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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 SeptemberJune 30, 20222023
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¨x
Non-accelerated filerx¨Smaller 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 133,650,579139,303,254 shares of common stock as of November 10, 2022.August 4, 2023.



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TABLE OF CONTENTS
Page
Item 1A. Risk Factors
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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;
“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.
“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.
“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.
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“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.
“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;
“Transaction” means the Mergers and the related transactions contemplated by the Merger Agreement.
“TVSquared” or “TVS” means TV Squared Limited.
“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.
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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 severala 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.trading;
• our ability to raise financing in the future.future;
• our success in retaining or recruiting, or changes required in, our officers, key employees or directors.directors;
• changes in applicable laws or regulations.regulations;
• our ability to maintain and expand relationships with advertisers.advertisers;
• decreases and/or changes in CTV audience viewership behavior.behavior;
• Innovid’s ability to make the right investment decisions and to innovate and develop new solutions.solutions;
• the accuracy of Innovid’s estimates of market opportunity, forecasts of market growth and projections of future financial performance.performance;
• the extent of investment required in Innovid’s sales and marketing efforts.efforts;
• Innovid’s ability to effectively manage its growth.growth;
• sustained overall demand for advertising.advertising;
• the impact of the COVID-19 related supply chain issues and an increased rate of inflation.pandemic;
• the continued acceptance of digital advertising by consumers and the impact of opt-in, opt-out or ad-blocking technologies.technologies;
• Innovid’s ability to scale its platform and infrastructure to support anticipated growth and transaction volume.volume;
• the impact of increasing competition in the digital advertising space, including with competitors who have significantly more resources.resources;
• other risks and uncertainties indicated in this report, including those set forth under the section titled “Risk Factors” and those incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022 (the “2022 Annual Report on Form 10-K”), which was filed with the SECSecurities and Exchange Commission (“SEC”) on March 18, 2022 (the “2021 Annual Report”) as updated in later SEC filings, including those set forth under the section titled “Risk Factors.”3, 2023.
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 becauseas a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.
WHERE TO FIND MORE INFORMATION
Our website address is www.innovid.com. We may use our website as a means of disclosing material non-public information. Such disclosures will be included on our website in the “Investors” section or at investors.innovid.com. We may also use certain social media channels, such as LinkedIn, Facebook or Twitter, as a means of disclosing information about us and our business to our colleagues, customers, investors and the public. While not all of the information that the Company posts to the Innovid website or to social media accounts is of a material nature, some information could be deemed to be material. Accordingly, investors should monitor our website and certain of our social media channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. However, information contained on, or that can be accessed through, these communications channels do not constitute a part of this Quarterly Report and are not incorporated by reference herein. Our SEC filings are available to you on the SEC’s website at http://www.sec.gov. This site contains reports and other information regarding issuers that file electronically with the SEC. The information on that website is not part of this Quarterly Report and is not incorporated by reference herein.


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




September 30, 2022

December 31, 2021

June 30, 2023

December 31, 2022
(Unaudited)(Unaudited)
ASSETSASSETS


ASSETS


CURRENT ASSETS:


Cash and cash equivalentsCash and cash equivalents$46,509 $156,696 Cash and cash equivalents$43,384 $37,541 
Trade receivables, net (allowance for doubtful accounts of $69 and $81 at September 30, 2022 and December 31 2021, respectively)40,223 35,422 
Short-term bank depositsShort-term bank deposits— 10,000 
Trade receivables, net (allowance for credit losses of $330 and $65 at June 30, 2023, and December 31, 2022, respectively)Trade receivables, net (allowance for credit losses of $330 and $65 at June 30, 2023, and December 31, 2022, respectively)43,238 43,653 
Prepaid expenses and other current assetsPrepaid expenses and other current assets3,812 3,131 Prepaid expenses and other current assets4,123 2,640 
Total current assets
Total current assets
90,544 195,249 
Total current assets
90,745 93,834 
NON-CURRENT ASSETS:
Long-term depositLong-term deposit310 310 Long-term deposit260 277 
Long-term restricted depositsLong-term restricted deposits406 462 Long-term restricted deposits396 430 
Property and equipment, netProperty and equipment, net11,719 4,840 Property and equipment, net18,959 14,322 
GoodwillGoodwill114,678 4,555 Goodwill102,473 116,976 
Intangible assets, netIntangible assets, net34,206 — Intangible assets, net27,659 29,918 
Operating lease right of use assetOperating lease right of use asset3,217 — Operating lease right of use asset2,008 2,910 
Other non-current assetsOther non-current assets795 116 Other non-current assets834 938 
Total non-current assets
Total non-current assets
165,331 10,283 
Total non-current assets
152,589 165,771 
TOTAL ASSETS
TOTAL ASSETS
$255,875 $205,532 
TOTAL ASSETS
$243,334 $259,605 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payablesTrade payables2,950 5,026 Trade payables4,421 3,361 
Employees and payroll accrualsEmployees and payroll accruals10,682 7,742 Employees and payroll accruals10,969 10,165 
Lease liabilities - current portionLease liabilities - current portion1,611 2,186 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities6,573 3,082 Accrued expenses and other current liabilities5,194 5,474 
Current portion of long-term debt— 6,000 
Lease liabilities - current portion1,904 — 
Total current liabilities
Total current liabilities
22,109 21,850 
Total current liabilities
22,195 21,186 
NON-CURRENT LIABILITIES:
Long-term debtLong-term debt15,000 — Long-term debt20,000 20,000 
Lease liabilities - non-current portionLease liabilities - non-current portion2,279 — Lease liabilities - non-current portion1,081 1,636 
Other non-current liabilitiesOther non-current liabilities3,918 3,455 Other non-current liabilities9,461 6,554 
Warrants liabilityWarrants liability7,590 18,972 Warrants liability1,022 4,301 
Total non-current liabilities
Total non-current liabilities
28,787 22,427 
Total non-current liabilities
31,564 32,491 
TOTAL LIABILITIES
TOTAL LIABILITIES
50,896 44,277 
TOTAL LIABILITIES
53,759 53,677 
COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)
STOCKHOLDERS’ EQUITY:
Common stock of $0.0001 par value - Authorized: 500,000,000 at September 30, 2022 and December 31, 2021; Issued and outstanding: 133,492,514 and 119,017,380 at September 30, 2022 and December 31, 2021, respectively13 12 
Common stock: $0.0001 par value - Authorized: 500,000,000 at June 30, 2023, and December 31, 2022; Issued and outstanding: 138,737,104 and 133,882,414 at June 30, 2023, and December 31, 2022, respectivelyCommon stock: $0.0001 par value - Authorized: 500,000,000 at June 30, 2023, and December 31, 2022; Issued and outstanding: 138,737,104 and 133,882,414 at June 30, 2023, and December 31, 2022, respectively13 13 
Additional paid-in capitalAdditional paid-in capital352,423 293,719 Additional paid-in capital367,970 356,801 
Accumulated deficitAccumulated deficit(147,457)(132,476)Accumulated deficit(178,408)(150,886)
Total stockholders’ equityTotal stockholders’ equity204,979 161,255 Total stockholders’ equity189,575 205,928 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITYTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$255,875 $205,532 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$243,334 $259,605 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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INNOVID, CORP. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except stock and per stock data)





Three months ended September 30,Nine months ended September 30,

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


2022202120222021

2023202220232022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
RevenuesRevenues$34,469 $23,469 $93,419 $64,324 Revenues$34,546 $33,088 $65,031 $58,950 
Cost of revenues (1)Cost of revenues (1)8,534 4,548 21,811 12,359 Cost of revenues (1)8,591 7,351 16,856 13,277 
Research and development (1)Research and development (1)7,312 5,342 24,276 16,698 Research and development (1)6,876 9,710 13,993 16,964 
Sales and marketing (1)Sales and marketing (1)13,726 8,689 38,397 23,366 Sales and marketing (1)11,460 14,320 23,097 24,671 
General and administrative (1)General and administrative (1)9,046 3,982 30,456 10,561 General and administrative (1)8,924 9,955 18,574 21,410 
Depreciation, amortization and impairment1,882 156 3,481 487 
Operating (loss) profit(6,031)752 (25,002)853 
Finance expenses (income), net4,962 707 (10,655)3,878 
(Loss) profit before taxes
(10,993)45 (14,347)(3,025)
Depreciation and amortizationDepreciation and amortization2,064 926 4,094 1,599 
Goodwill impairmentGoodwill impairment14,503 — 14,503 — 
Operating lossOperating loss(17,872)(9,174)(26,086)(18,971)
Finance income, netFinance income, net(248)(13,306)(2,723)(15,617)
Loss before taxes
Loss before taxes
(17,624)4,132 (23,363)(3,354)
Taxes on incomeTaxes on income839 304 634 829 Taxes on income1,335 (168)4,159 (205)
Net loss(11,832)(259)(14,981)(3,854)
Net (loss) incomeNet (loss) income(18,959)4,300 (27,522)(3,149)
Accretion of preferred stock to redemption value (8,189)— (52,993)
Net loss attributable to common stockholders$(11,832)$(8,448)$(14,981)$(56,847)
Net loss per stock attributable to common stockholders (2)
Net (loss) income attributable to common stockholdersNet (loss) income attributable to common stockholders$(18,959)$4,300 $(27,522)$(3,149)
Net (loss) income per stock attributable to common stockholdersNet (loss) income per stock attributable to common stockholders
BasicBasic$(0.09)$(0.45)$(0.12)$(4.32)Basic$(0.14)$0.03 $(0.20)$(0.02)
DilutedDiluted$(0.09)$(0.45)$(0.12)$(4.32)Diluted$(0.14)$0.03 $(0.20)$(0.02)
Weighted-average number of stock used in computing net loss per stock attributable to common stockholders (2)
Weighted-average number of stock used in computing net (loss) income per stock attributable to common stockholdersWeighted-average number of stock used in computing net (loss) income per stock attributable to common stockholders
BasicBasic132,959,511 18,849,710 129,768,724 13,157,022 Basic137,643,910 132,152,652 134,296,569 128,220,893 
DilutedDiluted132,959,511 18,849,710 129,768,724 13,157,022 Diluted137,643,910 139,988,123 134,296,569 128,220,893 
The accompanying notes are an integral part of the condensed consolidated financial statements.
(1) Exclusive of depreciation, amortization and amortizationgoodwill impairment 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 because of the Transaction. See Note 3 for further details.
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INNOVID, CORP. AND ITS SUBSIDIARIES CONDENSED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except stock data)








