0.8% for the three months ended June 30, 2022 (unaudited) and 2021 (unaudited), respectively, and were 16.6% and 0.9% of the Company’s revenues for the six months ended June 30, 2022 (unaudited) and 2021 (unaudited).
Costs to obtain a contract:
Contract costs include commission programs to compensate sales employees for generating sales orders with new customers or for new services with existing customers. The commissions are commensurate. The Company elected to apply the practical expedient and recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. The Company did not capitalize any contract costs during the periods ended June 30, 2022 (unaudited) and 2021 (unaudited), respectively.
16

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
(k)Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued the ASU No. 2016-02, Leases (Topic 842). The standard outlines a comprehensive lease accounting model that supersedes the previous lease guidance and requires lessees to recognize lease liabilities and corresponding right-of-use (“ROU”) assets for all leases with lease terms greater than 12 months. The guidance also changes the definition of a lease and expands the disclosure requirements of lease arrangements. Innovid adopted the standard in the first quarter of 2022 using the modified retrospective method. Results for reporting periods beginning after December 31, 2021 have been presented in accordance with the standard, while results for prior periods have not been adjusted and continue to be reported in accordance with the Company's historical accounting. The cumulative effect of initially applying the new leases standard was recognized as an adjustment to the opening interim condensed consolidated balance sheet as of January 1, 2022 (unaudited).
The Company elected a package of practical expedients for leases that commenced prior to January 1, 2022 and did not reassess historical conclusions on: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases.
This standard has a significant impact on our condensed consolidated balance sheet but did not have a significant impact on the Company’s condensed consolidated statements of operations. The most significant effects relate to the recognition ROU assets and lease liabilities on interim condensed consolidated balance sheet for real estate and cars operating leases.
Upon adoption, the Company recognized lease liabilities and corresponding ROU assets, adjusted for the accrued rent and remaining lease incentives received on the adoption date, as follows:
January 1, 2022
(Unaudited)
ROU assetsLease liabilities
Real Estate$3,878 $5,482 
Cars50 49 
Total operating leases$3,928 $5,531 
See Note 4 for further details.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. Innovid adopted the standard in the first quarter of 2022. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. This new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting. The Company adopted the standard effective in the first quarter of 2022 on a prospective basis. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.
(l)Recently issued accounting pronouncements not yet adopted by the Company:
As an “emerging growth company,” the 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 reflect this election.
17

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The final guidance issued by the FASB for convertible instruments eliminates two of the three models in ASC 470-20 that require separate accounting for embedded conversion features. Separate accounting is still required in certain cases. Additionally, among other changes, the guidance eliminates some of the conditions for equity classification in ASC 815-40-25 for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements.
Other issued new guidance is not expected to have an impact on the Company’s condensed consolidated financial statements.
NOTE 3:- TRANSACTION AND BUSINESS COMBINATION
Business Combination
On February 28, 2022, the Company completed the acquisition of TVS. TVS is an independent global measurement and attribution platform for converged TV and a private company limited by shares incorporated under the laws of Scotland. The Company acquired all of the equity of TVS for an aggregate amount of $100,000 in cash, 11,549,465 shares of the Company common stock at fair value of $3.80 per share, and the issuance of 949,893 fully vested stock option of the Company at weighted average fair value of $3.49, subject to certain adjustments as defined in the Stock Purchase Agreement.
The Company, through this acquisition, added a real-time, cross-platform service to its offerings, including measurement outcomes such as frequency and unique unduplicated reach and performance metrics. The combination of ad serving and cross-platform measurement enables the buy- and sell-sides to solve fragmentation by unlocking a complete picture of advertising across the linear TV, CTV and digital video marketplaces.
The acquisition of TVS has been accounted for as a business combination using the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The valuation of assets acquired and liabilities assumed, have not yet been finalized as of June 30, 2022 (unaudited). As a result, Innovid recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Subsequent to the acquisition date, the Company made certain measurement period adjustments to the preliminary purchase price allocation.
Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value of intangible assets, goodwill, and income taxes among other items. The completion of the valuation will occur no later than one year from the acquisition date.
18

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date (unaudited):