Temporary equityCommon stockTreasury stockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity (deficit)
NumberAmountNumberAmountNumberAmount
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)
Accretion of preferred stock to redemption value— 8,189 — — — — (1,105)(7,084)(8,189)
Stock-based compensation— — — — — — 591 591 
Stock options exercised— — 766,664 — — — 513 513 
Net loss— — — — — — (259)(259)
Balance as of September 30, 2021 (unaudited)73,690,340 $139,990 19,085,969 $2 1,914,328 $(1,629)$10 $(101,769)$(103,386)
Temporary equityCommon stockTreasury stockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equityCommon stockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity
NumberAmountNumberAmountNumberAmountNumberAmount
Balance as of December 31, 2021Balance as of December 31, 2021  119,017,380 $12   $293,719 $(132,476)$161,255 Balance as of December 31, 2021119,017,380 $12 $293,719 $(132,476)$161,255 
Common stock and equity awards issued for acquisition of TVSCommon stock and equity awards issued for acquisition of TVS— — 11,549,465 — — 47,151 — 47,152 Common stock and equity awards issued for acquisition of TVS11,549,465 47,151 — 47,152 
Stock-based compensationStock-based compensation— — — — — — 1,496 — 1,496 Stock-based compensation— — 1,496 — 1,496 
Stock options exercisedStock options exercised— — 1,521,927 — — — 462 — 462 Stock options exercised1,521,927 — 462 — 462 
Net lossNet loss— — — — — — — (7,449)(7,449)Net loss— — — (7,449)(7,449)
Balance as of March 31, 2022 (unaudited)Balance as of March 31, 2022 (unaudited)  132,088,772 13   342,828 (139,925)202,916 Balance as of March 31, 2022 (unaudited)132,088,772 $13 $342,828 $(139,925)$202,916 
Stock-based compensationStock-based compensation— — — — — — 4,628 — 4,628 Stock-based compensation—  4,628 — 4,628 
Stock options exercisedStock options exercised— — 322,943 — — — 174 — 174 Stock options exercised322,943 — 174 — 174 
Net profit— — — — — — — 4,300 4,300 
Net incomeNet income—  — 4,300 4,300 
Balance as of June 30, 2022 (unaudited)Balance as of June 30, 2022 (unaudited)  132,411,715 13   347,630 (135,625)212,018 Balance as of June 30, 2022 (unaudited)132,411,715 $13 $347,630 $(135,625)$212,018 
Common stockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity
NumberAmount
Balance as of December 31, 2022Balance as of December 31, 2022133,882,414 $13 $356,801 $(150,886)$205,928 
Stock-based compensationStock-based compensation— — — — — — 4,612 — 4,612 Stock-based compensation— — 4,897 — 4,897 
Stock options and RSUs exercised— — 1,080,799 — — — 181 — 181 
Stock options exercised and RSUs vestedStock options exercised and RSUs vested2,734,320 — 250 — 250 
Net lossNet loss— — — — — — — (11,832)(11,832)Net loss— — — (8,563)(8,563)
Balance as of September 30, 2022 (unaudited)  133,492,514 $13   $352,423 $(147,457)$204,979 
Balance as of March 31, 2023 (unaudited)Balance as of March 31, 2023 (unaudited)136,616,734 $13 $361,948 $(159,449)$202,512 
Stock-based compensationStock-based compensation— — 5,658 — 5,658 
Stock options exercised and RSUs vestedStock options exercised and RSUs vested2,120,370 — 364 — 364 
Net lossNet loss— — — (18,959)(18,959)
Balance as of June 30, 2023 (unaudited)Balance as of June 30, 2023 (unaudited)138,737,104 $13 $367,970 $(178,408)$189,575 
The accompanying notes are an integral part of the condensed consolidated financial statements.

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INNOVID, CORP. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except stock and per stock data)
Nine months ended September 30,Six Months Ended June 30, 2023
2022

20212023

2022
Cash flows from operating activities:Cash flows from operating activities:(Unaudited)(Unaudited)Cash flows from operating activities:(Unaudited)(Unaudited)
Net lossNet loss$(14,981)$(3,854)Net loss$(27,522)$(3,149)
Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairment3,481 487 
Depreciation and amortizationDepreciation and amortization4,094 1,599 
Goodwill impairmentGoodwill impairment14,503 — 
Stock-based compensationStock-based compensation9,956 2,311 Stock-based compensation9,865 5,634 
Change in fair value of warrantsChange in fair value of warrants(11,382)3,191 Change in fair value of warrants(3,279)(15,946)
Changes in operating assets and liabilitiesChanges in operating assets and liabilitiesChanges in operating assets and liabilities
(Increase)/ decrease in trade receivables, net(1,294)581 
(Increase)/ decrease in prepaid expenses and other current assets514 (1,587)
Increase/ (decrease) in trade payables(1,032)710 
Decrease / (increase) in trade receivables, netDecrease / (increase) in trade receivables, net415 (4,624)
Increase in prepaid expenses and other current assetsIncrease in prepaid expenses and other current assets(1,390)(747)
Decrease in operating lease right of use assetsDecrease in operating lease right of use assets1,332 — Decrease in operating lease right of use assets902 872 
Increase / (decrease) in trade payablesIncrease / (decrease) in trade payables1,060 (321)
Increase in employees and payroll accrualsIncrease in employees and payroll accruals2,227 355 Increase in employees and payroll accruals804 1,044 
Decrease in operating lease liabilitiesDecrease in operating lease liabilities(1,782)— Decrease in operating lease liabilities(1,130)(1,208)
Increase in accrued expenses and other current liabilitiesIncrease in accrued expenses and other current liabilities2,872 852 Increase in accrued expenses and other current liabilities2,626 945 
Net cash (used in)/ provided by operating activities
(10,089)3,046 
Net cash provided by / (used in) operating activities
Net cash provided by / (used in) operating activities
948 (15,901)
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Acquisition of business, net of cash acquiredAcquisition of business, net of cash acquired(99,568)— Acquisition of business, net of cash acquired— (99,568)
Internal use software capitalizationInternal use software capitalization(6,975)(1,049)Internal use software capitalization(5,591)(3,516)
Purchase of property and equipmentPurchase of property and equipment(282)(378)Purchase of property and equipment(189)(221)
Founders' note receivable— (459)
Decrease (increase) in deposits38 (58)
Net cash used in investing activities
(106,787)(1,944)
Withdrawal of short-term bank depositsWithdrawal of short-term bank deposits10,000 — 
Increase in depositsIncrease in deposits27 32 
Net cash provided by / (used in) investing activities
Net cash provided by / (used in) investing activities
4,247 (103,273)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Repayment of acquisition liability— (126)
Proceeds from loansProceeds from loans9,000 — Proceeds from loans10,000 9,000 
Repayment of loansRepayment of loans— (3,033)Repayment of loans(10,000)— 
Payment of SPAC merger transaction costsPayment of SPAC merger transaction costs(3,185)— Payment of SPAC merger transaction costs— (3,185)
Proceeds from exercise of optionsProceeds from exercise of options817 882 Proceeds from exercise of options614 636 
Net cash (used in)/ provided by financing activities
6,632 (2,277)
Decrease in cash, cash equivalents and restricted cash(110,243)(1,175)
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$46,915 $14,917 
Net cash provided by financing activities
Net cash provided by financing activities
614 6,451 
Increase (decrease) in cash, cash equivalents, and restricted cashIncrease (decrease) in cash, cash equivalents, and restricted cash5,809 (112,723)
Cash, cash equivalents, and restricted cash at the beginning of the periodCash, cash equivalents, and restricted cash at the beginning of the period37,971 157,158 
Cash, cash equivalents, and restricted cash at the end of the periodCash, cash equivalents, and restricted cash at the end of the period$43,780 $44,435 
Supplemental disclosure of cash flows activities:Supplemental disclosure of cash flows activities:Supplemental disclosure of cash flows activities:
(1) Cash paid during the period for:(1) Cash paid during the period for:(1) Cash paid during the period for:
Income taxes paid, net of tax refundsIncome taxes paid, net of tax refunds$727 $216 Income taxes paid, net of tax refunds$879 $363 
InterestInterest$371 $189 Interest$782 $137 
(2) Non-cash transactions:(2) Non-cash transactions:(2) Non-cash transactions:
Business combination consideration paid in stockBusiness combination consideration paid in stock$47,152 $— Business combination consideration paid in stock$— $47,152 
Accretion of preferred stock to redemption value— $52,993 
Deferred offering cost included in accrued liabilities— $2,406 
Reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheetsReconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheetsReconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets
Cash and cash equivalentsCash and cash equivalents46,509 14,472 Cash and cash equivalents43,384 44,024 
Long-term restricted depositsLong-term restricted deposits406 445 Long-term restricted deposits396 411 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flowsTotal cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$46,915 $14,917 Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$43,780 $44,435 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)

NOTE 1: - OVERVIEW1. DESCRIPTION OF BUSINESS
Innovid Corp. together with its consolidated subsidiaries, the “Company” or “Innovid”, is a leading independent software platform that provides an ad serving and creative servicespersonalization platform 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.
On2020 and Innovid Corp. was the surviving entity following the completion of its merger with ION on November 30, 2021 ION and Innovid Inc. (“Legacy Innovid”) closed the transaction as described below (the “Transaction”“ION 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 TV Squared Limited (“TVS”, together with ION’s Transaction, the “Transactions”) by way of TVSquaredstock purchase agreement (“TVS”Stock Purchase Agreement”), 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 optionoptions of the Company at a 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 CompanyInnovid Corp.’s common stock and warrants commencedare trading on the NYSE under the symbols “CTV” and “CTVWS,“CTV.WS,” respectively, onsince December 1, 2021.
Innovid Corp. has subsidiaries in the US, Israel, Argentina, the UK, Germany and Australia.
NOTE 2: -2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Basis of presentation: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.presentation. 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 onas of December 31, 2021,2022, 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 20212022 Annual Report on Form 10-K.
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2021,2022, have been applied consistently in these unaudited interim condensed consolidated financial statements, unless otherwise stated.
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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 September 30, 2022Three months ended September 30, 2021
UnauditedUnaudited
Under previous classificationEffect of changeAs reportedPreviously reportedEffect of changeAs adjusted
Cost of revenues$9,505 $(971)$8,534 $4,569 $(21)$4,548 
Operating expenses:
Research and development7,920 (608)7,312 5,426 (84)5,342 
Sales and marketing13,958 (232)13,726 8,735 (46)8,689 
General and administrative9,117 (71)9,046 3,987 (5)3,982 
Depreciation, amortization and impairment$— $1,882 $1,882 $— $156 $156 

Nine months ended September 30, 2022Nine months ended September 30, 2021
UnauditedUnaudited
Under previous classificationEffect of changeAs reportedPreviously reportedEffect of changeAs adjusted
Cost of revenues$23,782 $(1,971)$21,811 $12,418 $(59)$12,359 
Operating expenses:
Research and development25,031 (755)24,276 16,932 (234)16,698 
Sales and marketing38,967 (570)38,397 23,534 (168)23,366 
General and administrative30,641 (185)30,456 10,587 (26)10,561 
Depreciation, amortization and impairment$— $3,481 $3,481 $— $487 $487 
(c)Use of estimates: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.
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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 considering some or all of these factors. This in turn could negatively impact our revenues from such advertisers.Accounting Policies
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 nine-month period ended September 30, 2022 (unaudited). As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
(d)Software development costs:costs
Software development costs, which are included in property and equipment, net, consists of capitalized costs related to the purchase and developdevelopment of 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 is presented within depreciation and amortization in the condensed consolidated statements of operations. During the three and nine-month periodsix months ended SeptemberJune 30, 2023 (unaudited), the Company capitalized $2,825 and $6,281, respectively, and during the three and six months ended June 30, 2022 (unaudited), the Company capitalized $3,749$2,335 and $7,755,$4,006, respectively, related to internal-use software cost. In
Impairment of long-lived assets
Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the third quartercarrying value of 2022,an asset may not be recoverable. If there are indications of an impairment, the Company recorded impairment chargestests for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of $537 related to an abandonment of certain projects for internal-use software. It is presented within depreciation, amortization and impairment in the condensed consolidated statement of operations. During the three-months period ended September 30, 2021, the Company capitalized $1,049 in internal-use software cost. There were no impairments of capitalized software costs in 2021.
(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 considerationasset to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. Thecarrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value of purchase consideration overis recognized as an impairment loss. During the fair values of these identifiablethree and six months ended June 30, 2023 (unaudited), the Company tested its long-lived assets for recoverability 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:concluded that no impairment should be recognized.
Goodwill and certain other purchasedacquired intangible assets
Goodwill and acquired intangible assets have been recorded in the Company's condensed consolidated financial statements because of acquisitions.resulting from     various business combinations. 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 annual 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.
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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
The Company currently has one reporting unit.
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 itits 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 itits 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. ForDuring the three and nine months ended SeptemberJune 30, 2022 (unaudited) and September 30, 2021 (unaudited), no impairments2023, the Company recorded Goodwill impairment in the amount of goodwill were recorded.$14,503. Refer to Note 3 for further details.
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 nine months ended September 30, 2022 (unaudited) and September 30, 2021 (unaudited), no impairments of intangible assets were recorded.
TechnologyCustomer relationships, acquired technology and trade name are being amortized over the estimated useful life of approximately 11 years, 6 years, and 84 years, respectively, using the straight-line amortization method.
The amortization of trade name, customer relationships, acquired technology and technologytrade names, is presented within depreciation amortization and impairmentamortization in the condensed consolidated statementstatements of operations.
(g)
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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Fair value of financial instruments:instruments
The Company applies a fair value framework 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 arerepresent the approximate fair valuesvalue due to the short-term maturities of these instruments.
The Company measures itsCompany’s investments in money market funds are classified as cash equivalents and warrantsmeasured at fair value. The Company measures its warrant liability at fair value.
The goodwill impairment recorded in the second quarter of 2023 was estimated using the Company's stock price, a Level 1 input, adjusted for an estimated control premium.
The following tabletables present information about the Company’s financial instruments that are measured at fair value on a recurring basis:

September 30, 2022
(Unaudited)

Level 1Level 2Level 3
Assets:
Money market funds$39,250 $— $— 
Liabilities:
Warrants liability$1,518 $— $6,072 

June 30, 2023
(Unaudited)

Level 1Level 2Level 3
Assets:
Money market funds$36,323 $— $— 
Liabilities:
Warrants liability$1,022 $— $— 

December 31, 2022

Level 1Level 2Level 3
Assets:
Money market funds$18,948 $— $— 
Certificates of deposit— 20,000 — 
Liabilities:
Warrants liability$1,265 $— $3,036 
The change in the fair value of the Level 3 warrant liability is summarized below:

June 30,December 31,June 30,

20232022

2022
(Unaudited)(Unaudited)
Beginning of the period$3,036 $15,462 $15,462 
Change in fair value(2,330)(12,426)(13,132)
Transfer to level 1(706)— — 
End of the period$— $3,036 $2,330 
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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)

December 31, 2021

Level 1Level 2Level 3
Assets:
Money market funds$4,515 $— $— 
Liabilities:
Warrants liability$3,510 $— $15,462 
The change inAs of June 30, 2023, the fair value of the Level 3Company’s warrant liability is summarized below:

September 30,December 31,September 30,

2022

20212021
(Unaudited)(Unaudited)
Beginning of the period$15,462 $499 $499 
Additions*— 18,427 — 
Change in fair value(9,390)1,616 3,191 
Conversion of Legacy Innovid Warrants on the Closing of the Transaction— (5,080)— 
End of the period$6,072 $15,462 $3,690 
* Additions duringincludes the year ended December 31, 2021, represent Company Warrant liability assumed in the Transaction. SeeWarrants (refer to Note 5 for further details.
As of September 30, 2022 (unaudited)5), the Company’s warrants liability includes warrants that were originally issued in connection with ION’s initial public offering, the ION“ION IPO, which were transferred to the Company as part of the Closing.ION’s Transaction. The CompanyCompany’s Warrants are recorded on the balance sheet at fair value with changes in fair value recognized through earnings. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement the valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.
The Company has determined that the fair value of the Public Warrants and Transferred Private Warrants (refer to Note 5) Warrants, at a specificthe balance sheet date is determined by the closing price of the Company’s Public Warrants, traded under the symbol “CTVWS”warrants, and are within Level 1 of the fair value hierarchy. The closing quoted price of the Public Warrants and Transferred Private Warrants was $0.48 and $1.11$0.10 as of SeptemberJune 30, 2022 (unaudited) and December 31, 2021, respectively. The fair value of2023 the price for Public Warrants was $1,518 and $3,510$0.40 as of September 30, 2022 (unaudited) and December 31, 2021, respectively. 2022.
The Transferred Private Warrants are no longer classified as Level 3 as of June 30, 2023. Refer to Note 5, Warrants for further discussion.
Gains and losses from the remeasurement of the warrantsPublic and Private Warrants’ liability areis recognized in “Finance expenses (income), net”finance income, net in the condensed consolidated statements of operations.
The Private Placement Warrants are classified as Level 3 as of September 30, 2022 (unaudited) and continue to be valued using the Black-Scholes option pricing model. The fair value of the Private Placement Warrants was $6,072 and $15,462 as of September 30, 2022 (unaudited) and December 31, 2021, respectively. Gains and losses from the remeasurement of the warrants liability are recognized in “Finance expenses (income), net” in the condensed consolidated statements of operations.
The key inputs into the Black-Scholes model for the Private Placement Warrants were as follows:

September 30,December 31,

20222021
(Unaudited)
Risk-free interest rate4.10 %1.24 %
Expected dividends— %— %
Expected term (years)4.24.9
Expected volatility80 %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.
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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
(h)Concentrations of credit risks: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.
Most of the Company’s cash and cash equivalents are invested in deposits with major banks in the US and Israel. The Company is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying consolidated balance sheets exceed federally insured limits. Generally, these investments may be redeemed upon demand and, therefore, bear minimal risk.
The Company’s trade receivables, net is mainly derived from sales to customers located in the US, 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.
TwoOne of the Company’s customers accounted for more than 10% of the Company’s total revenues during the three and six months ended SeptemberJune 30, 2022 and one customer during the three months ended September 30, 2021.2023.