Total value
Cash and cash equivalents
$5,318 
Accounts receivables
3,507
Other current assets1,912
Property and equipment154
Total tangible assets
10,891 
Technology17,075
Customer relationships
14,700
Trade name
4,600
Goodwill
110,053
Total assets acquired
157,319 
Less: Deferred tax liabilities(1,783)
Less: Other assumed liabilities
(3,498)
Net assets acquired
$152,038 
Intangible assets relate to technology, trade name and customer relationship of $17,075, $4,600 and $14,700, respectively. These are being amortized over the estimated useful life of approximately 6 years, 8 years, and 11 years, respectively. The estimated fair values of identifiable intangible assets were determined using the "income approach", which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, competitive trends impacting the asset and each cash flow stream, as well as other factors.
Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recognized from the acquisition of TVS represents the value of additional growth potential of the revenue base from the creation of a single combined global organization and synergies related to combined IT efforts for enhancement of the existing and acquired technologies . The goodwill is not deductible for tax purposes.
In addition to the purchase consideration, the Company entered into cash compensation arrangements with certain employees, which amounted to $9,700 in aggregate and are subject to certain performance and employment conditions following the acquisition date.
The Company incurred total transaction costs of $5,033 for the acquisition, of which $4,873 was incurred for the six months ended June 30, 2022 (unaudited). Acquisition related transaction costs include legal, accounting fees and other professional costs directly related to the acquisition, and are recognized in “general and administrative” in the condensed consolidated statements of operations.
Following the acquisition date, the operating results of TVS have been included in the interim condensed consolidated financial statements. For the period from the acquisition date through June 30, 2022 (unaudited), revenues attributable to TVS were $9,238 and net loss attributable to TVS were $3,256, inclusive of $1,239 of intangible asset amortization. For the three months period ended June 30, 2022 (unaudited), revenues attributable to TVS were $6,789 and net loss attributable to TVS were $2,302, inclusive of $729 intangible asset amortization.
19

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Pro Forma Financial Information
The following table presents the unaudited pro forma combined results of Innovid and TVS for the three months and six months ended June 30, 2022 and 2021 as if the acquisition of TVS had occurred on January 1, 2021:
Three months ended June 30,Six months ended June 30,
2022

20212022

2021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenues$33,088 $28,045 $63,267 $50,558 
Net profit (loss)4,869 (4,113)628 (19,503)
The unaudited pro forma interim condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of Innovid and TVS. In order to reflect the occurrence of the acquisition on January 1, 2021, the unaudited pro forma financial information includes adjustments to reflect incremental amortization expense to be incurred based on the current preliminary fair values of the identifiable intangible assets acquired and the reclassification of acquisition-related costs incurred during the three months and six months ended June 30, 2022 to the three months and six months ended June 30, 2021. The unaudited pro forma financial information is not necessarily indicative of what the condensed consolidated results of operations would have been had the acquisition been completed on January 1, 2021. In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company.
Transaction
As discussed in Note 1, on November 30, 2021, the Transaction was closed.
The Transaction was accounted for as a reverse recapitalization in accordance with US GAAP. Under this method of accounting, ION who was the legal acquirer, was treated as the “acquired” company for accounting purposes and the Transaction was treated as the equivalent of Innovid Corp. issuing stock for the net assets of ION, accompanied by a recapitalization. The net assets of ION are stated at historical cost, with no goodwill or other intangible assets recorded.
Upon the Closing of the Transaction, among other things:
All outstanding shares of Legacy Innovid common stock, Legacy Innovid redeemable convertible preferred stock, Legacy Innovid Warrants, and Secondary Sale Transaction of 6,885,486 shares to PIPE investors, were exchanged for 93,787,278 shares of common stock in Innovid Corp..

Number of shares
Legacy Innovid common stock of January 1, 202116,275,609 
Warrant exercised132,392 
Stock option exercised3,180,943 
Conversion of redeemable convertible preferred stock into common stock73,690,340 
Conversion of Legacy Innovid Warrants507,994 
Exchanged into Innovid Corp. common stock on November 30, 202193,787,278 
Holders of 19,585,174 shares of ION’s Class A common stock sold in its initial public offering (the “Initial Shares”) exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from ION IPO, which was approximately $10.00 per share, or $195,888 in the aggregate. The remaining shares of ION Class A common stock, including total shares of ION Class B common stock converted to ION Class A common stock immediately prior to the Domestication, were automatically converted to 12,039,826 shares of common stock in Innovid Corp.
After giving effect to the Transaction, the redemption of Initial Shares as described above and the consummation of the PIPE Investment, there were 118,941,618 shares of common stock issued and outstanding after the close of the Transaction.
Innovid Corp received approximately $149,252 in cash proceeds, net of transaction costs paid. The Company has not paid an accrued liability of $3,185 directly related to the Transaction as of December 31, 2021.
20

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
The following table reconciles the elements of the Transaction to the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in temporary equity and stockholders’ equity for the year ended December 31, 2021.