Three months ended September 30,Nine months ended September 30,

2022

20212022

2021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Customer A12 %*)10 %*)
Customer B13 %*)*)

*)

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

2023

20222023

2022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Customer A16 %*)16 %*)
*) less than 10%
(i)Warrants:Revenue recognition
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 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 outsideMost 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 warrantsrevenues 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 (income), net” in the condensed consolidated statements of operations.
(j)Revenue recognition:
The Company generates revenuesderived from providing Advertising ServicesAd serving solutions to advertisers, publishers,media agencies and media agencies.publishers. 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
The Company also provides measurement services relate to advertisers and agencies, streaming platforms and publishers. The measurement service provides analytics and the ability to track performance of advertising campaigns. The measurement service provides insights into the effectiveness of TV and digital advertising.
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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
The Company also provides creative services for 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.
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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,customer; (2) identify the performance obligations in the contract,contract; (3) determine the transaction price,price; (4) allocate the transaction price to the performance obligations in the contract,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 SSP.standalone 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.basis.
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.
Revenues related to creative projects are recognized at a point in time when the Company delivers an ad unit. Creative services projects are usually delivered within a week.
The Company’s accounts receivable consist primarily of receivables related to providing ad serving, creativemeasurement and measurementcreative 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 monthly 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. SomeMost of the Company’s contracts can be cancelledcanceled 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.
Deferred revenues represent mostly unrecognized fees billed or collected for measurement platform services. Deferred revenues are recognized as (or when) we perform under the contract.
Ad serving and creative services were 77.2%77.3% and 98.8%78.4% of the Company’s revenues for the three months ended SeptemberJune 30, 20222023 (unaudited) and September 30, 20212022 (unaudited), respectively and were 80.9%77.2% and 98.6%83.4% of the Company’s revenues for the ninesix months ended SeptemberJune 30, 20222023 (unaudited) and September 30, 20212022 (unaudited). Measurement services were 22.5%22.7% and 1.1%21.6% for the three months ended SeptemberJune 30, 20222023 (unaudited) and SeptemberJune 30, 20212022 (unaudited), respectively and were 18.8%22.8% and 0.9%16.6% of the Company’s revenues for the ninesix months ended SeptemberJune 30, 20222023 (unaudited) and September 30, 20212022 (unaudited).
Costs to obtain a contract:contract
Contract costs include commission programs to compensate sales employees for generating sales orders with new customers or for new services with existing customers. TheGenerally, 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. TheIf commissions are not commensurate, the Company did not capitalize any contractcapitalizes these commissions. Capitalized commission costs duringwere immaterial for the ninethree and six months ended SeptemberJune 30, 2023 (unaudited) and June 30, 2022 (unaudited) and September 30, 2021 (unaudited), respectively..

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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).Trade receivable, net
The Company elected a packagerecords trade receivable for amounts invoiced and yet unbilled invoices. The Company makes estimates of practical expedientsexpected credit losses for leasesthe allowance for doubtful accounts based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that commenced priormay affect its ability to January 1, 2022,collect from customers. The estimated credit loss allowance is recorded as general 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 impactadministrative expenses on the Company’sCompany's condensed consolidated statements of operations. The most significant effects relate to the recognition ROU assets
Income taxes and lease liabilities on interim condensed consolidatedtax contingencies
Income taxes are computed using a balance sheet approach reflecting both current and deferred taxes. Current and deferred taxes reflect the tax impact of all of the events included in the financial statements. The basic principles employed in the balance sheet approach are to reflect a current tax liability or asset that is recognized for real estatethe estimated taxes payable or refundable on tax returns for the current and cars operating leases.
Upon adoption,prior years, a deferred tax liability or asset that is recognized for the Company recognized leaseestimated future tax effects attributable to temporary differences and carryforwards, the measurement of current and deferred tax liabilities and corresponding ROU assets adjusted foris based on provisions of the accrued rent and remaining lease incentives received onenacted tax law of which 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 intraperiodeffects of future changes in tax allocation, the methodology for calculating income taxes in an interim periodlaws or rates are not anticipated, and the recognitionmeasurement of deferred tax liabilitiesassets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. There are certain situations in which deferred taxes are not provided. Some basis differences are not temporary differences because their reversals are not expected to result in taxable or deductible amounts.
The Company regularly evaluates deferred tax assets for outside basis differences. It also clarifiesfuture realization and simplifiesestablishes a valuation allowance to the extent that a portion is not more likely than not to be realized. The Company considers whether it is more likely than not that the deferred tax assets will be realized, including existing cumulative losses in recent years, expectations of future taxable income, carryforward periods and other aspectsrelevant quantitative and qualitative factors. The recoverability of the accountingdeferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely on estimates.
ASC 740, Income Taxes (“ASC 740”) contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative basis) likely to be realized upon ultimate settlement. The Company classifies interest related to unrecognized tax benefits in taxes on income.
On December 20, 2017, Congress passed the “US Tax Act.” The US Tax Act requires complex computations to be performed that were not previously required by US tax law, significant judgments to be made in interpretation of the provisions of the US Tax Act, significant estimates in calculations and the preparation and analysis of information not previously relevant or regularly produced. The US Tax Act provides that a person who is a US shareholder of any CFC is required to include its GILTI in gross income for the tax year in a manner generally similar to that for Subpart F inclusions. The term “global intangible low taxed income” is defined as the excess (if any) of the US shareholder’s net CFC tested income for that tax year, over the US shareholder’s net deemed tangible income return for that tax year. The Company’s policy is to treat GILTI as a period expense in the provision 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),Recently Adopted 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.
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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.Pronouncements
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, 2022.2022, and interim periods within those fiscal years. The adoption has impacted how the Company is currently evaluating the potentialassesses its estimates for credit losses but did not have a material impact of this guidance on itsthese unaudited interim condensed consolidated financial statements.
Other guidance that has been issued since the end of our previous reporting period 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 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 September 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. After 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. Refer to Note 9 for disclosure related to measurement period adjustments as it relates to taxes. The completion of the valuation will occur no later than one year from the acquisition date.
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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 receivables3,507
Other current assets1,912
Property and equipment154
Total tangible assets10,891 
Technology17,075
Customer relationships14,700
Trade name4,600
Goodwill110,123
Total assets acquired157,389 
Less: Deferred tax liabilities(1,624)
Less: Other assumed liabilities(3,727)
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 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 nine months ended September 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.

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

20212022

2021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenues$34,469 $29,486 $97,736 $80,044 
Net loss(11,832)(1,826)(11,205)(21,330)
3. GOODWILL
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 nine months ended September 30, 2022 (unaudited) to the three months and nine months ended September 30, 2021 (unaudited). 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, 2021,16,275,609 
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 $195,888changes in the aggregate. The remaining sharescarrying amount 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.
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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.goodwill:

Goodwill
Total value
Cash - ION trust account and cash, netBalance as of redemptionsJanuary 1, 2023$55,466116,976 
Cash - PIPE Investment, net of Secondary Sale Amount of $68,855Goodwill impairment131,145 
Less: Transaction costs paid(31,160)(14,503)
Less: Deferred underwriting fee paid(6,199)
Proceeds from reverse recapitalization, net149,252
Less: Accrued transaction costs not yet paid(3,185)
Less: Company Warrant assumedBalance as part of the Transaction(22,791)June 30, 2023
Plus: Transaction costs allocated to Company Warrant2,750 
Reverse recapitalization, net$126,026102,473 
DuringThe Company periodically analyzes whether any indicators of goodwill impairment have occurred. In the six-month period ended June 30, 2022,second quarter of 2023, the Company fully paidexperienced a decline in its stock price resulting in its market capitalization being less than the accrued transaction costscarrying value of $3,185.its one reporting unit. Thus, the Company performed quantitative assessments of the Company’s reporting unit. The fair value was determined based on the market approach. The market approach utilizes the Company's market capitalization plus an appropriate control premium. Market capitalization is determined by multiplying the number of common stock outstanding by the market price of its common stock. The control premium is determined by utilizing publicly available data from studies for similar transactions of public companies.
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,this assessment, the Company assumed the outstanding Public Warrants to purchase 3,162,500 sharesrecorded a goodwill impairment of the Company’s common stock and the outstanding Private Placement Warrants to purchase 7,060,000 shares$14,503 as 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 commencingJune 30, days after the Closing. The warrants expire five years after the completion of the Transaction.2023.

NOTE 4: -4. LEASES
Innovid's lease portfolio primarily consists of real estate properties and cars.properties. 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 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:
September 30, 2022
(Unaudited)
ROU assetsLease liabilities
Real Estate$3,187 $4,156 
Cars30 27 
Total operating leases$3,217 $4,183 

June 30, 2023December 31, 2022
(Unaudited)
ROU assetsLease liabilitiesROU assetsLease liabilities
Real Estate$2,008 $2,692 $2,886 $3,801 
Cars— — 24 21 
Total operating leases$2,008 $2,692 $2,910 $3,822 





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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
September 30, 2022
(Unaudited)
Lease liabilities
Current lease liabilities$1,904 
Non-current lease liabilities2,279 
Total lease liabilities$4,183
The following table summarizes the lease costs recognized in the interim condensed consolidated statement of operations:
Three months ended September 30, 2022Nine months ended September 30, 2022
(Unaudited)(Unaudited)
Operating lease cost$466 $1,413 
Short term lease cost126 334 
Variable lease cost10 20 
Total lease cost$602 $1,767 

Three months ended June 30,Six months ended June 30,
2023202220232022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Operating lease cost$458 $472 $921 $947 
Short term lease cost320 126 583 208 
Variable lease cost25 46 10 
Total lease cost$803 $604 $1,550 $1,165 

As of SeptemberJune 30, 2022,2023 (unaudited), the weighted-average remaining lease term and weighted-average discount rate for operating leases are 2.41.8 years and 3.1%2.5%, respectively.
The following table presents supplementary cash flow information regarding the company'sCompany's operating leases:
Nine months ended September 30, 2022
(Unaudited)
Cash paid for amounts included in the measurement of lease liabilities$1,688 
Right of use assets obtained in exchange for new operating lease liabilities$— 
Right of use assets obtained in exchange for operating lease liabilities upon lease modification$610 

Six months ended June 30, 2023Six months ended June 30, 2022
(Unaudited)(Unaudited)
Cash paid for amounts included in the measurement of lease liabilities$1,035 $1,133 
The following table summarizes the future payments of Innovid for its operating lease liabilities:
September 30, 2022Six months ended June 30, 2023
(Unaudited)(Unaudited)
2022 Remaining$471 
20232,160 
2023 Remaining2023 Remaining$1,124 
202420241,035 2024972 
20252025695 2025636 
Total undiscounted lease paymentsTotal undiscounted lease payments$4,361 Total undiscounted lease payments$2,732 
Less: InterestLess: Interest(178)Less: Interest(40)
Total lease liabilities - operating$4,183 
Total lease liabilitiesTotal lease liabilities$2,692 

NOTE 5: -5. WARRANTS LIABILITY
Company Warrants
As of SeptemberJune 30, 2022 (unaudited),2023, the Company had 3,162,500 Public Warrants and 7,060,000 Private Warrants outstanding. As of June 30, 2023, the majority of the Private Warrants (the “Transferred Private Warrants”) had been transferred from their initial holder to other transferees. The Transferred Private Warrants terms are now identical to the Public Warrants resulting in use of the same price for valuation purposes.
The Company’s Warrants’ fair value as of June 30, 2023 (unaudited), and December 31, 2022, was $1,022 and $4,301, respectively. Gains and losses related to the Company’s Warrants are recognized in “Finance income, net.” See Note 9 for further details.





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INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Public Warrants
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.
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 $0.10 per warrant.
upon a minimum of 30 days’ prior written notice of redemption; if holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the fair market value of the Innovid Corp. ordinary shares; and
if, and only if, the closing price of the Innovid Corp. ordinary shares equals or exceeds $10.00 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.
23

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
If the Company calls these Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below their exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants.
Private Placement Warrants
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Innovid Corp. ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of the Transaction subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchaser or its permitted transferees.
The Company evaluated the Company Warrants (Public Warrants and Private Placement Warrants) in accordance with ASC 480, “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers, as well as provisions that provided for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant, preclude the Company Warrants from being accounted for as components of equity. As the warrants do not meet all the requirements for equity classification, the Company Warrants are recorded as liabilities on the Balance Sheets and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement” with changes in fair value recognized in the Statements of Operations in the period of change.
The Company Warrants’ fair value as of September 30, 2022 (unaudited) and December 31, 2021 was $7,590 and $18,972, respectively. Gains and losses related to the Company’s Warrants are recognized in “Finance expenses (income), net”. See Note 9 for further details.
NOTE 6: - CREDIT LINE AND OTHER BORROWINGS
Credit Line:6. LONG-TERM DEBT
On August 4, 2022, two wholly owned subsidiaries of the Company, Innovid LLC and TV Squared Inc, entered an amended and restated loan and security agreement with Silicon Valley Bank (the “2022 A&R Agreement”), to increase the revolving line of credit from $15,000 to $50,000 (the “New Revolving Credit Facility”). The 2022 A&R Agreement and the New Revolving Credit Facility were amended by a First Loan Modification Agreement dated August 2, 2023 (the “2023 Modification Agreement”). The interest for the New Revolving Credit Facility is payable monthly in arrears. The New Revolving Credit Facility bears interest at an annual rate equal towhich is the greater of 4.25% and prime rate(a) WSJ Prime Rate plus 0.75%0.25% or (b) 4.25%, on the aggregate outstanding principal of each credit extension.balance. Additional fees include fees in an amount of 0.20% per annum of the average unused portion of the New Revolving Credit Facility to be paid quarterly in arrears. The Company will also pay non-refundable commitment fees of $40 and $75 at inception and first anniversary date, respectively.respectively, together with a modification fee of $20 payable on the date of the 2023 Modification Agreement. The maturity date of the 2022 A&R Agreement, as amended by the 2023 Modification Agreement, is June 30, 2024.2025. The New Revolving Credit Facility is subject to certain customary conditions precedent to the credit extension as stated in the 2022 A&R Agreement.
The New Revolving Credit Facility requires the Company to comply with all covenants, primarily maintaining an adjusted quick ratio of at least 1.30 to 1.00. As defined in the 2022 A&R Agreement, “adjusted quick ratio” is the ratio of (a) quick assets to (b) current liabilities minus the current portion of deferred revenue. “Quick assets” are determined as the Company’s unrestricted cash plus accounts receivable, net, and is determined according to US GAAP. The Company is also required to maintain the minimum quarterly adjusted EBITDA as defined in the 2022 A&R Agreement, as amended by the 2023 Modification Agreement, if the Company does not maintain the quarterly adjusted quick ratio of at least 1.50 to 1.00.
As of SeptemberJune 30, 2023 (unaudited), and December 31, 2022, the Company utilized $20,000 of the $50,000 credit line. In January 2023, the Company repaid $5,000 under the credit line and $5,000 was subsequently drawn in March 2023. In May 2023, the Company repaid $5,000 under the credit line and $5,000 was subsequently drawn in June 2023.
As of June 30, 2023 (unaudited), the Company is in compliance with all the covenants.
AsPrior to the 2022 A&R Agreement, the credit installments bore US dollar denominated interest at an annual rate equal to 0.75%-1% plus the prime rate on the outstanding principal of September 30, 2022 (unaudited),each credit installment and prior to the Company utilized $15,000 of2023 Modification Agreement the $50,000 credit line, $6,000 ofNew Revolving Credit Facility bore interest at an annual rate which was drawn during 2020 and $9,000 was drawn during the second quartergreater of 2022. Interest expenses are recognized in “Finance expenses (income), net”(a) WSJ Prime Rate plus 0.75% or (b) 4.25%. See Note 9 for further details.

24

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
NOTE 7: -7. COMMITMENTS AND CONTINGENT LIABILITIES
(a)Pledges and bank guarantees:guarantees
1.In conjunction with the credit agreement and its amendments2022 A&R Agreement (see Note 6)6, Long-term Debt), Innovid LLC pledged 65,000 common stockstocks of its Israeli Subsidiary, NIS 0.01 par value each.
2.The Company’s subsidiariesIsraeli Subsidiary pledged bank deposits in an aggregate amount of $862$601 in connection with an office rent agreement and credit cards.
3.Innovid Inc. obtained bank guarantees in an aggregate amount of $231 in connection with its office lease agreements.
(b)






17

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Legal contingencies:contingencies
On March 4, 2022, a lawsuit was filed in the United States District Court for the Western District of Texas by the Nielsen, Claim was filed by Nielsen,Company (US) LLC against TVS. TVS has filed its answer to the complaint and has also filed an opposed motionalleging infringement of US Patent No.10,063,378. On June 1, 2022, TVS moved to transfer venuethe case to the Southern District of New York. On February 24, 2023, the case was transferred to the Southern District of New York. On March 23, 2023, the parties jointly filed their proposed case management plan and scheduling order, which the Court entered and thereafter opened discovery. That motion is scheduled to be heard on November 14, 2022order sets the close of fact discovery for October 23, 2023, and if unsuccessful the following hearing in the current venue would be scheduledclose of expert discovery for January 2023.23, 2024, but does not set a date for trial. On the same day, TV Squared filed a motion for judgment on the pleadings under Federal Rule 12(c) arguing invalidity of all asserted patent claims. Briefing concluded on April 24, 2023, and the motion remains pending. The plaintiff has not specified the amount sought in the litigation. Given the uncertainty of litigation and the preliminary stage of the lawsuit, the Company is unable at this time to give an estimate of the amount or range of potential loss, if any, which might result to the Company if the outcome in such litigation was unfavorable. As of June 30, 2023, the Company did not record a loss contingency.

NOTE 8: -8. STOCK-BASED COMPENSATION
Stock-based compensation expense is principally related to awards issued to employees pursuant to the Legacy Innovid Stock Option Plan (“Legacy Plan”) and 2021 Innovid Corp. Incentive Plan (“2021 Plan”) and is summarized as follows:


Three months ended September 30,Nine months ended September 30,

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


2022202120222021

2023202220232022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Cost of goods soldCost of goods sold$307 $14 $795 $34 Cost of goods sold$435 $383 $876 $488 
Research and developmentResearch and development1,039 90 2,438 319 Research and development1,229 920 2,403 1,399 
Sales and marketingSales and marketing1,391 128 3,500 400 Sales and marketing1,690 1,529 3,269 2,109 
General and administrativeGeneral and administrative1,546 145 3,095 1,285 General and administrative1,980 1,306 3,410 1,734 
TotalTotal$4,283 $377 $9,828 $2,038 Total$5,334 $4,138 $9,958 $5,730 
18

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
In connection with the awards granted to service providers and non-employee consultants, the Company recorded stock compensation expensesCompany’s expense is immaterial in the amount of $40 and $214 during the three months ended September 30, 2022 (unaudited) and 2021 (unaudited), respectively, and in the amount of $225 and $273, during the nine months ended September 30, 2022 (unaudited) and 2021 (unaudited), respectively. The majority of these expenses in 2022 were recorded in research and development and sales and marketing. The majority of these expenses in 2021 were recorded in general and administrative expenses. periods presented.
During the three and nine-month periodsix months ended SeptemberJune 30, 20222023 (unaudited), the Company capitalized stock-based compensation expense of $290$325 and $780,$690 of internal-use software costs, respectively.
During the three and six months ended June 30, 2022, the Company capitalized stock-based compensation expense of $490, respectively, in internal-use software cost. The Company stock-based compensation expense related to internal-use software cost for the same period in 2021 were immaterial.
Stock Options
Stock options may be granted to officers, directors, employees and non-employee consultants of the Company. Each option granted under the Plan expires no later than 10 years from the date of grant. The options vest usually over four years from commencement of employment or services.service start date. Any options which are forfeited or not exercised before expiration become available for future grants.
In connection with the TVS acquisition, Innovid issued 949,893 stock options to holders of TVS options for replacement options. These options were fully vested upon issuance due to acceleration upon acquisition and therefore do not require future service for vesting. The Company attributed a total amount of $152 to post acquisition service and recorded it as stock compensation expenses immediately after the acquisition closed. See Note 3 for further details.
25

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
A summary of the employees’ stock option activity under the Legacy Plan and 2021 Plan for the ninesix months ended SeptemberJune 30, 20222023 (unaudited), is as follows:


Amount
of
options
Weighted
average
exercise
price
Weighted
average
remaining contractual term
(in years)
Aggregate intrinsic value (in thousands)