Total value
Cash - ION trust account and cash, net of redemptions
$55,466 
Cash - PIPE Investment, net of Secondary Sale Amount of $68,855
131,145 
Less: Transaction costs paid
(31,160)
Less: Deferred underwriting fee paid(6,199)
Proceeds from reverse recapitalization, net
149,252 
Less: Accrued transaction costs not yet paid
(3,185)
Less: Company Warrant assumed as part of the Transaction
(22,791)
Plus: Transaction costs allocated to Company Warrant2,750 
Reverse recapitalization, net
$126,026 
During the six-month period ended June 30, 2022, the Company fully paid the accrued transaction costs of $3,185.
As a result of the Transaction, each share of Legacy Innovid redeemable convertible preferred stock and common stock was converted into the right to receive approximately 1.337 shares of the common stock of the Company.
Public Warrants and Private Placement Warrants
As a result of the Transaction, the Company assumed the outstanding Public Warrants to purchase 3,162,500 shares of the Company’s common stock and the outstanding Private Placement Warrants to purchase 7,060,000 shares of the Company’s common stock. Each whole Warrant entitles the registered holder to purchase one share of the Company’s common stock at a price of $11.50 per share, at any time commencing 30 days after the Closing. The warrants expire five years after the completion of the Transaction.

NOTE 4:- LEASES
Innovid's lease portfolio primarily consists of real estate properties and cars. Short-term leases with a term of 12 months or less are not recorded on the balance sheet. Innovid does not separate lease components from non-lease components.
The Company is a lessee in all of its lease agreements. The Company records lease liabilities based on the present value of lease payments over the lease term. Innovid generally uses an incremental borrowing rate to discount its lease liabilities, as the rate implicit in the lease is typically not readily determinable. Certain lease agreements include renewal options that are under the Company's control. Innovid includes optional renewal periods in the lease term only when it is reasonably certain that Innovid will exercise its option.
Variable lease payments are primarily related to payments to lessors for taxes, maintenance, insurance and other operating costs. The Company's lease agreements do not contain any significant residual value guarantees or restrictive covenants.
The Company has the following operating ROU assets and lease liabilities:
June 30, 2022
(Unaudited)
ROU assetsLease liabilities
Real Estate$3,035 $4,118 
Cars34 31 
Total operating leases$3,069 $4,149 
21

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
June 30, 2022
(Unaudited)
Lease liabilities
Current lease liabilities$1,685 
Non-current lease liabilities2,464 
Total lease liabilities$4,149 
The following table summarizes the lease costs recognized in the interim condensed consolidated statement of operations:
Three months ended June 30, 2022Six months ended June 30, 2022
(Unaudited)(Unaudited)
Operating lease cost$472 $947 
Short term lease cost126 208 
Variable lease cost6 10 
Total lease cost$604 $1,165 
As of June 30, 2022, the weighted-average remaining lease term and weighted-average discount rate for operating leases are 2.6 years and 3.2%, respectively.
The following table presents supplementary cash flow information regarding the company's operating leases:
Six months ended June 30, 2022
(Unaudited)
Cash paid for amounts included in the measurement of lease liabilities$1,133 
Right of use assets obtained in exchange for new operating lease liabilities$ 

The following table summarizes the future payments of Innovid for its operating lease liabilities:
June 30, 2022
(Unaudited)
2022 Remaining$995 
20231,873 
2024766 
2025703 
Total undiscounted lease payments$4,337 
Less: Interest(188)
Total lease liabilities - operating$4,149 

NOTE 5:- WARRANTS LIABILITY
Company Warrants
As of June 30, 2022, the Company had 3,162,500 Public Warrants and 7,060,000 Private Warrants outstanding.
Public Warrants
22

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of the Transaction and (b) one year from the closing of the Initial Public Offering. The Public Warrants will expire five years from the completion of the Transaction or earlier upon redemption or liquidation.
Redemption of warrants when the price per Innovid Corp. ordinary share equals or exceeds $18.00.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
in whole and not in part;
at a price of $0.01 per warrant;
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
if, and only if, the closing price of the Innovid Corp. ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise the warrant prior to the scheduled redemption date. However, the price of the Company’s common shares may fall below the $18.00 redemption trigger price (as adjusted for share sub-divisions, share capitalization, reorganization, recapitalization and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
Redemption of warrants when the price per Innovid Corp. ordinary share equals or exceeds $10.00.
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
in whole and not in part;
at a price of $