Amount
of
options
Weighted
average
exercise
price
Weighted
average
remaining contractual term
(in years)
Aggregate intrinsic value (in thousands)
Outstanding at beginning of period
Outstanding at beginning of period
11,122,648 $0.82 6.87$64,818 Outstanding at beginning of period10,658,085 $1.15 6.85$5,923 
Transfer between employee and consultant40,118 0.64 
GrantedGranted2,041,956 2.09 Granted832,232 1.55 
Granted in acquisition949,893 0.31 
ForfeitedForfeited(118,837)1.10 Forfeited(207,449)1.89 
ExpiredExpired(18,653)0.90 Expired(163,640)1.65 
ExercisedExercised(2,845,702)0.28 Exercised(1,376,572)0.45 
Outstanding at end of period
Outstanding at end of period
11,171,423 $1.14 7.62$17,515 Outstanding at end of period9,742,656 $1.26 7.08$14,232 
Exercisable options at end of period
Exercisable options at end of period
6,587,903 $0.71 6.76$13,202 
Exercisable options at end of period
6,563,845 $0.99 6.37$11,356 
A summary of the consultants’ stock option activity under the Legacy Plan for the ninesix months ended SeptemberJune 30, 20222023 (unaudited), is as follows:


Amount
of
options
Weighted
average
exercise
price
Weighted
average
remaining contractual term
(in years)
Aggregate intrinsic value (in thousands)

Amount
of
options
Weighted
average
exercise
price
Weighted
average
remaining contractual term
(in years)
Aggregate intrinsic value (in thousands)
Outstanding at beginning of period
Outstanding at beginning of period
179,627 $0.31 2.34$1,139 Outstanding at beginning of period69,542 $0.47 4.21$86 
Transfer between employee and consultant(40,118)0.64 
ForfeitedForfeited(460)2.81 Forfeited— — 
ExercisedExercised(69,298)0.30 Exercised— — 
Outstanding at end of period
Outstanding at end of period
69,751 $0.48 4.45$156 Outstanding at end of period69,542 $0.47 3.72$156 
Exercisable options at end of period
Exercisable options at end of period
62,227 $0.46 4.12$144 
Exercisable options at end of period
66,196 $0.46 3.53$149 
As of SeptemberJune 30, 20222023 (unaudited), the Company had approximately $5,401$3,945 of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted-average period of 2.021.92 years.
19

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Restricted Stock Units
In connection with the Company’s transition to its next life-cycle stage post Transaction, Restricted Stock Units (“RSUs”) may be granted to officers, directors, employees and non-employee consultants of the Company, and generally vest over a three- or four-year period.
A summary of the employees’ RSU activity under the 2021 Plan for the ninesix months ended SeptemberJune 30, 20222023 (unaudited), is as follows:

Number of share units
Weighted
average
grant date
fair value
Outstanding at beginning of period
  
Granted8,446,838 5.98 
Released(10,669)6.60 
Forfeited(778,388)6.46 
Outstanding at end of period
7,657,781 $5.93 
26

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

Number of share units
Weighted
average
grant date
fair value
Outstanding at beginning of period7,989,825 $5.60 
Granted12,096,238 1.28 
Vested(3,424,868)5.27 
Forfeited(1,113,878)4.88 
Outstanding at end of period15,547,317 $2.36 
A summary of the consultants’ RSU activity under the 2021 Plan for the ninesix months ended SeptemberJune 30, 20222023 (unaudited), is as follows:


Number of share units
Weighted
average
grant date
fair value

Number of share units
Weighted
average
grant date
fair value
Outstanding at beginning of period
Outstanding at beginning of period
  Outstanding at beginning of period130,268 $6.60 
GrantedGranted176,151 6.52 Granted107,343 1.18 
VestedVested(53,250)6.60 
ForfeitedForfeited(5,387)6.60 Forfeited(8,226)6.60 
Outstanding at end of period
Outstanding at end of period
170,764 $6.51 Outstanding at end of period176,135 $3.30 
The weighted-average grant-date fair value of RSUs generally is determined based on the number of units granted and the quoted price of Innovid’s common stock on the date of grant.
As of SeptemberJune 30, 20222023 (unaudited), $37,341$33,727 of unrecognized compensation cost related to RSUs is expected to be recognized as expense over the weighted average period of 2.202.3 years.

NOTE 9: -9. FINANCE EXPENSES (INCOME),INCOME, NET
The Company recognizes the gains and losses from the remeasurement of the warrants liability related to the Public Warrants and Private Placement Warrants, as defined in Note 5, Warrants,in “Finance expenses (income),income, net” in the condensed consolidated statements of operations. The unrealized (loss)/gain from changes in the fair value of the Company Warrants for the three months and nine months period ended SeptemberJune 30, 2023 (unaudited) and 2022 (unaudited) was ($4,564), were $565 and $11,382,$13,159, respectively. The unrealized gain from changes in the fair value of the Company Warrants for the six months ended June 30, 2023 (unaudited) and 2022 (unaudited), were $3,279 and $15,946, respectively.
The Company also recognized interest expenses in “Finance expenses (income),income, net” in the condensed consolidated statements of operations. Interest expenses for the three months ended SeptemberJune 30, 20222023 (unaudited) and 20212022 (unaudited), were $234$420 and $63,$76, respectively. Interest expenses for the ninesix months ended SeptemberJune 30, 2023 and 2022, were $782 and 2021 were $371 and $197,$137, respectively.

20
NOTE 10: -

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
10. INCOME TAX
The Company recorded a provision for incomeincomes taxes of $839$1,335 and $304a net tax benefit of $168 for the three months ended SeptemberJune 30, 2023 (unaudited) and 2022 (unaudited), respectively, and 2021,a net expense of $4,159 and a net tax benefit of $205 for the six months ended June 30, 2023 and 2022, respectively.
The calculation of income taxes is based upon the estimated annualCompany’s effective tax rates were (7.6)% and (4.1)% for the year applied tothree months ended June 30, 2023 and 2022, respectively, and (17.8)% and 6.1% for the current period loss before tax plussix months ended June 30, 2023 and 2022, respectively.
For the taxthree months ended June 30, 2023 (unaudited), the net effect of any significant unusualdiscrete items increased the effective tax rate by 0.2%. Excluding these items, the Company’s effective tax rate would have been (7.4)%. For the six months ended June 30, 2023, the net effect of discrete events or changesitems increased the effective tax rate by 1.1%. Excluding these items, the Company’s effective tax rate would have been (18.9)%.
For the three months ended June 30, 2022 (unaudited), the net effect of discrete items increased the effective tax rate by 3.3%. Excluding these items, the Company’s effective tax rate would have been (7.4)%. For the six months ended June 30, 2022, the net effect of discrete items decreased the effective tax rate by 4.6%. Excluding these items, the Company’s effective tax rate would have been 10.7%.
The increase in year-to-date tax law. The majority ofexpense primarily results from a shift in the expense is related to “discrete” items related to the expectedCompany’s foreign earnings, resulting in higher profitability and current tax expense, (federal,with no offsetting deferred tax benefit as a result of an overall valuation allowance.
In addition, certain temporary differences associated with the capitalization of research and development under IRC Section 174 and deductibility of stock compensation that would normally not impact the effective tax rate or overall tax expense, could cause the US to generate current state tax expense with no corresponding deferred tax benefit. Unless the US tax rules around research and withholding tax)development (Section 174) are modified, there will continue to be an adverse impact on our effective rates for loss companies which are excluded fromincome taxes paid.
Lastly, the forecastedcurrent tax rate.expense is increased as compared to prior years, in both the foreign jurisdictions and the US, because of decreased net operating losses available due to prior year utilization.


NOTE 11: -11. SEGMENT REPORTING
The Company operates as one operating segment, which primarily focuses on the software platform for advertising, measurement, and creative services.creative. Our CEO is the chief operating decision-maker, and manages and allocates resources to the operations of the Company on an entity-wide basis. Managing and allocating resources on an entity-wide basis enables the CEO to assess the overall level of resources available and how to best deploy these resources across functions and R&D projects based on needs and,
Revenue by geographical location are as necessary, reallocate resources among the Company’s internal priorities and external opportunities to best support the long-term growth of the business.follows:

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

2023

202220232022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
US$31,567 $29,569 $59,214 $52,952 
Canada465 302 853 490 
APAC734 1,025 1,549 1,956 
EMEA1,595 1,914 3,038 3,043 
LATAM185 278 377 509 
Total revenues
$34,546 $33,088 $65,031 $58,950 
2721

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Revenue by geographical location are as follows:

Three months ended September 30,Nine months ended September 30,

2022

20212022

2021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
US$31,579 $21,324 $84,531 $58,270 
Canada390 345 880 799 
APAC1,013 790 2,969 2,182 
EMEA1,280 619 4,323 1,842 
LATAM207 391 716 1,231 
Total revenues
$34,469 $23,469 $93,419 $64,324 
The Company’s long-lived tangibleproperty and equipment, net and ROU assets by geographical location is as follows:
September 30,December 31,June 30,December 31,
2022

20212023

2022
(Unaudited)(Unaudited)
IsraelIsrael$2,823 $1,495 Israel$2,388 $2,707 
USUS11,542 3,051 US18,212 14,065 
Rest of the WorldRest of the World571 294 Rest of the World367 460 
Total
Total
$14,936 $4,840 
Total
$20,967 $17,232 

NOTE 12: -12. BASIC AND DILUTED NET LOSS(LOSS) INCOME PER SHARE
Basic and diluted net loss(loss) income per share attributable to common stockholders was calculated as follows:
Three months ended September 30,Nine months ended September 30,
2022

20212022

2021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Numerator:
Net profit (loss)(11,832)(259)(14,981)(3,854)
Accretion of preferred stock to redemption value— (8,189)— (52,993)
Net profit (loss) attributable to common stockholders - basic and diluted
$(11,832)$(8,448)$(14,981)$(56,847)
Denominator:
Weighted-average number of stock used in computing net loss per stock attributable to common stockholders
Basic weighted average number of shares outstanding132,959,511 18,849,710 129,768,724 13,157,022 
Diluted weighted average number of shares outstanding132,959,511 18,849,710 129,768,724 13,157,022 
Net profit (loss) per stock attributable to common stockholders –
Basic$(0.09)$(0.45)$(0.12)$(4.32)
Diluted$(0.09)$(0.45)$(0.12)$(4.32)
Net loss per share calculations and potentially dilutive security amounts for all periods prior to the Transaction have been retrospectively adjusted to the equivalent number of shares outstanding immediately after the Transaction to affect the reverse recapitalization.
28

INNOVID, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except stock and per stock data)
Three months ended June 30,Six months ended June 30,
2023

20222023

2022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Numerator:
Net (loss) income$(18,959)$4,300 $(27,522)$(3,149)
Net (loss) income attributable to common stockholders basic and diluted
$(18,959)$4,300 $(27,522)$(3,149)
Denominator:
Weighted-average number of stock used in computing net (loss) income per stock attributable to common stockholders`
Basic weighted average number of shares outstanding137,643,910 132,152,652 134,296,569 128,220,893 
Effect of dilutive securities options and RSU (share equivalent)— 7,835,471 — — 
Diluted weighted average number of shares outstanding137,643,910 139,988,123 134,296,569 128,220,893 
Net profit (loss) per stock attributable to common stockholders
Basic$(0.14)$0.03 $(0.20)$(0.02)
Diluted$(0.14)$0.03 $(0.20)$(0.02)
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net profit (loss)loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Three months ended September 30,0Nine months ended September 30,Three months ended June 30,Six months ended June 30,
2022

20212022

20212023

20222023

2022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Preferred stock— 73,690,340 — 73,690,340 
Unvested RSU outstandingUnvested RSU outstanding7,827,545 — 7,827,545 — Unvested RSU outstanding15,723,452 7,991,829 15,723,452 8,002,502 
Options outstandingOptions outstanding11,241,174 11,774,686 11,241,174 11,774,686 Options outstanding9,812,198 3,533,772 9,812,198 12,363,179 
Warrants outstandingWarrants outstanding10,222,500 680,271 10,222,500 680,271 Warrants outstanding10,222,500 10,222,500 10,222,500 10,222,500 


13. SUBSEQUENT EVENTS
On August 2, 2023, two wholly owned subsidiaries of the Company, Innovid LLC and TV Squared Inc, entered the 2023 Modification Agreement with Silicon Valley Bank, a division of First-Citizen Bank & Trust Company. Refer to Note 6 for further details.
2922


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ThisThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our audited financial statements and notes contained in our Annual Report on Form 10-Q10-K for the year ended December 31, 2022 (our “2022 Annual Report on Form 10-K”). In addition to our historical condensed consolidated financial information, the following discussion contains forward-looking statements rather than historical facts that involve risksreflect our plans, estimates, and uncertainties. You can identify these statements using forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause ourbeliefs. Our actual results tocould differ materially from those discussed in the expectations we describeforward-looking statements. Factors that could cause or contribute to these differences include those discussed in our forward-looking statements, which could have a material adverse effect2022 Annual Report on Form 10-K as such factors may be updated from time to time in our business, operating results, and financial condition. The forward-looking statements included herein are only made as ofother filings with the date ofSEC, including elsewhere in this Quarterly Report, including under the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.heading “Cautionary Statements Regarding Forward-Looking Statements.”

Company Overview
We are a leading independentInnovid is an enterprise cloud software platform that provides critical technology infrastructure for the creation, delivery, and measurement of advertising across connected TV ads across CTV,(CTV), mobile TV, and desktop TV environments. Innovid’s revenue has grown alongsideAs of June 30, 2023, according to Kantar Media, over 50% of the growth of CTV advertising. We believetop 200 TV advertisers by US advertising spend are utilizing our open platform and purpose-builtin their advertising delivery infrastructure. Our technology, purposely built for CTV, combined with our position as a media-independentmedia-agnostic provider, has allowed us to win a largetop TV advertisers and growinggrow market share,share; while the growth of CTV combined with our usage-based revenue model has further contributedcontinues to contribute to our rapidoverall growth. Our acquisition of TVSquared, an independent global measurement and attribution platform for CTV added a real-time, cross-platform service to our offerings, including measurement of 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 and will allow us to capitalize further on the growth of CTV by enabling us to create a new independent currency-grade standard for cross-platform TV measurement, powered by the scale and automation of a global ad server. Our measurement services are now consolidated in InnovidXP, our new global measurement platform built for CTV.
Innovid’s purpose-built CTV infrastructure platform is comprised of three key offerings: Ad Serving Solutions, Creative Personalization Solutions and InnovidXP. Our software-based platform provides an open technology infrastructure that tightly integrates with the highly fragmented advertising technology and media ecosystem including demand side platforms such as The Trade Desk and Amobee; supply side platforms such as Magnite and Verizon Media; publishers such as Hulu and Peacock; and end user devices such as Amazon Fire and Samsung Smart TV. Our offering encompasses independent global ad serving, data-driven personalization, and new forms of measurement designed to connect all channels in a clean, comparable, and privacy-compliant manner.
We serve advertisers across multiple verticals, including Anheuser-Busch InBev, Verizon, CVS, Kellogg's, Mercedes-Benz, Target, and Sanofi, and target clients comprised of the largest global TV advertisers. Asadvertisers globally, including in the US, Germany, UK, Mexico, Argentina, Colombia, Israel, Singapore, Japan, and Australia. During the second quarter of September 30, 2022,2023, approximately 9% of Innovid's revenue was generated by our blue-chip advertiser client base included over 50%customers outside of the top 200 brands by TV US advertising spend according to Kantar MediaUS. As part of our measurement solutions go-to-market strategy, we partner with the largest streaming platform providers in the world, including Disney, Hulu, ESPN, and Winmo.NBCU. In addition, we work closely with the top advertising agency holding companies such as WPP, Publicis Groupe, Omnicom Group Inc, Interpublic Group of Cos., and Dentsu.Dentsu Inc. Our clients are diversified acrossspan all major industry verticals, including consumer packaged goods, pharmaceutical and healthcare, retail, financial services, automotive, and technology. We believe Innovid’s independence is critical to advertisers seeking an interoperable and open partner that is primarily focused on technology infrastructure. Although we work
Innovid's revenue growth closely correlates with the vendors who buygrowth of CTV advertising. CTV accounted for 51% and sell media, our platform only facilitates the creation, delivery and measurement50% of advertisements and campaigns and we do not make purchasing decisions or facilitate the purchasing of advertisement inventory. We are able to maintain our independence and remain free of potential buying conflicts because we do not make ad buying or selling decisions.
all video impressions served by Innovid serves customers globally through a delivery footprint covering over 70 countries. Induring the three months ended Septemberending June 30, 2021,2023, and June 30, 2022, respectively. During the three months ending June 30, 2023, this represented a year-over-year increase of 11% in CTV video impressions served by Innovid. Video impressions served by Innovid during the second quarters of 2023 and 2022 non-US customers generated approximately 9%attributed to mobile were 36% and 8% of the Company’s total revenue,38%, respectively, and for desktop TV were 13% and 12%, respectively. In the nine months ended September 30, 2021,second quarter of 2023, video impressions increase 1% for mobile TV and 2022, respectively, non-US customers generated approximately 9% and 10% of total revenue17% for desktop TV compared to the same period in both periods.
Our revenue model is primarily based on impressions volume and the cost per impression for our various Advertising Services. For our core ad serving platform, we generate revenue from our advertising customers based on the volume of advertising impressions delivered, enabling us to grow as our customers increase their digital ad spend and corresponding ad impressions. Additionally, we generate revenue from creative services based on flat fee per projects and measurement solutions based on the volume of advertising impressions measured. As we introduce new products such as advanced measurement and creative capabilities including personalization and interactivity, we expect to be able to charge higher prices per impression volume.prior year.
30


The TransactionTransactions
Innovid Corp. was originally incorporated as ION Acquisition Corp. 2 Ltd. (“ION”), a special purpose acquisition company, in Cayman Islands on November 23, 2020 forand Innovid Corp. was the purposesurviving entity following the completion of entering into aits merger share exchange, asset acquisition, stock purchase, recapitalization or business combinations.
Onwith ION on November 30, 2021 ION and Innovid Inc. closed the transaction as further described in this Form 10-Q. Through several mergers and a name change, Innovid Corp. was formed. ION entered into certain subscription agreements in June and October 2021 (“PIPE Investment”(the “ION Transaction”). The mergers and PIPE Investment are collectively referred to as “the Transaction”. Innovid Corp. is the public company entity which continues Legacy Innovid’s operating activity.
The Company common stock and warrants commenced trading on the NYSE under the symbols “CTV” and “CTVWS,” respectively, on December 1, 2021.
Business Combination
On February 28, 2022, wethe Company completed the acquisition of TVS. TVS is an independent global measurement and attribution platform for converged TV and a private company limitedSquared Limited (“TVS”, together with ION’s Transaction, the “Transactions”) by shares incorporated under the lawsway of Scotland. Westock purchase agreement (“Stock Purchase Agreement”). The Company acquired all the equity of TVS for an aggregate amount of approximately $100.0100.0 million in cash, 11,549,465 shares of the Company common stock at fair value of $3.80 per share, and other conditions as defined in the issuance of 949,893 fully vested stock option subject to certain adjustments. Our measurement services are now consolidated in InnovidXP, our new global measurement platform built for CTV.Stock Purchase Agreement.

23
COVID-19 and Other Global Events


Use of Estimates
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 aspreparation of the war in the Ukraine and the current macro-economic inflationary environment could have an impact 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 considering some or all of these factors. This in turn could negatively impact our revenues from such advertisers.
We have considered the impact of COVID-19 and of other global events on our estimates and assumptions and determined that there were no material adverse impacts on the interim condensed consolidated financial statements forin conformity with US GAAP requires us to make estimates, judgments and assumptions. We believe that the three and nine months ended September 30, 2022. As events continue to evolve and additional information becomes available, our estimates, judgments and assumptions may change materially in future periods.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.

Key Factors Affecting Our Performance
There are several factors that have impacted, and we believe, willmay continue to impact our results of operations and growth.
These factors include:
Continued market demand. Our performance is dependentdepends on continued global demand across the advertising ecosystem for independent third-party ad serving, personalization, and measurement of digital ads. Advertisers, programmatic platforms, social media channels and digital publishers are collectively placing increased emphasis on the quality and effectiveness of digital ad spend across all channels, formats and devices.
Our growth is primarily driven by CTV, the fastest growing segmentssegment of digital ad spend, mostly CTV, and our results depend on our ability to capturemonetize continued market growth.growth of CTV ad spend.
Growth of volume of CTV ad impressions of existing customers. Our results also depend on our ability to retain our existing customers and on our customers’ continued investment in CTV advertising. Customer retention will continue to impact our results as TV investment continues to shift from linear to CTV and the volume of CTV impressions grows.
31


CTV accounted for 54% of all video impression volume served in the three months ended September 30, 2022, up from 46% in the three months ended September 30, 2021. CTV impressions grew 36% year-over-year. Mobile impression volume decreased 1% year-over-year and in the three months ended September 30, 2022, accounted for 33% of all video impressions. Desktop increased 6% year-over-year and accounted for 13% of all video impressions served by Innovid in the same period.CTV accounted for 51% of all video impression volume served in the nine months ended September 30, 2022, up from 46% in the nine months ended September 30, 2021, and grew 32% year-over-year. Mobile increased 10% year-over-year and in the nine months ended September 30, 2022, accounted for 36% of all video impressions, and desktop increased 7% year-over-year and accounted for 13% of all video impressions served by Innovid in the same period.
Cross-sellingUpsell of additional services. A key part ofAn additional contributor to our overall business strategy isefforts in expanding revenue generated by cross selling our full range of Advertising Servicescustomers is our investment in cross-selling our solutions. We cross-sell our personalized creative solutions to primary ad serving customers, who, for example, begin using our services with standard TVdigital video ads and then introduce personalized formats over time or who use InnovidXP and then go ontime. We also cross-sell our advanced measurement solutions, which provide real-time metrics to use our ad server services.inform optimization of TV campaigns while in market. The success of these efforts will impact our results of operations.

Other factors impacting our results
Global expansion: Most of our clients are global advertisers and operate at a significant scale. Innovid serves customers globally through a delivery footprint covering over 70 countries.
We intend to continue to grow our footprint in international markets to meet the needs of our global customer base. Our results of operations will be impacted by the success of our geographic expansion, and whether the expected ad spend growth in these markets materializes.
New client accounts: We intend to continue targeting new brand, media agency and digital publisher customers who are currently utilizing solutions provided by our competitors or point solutions. Our results of operations will be impacted by our ability to attract new customers.
Seasonality: We experience revenue fluctuations in revenues that coincide with seasonal fluctuationschanges in the digital ad spending of our customers, in particular television ad spending patterns. Advertisers oftentypically allocate the largest portion of their media budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. As a result, the fourth quarter of the year typically reflects our highest level of revenues while the first quarter typically reflects our lowest level of revenues. However, this traditional revenue seasonality may also be impacted by certain external factors or major events that also impact traditional television advertising patterns such as supply chain disruptions and silicon/chip shortages. We expect our revenues to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole and for these seasonal fluctuations in ad spend to impact quarter-over-quarter results. We believe that the year-over-year comparison of results more appropriately reflects the overall performance of our business. However, this traditional seasonality may also be impacted by certain external factors or major events that impact traditional television advertising patterns, such as the COVID-19 pandemic or other global events.
Public company costs: We are incurring additional legal, accounting, and other expenses that we did not previously incur, including costs associated with SEC reporting and corporate governance requirements. These requirements include compliance with the Sarbanes-Oxley Act as well as other rules implemented by the SEC and the NYSE. Our financial statements reflect the impact of these expenses.
Global Markets
The majority of our clients are global advertisers and operate at a significant scale. Innovid serves customers globally through a delivery footprint including the US, APAC, EMEA, and LATAM. During the second quarter of 2023, approximately 9% of Innovid’s revenue was generated outside the US.
We continue to service international markets to meet the needs of our global customer base and to accelerate new customer acquisition in key geographies outside of the US. We believe our continuing ability to service international markets will impact our results of operations.

24


Components of Results of Operations
Revenues
We generate the majority of our revenues from providing Advertising ServicesAd serving solutions to our customers: advertisers, media agencies and publishers. We focus on standard, interactive and data driven digital video advertising. Our major revenue stream is ad serving. We also provide creative and measurement services.
Ad serving services relate to utilizing Innovid’s platform to serve advertising impressions to various digital publishers primarily across CTV, mobile TV, and desktop TV.
InnovidXP, our cross-platform TV display,Ad measurement solution, launched last year, measures the efficiency of CTV advertising and other channels. Creativein-flight optimizations for TV marketers. We will continue to invest in advanced measurement capability and provide solutions to advertisers , streaming platforms and agencies as their needs evolve in the highly fragmented CTV ecosystem.
We provide creative services relate tofor the design and development of interactive data-driven and dynamic ad formats by adding data, interactivity and dynamic features to standard ad units. Measurement services, which have been augmented by the acquisition of TVS, provide real-time, cross-platform analysis, including measurement and outcomes such as reach, frequency and unique unduplicated reach, as well as performance metrics.
32


We generate mostthe majority of our revenues from the sale and delivery of our products within the US. For information with respect to sales by geographic markets, refer to Note 11, Segment Reporting to the Condensed Consolidated Financial Statements included under Item 1, Financial Statements and Supplementary Data. Our CEO is the chief operating decision-maker, and manages and allocates resources to the operations of the Company on an entity-wide basis.
We anticipate that revenues from our US sales will continue to constitute a substantial portionmajority of our revenues in future periods. For information with respect to sales by geographic markets, see Note 10, “Segment Reporting” to our unaudited condensed consolidated financial statements presented in Item 1. “Financial Statements and Supplementary Data”.Our chief operating decision maker (our CEO) does not evaluate the profit or loss from any separate geography.
Cost of revenues
Cost of revenues consists primarily of costs to run our ad serving, creative and measurement services.solutions. These costs include hosting and ad serving fees, data costs, personnel costs including stock-based compensation, professional services costs and facility related costs. We allocate overhead, including rent and other facility related costs and communication costs, based on headcount.
Research and development
Research and development expenses consist primarily of personnel costs, including stock-based compensation, professional services costs, hosting and facility related costs. We allocate overhead including rent and other facility related costs and communication costs based on headcount. We expect research and development expenses to increase in future periods to support our growth, including continuing to invest in optimization, accuracy and reliability of our platform and other technology improvements to support and drive efficiency in our operations. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments.
ProductResearch and development expensescosts are expensed as incurred, exceptcharged to the extent that such costs are associated with software development that qualifies for capitalization, which are then recorded as capitalized software development costs included in property, plant, and equipment on our condensed consolidated balance sheet. We amortize capitalizedstatements of operations as incurred. ASC 350-40, Internal-Use Software (“ASC 350-40”), requires the capitalization of certain costs incurred during the application development stage. Any costs incurred for upgrades and functionality enhancements of the software development costs to depreciation and amortization.are also capitalized.
Sales and marketing
Sales and marketing expenses consist primarily of personnel costs, including commissions, stock-based compensation, professional services costs and facility related costs, as well as costs related to advertising, promotional materials, public relations, and other sales and marketing programs. We allocate overhead, including rent and other facility related costs and communication costs based on headcount.
General and administrative
General and administrative expenses consist primarily of personnel costs, including stock-based compensation, for executive management, finance, accounting, human capital, legal and other administrative functions as well as professional services costs and facility related costs. We allocate overhead, including rent and other facility related costs, and communication costs based on headcount.
Prior period reclassification
Beginning in the second quarter 2022, we present depreciation and amortization expenses as a separate line item on our condensed consolidated statements of operations. 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. In accordance with generally accepted accounting principles, 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. The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our condensed consolidated financial statements, adjusted for this reclassification. Refer to “Part I - Item 1. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies” for further information on prior period reclassification.
3325


Results of Operations
Three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the three and ninesix months ended SeptemberJune 30, 20212022
Three months ended September 30,Nine months ended September 30,Three months ended June 30,Six months ended June 30,
20222021202220212023202220232022
(in thousands)% of Revenue(in thousands)% of Revenue(in thousands)% of Revenue(in thousands)% of Revenue(in thousands)% of Revenue(in thousands)% of Revenue(in thousands)% of Revenue(in thousands)% of Revenue
RevenuesRevenues$34,469 100 %$23,469 100 %$93,419 100 %$64,324 100 %Revenues$34,546 100 %$33,088 100 %$65,031 100 %$58,950 100 %
Cost of revenuesCost of revenues8,534 25 %4,548 19 %21,811 23 %12,359 19 %Cost of revenues8,591 25 %7,351 22 %16,856 26 %13,277 23 %
Research and developmentResearch and development7,312 21 %5,342 23 %24,276 26 %16,698 26 %Research and development6,876 20 %9,710 29 %13,993 22 %16,964 29 %
Sales and marketingSales and marketing13,726 40 %8,689 37 %38,397 41 %23,366 36 %Sales and marketing11,460 33 %14,320 43 %23,097 36 %24,671 42 %
General and administrativeGeneral and administrative9,046 26 %3,982 17 %30,456 33 %10,561 16 %General and administrative8,924 26 %9,955 30 %18,574 29 %21,410 36 %
Depreciation, amortization and impairment1,882 %156 %3,481 %487 %
Operating (loss) profit(6,031)(17)%752 %(25,002)(27)%853 %
Finance expenses (income), net4,962 14 %707 %(10,655)(11)%3,878 %
(Loss) profit before taxes
(10,993)— 45 — %(14,347)(15)%(3,025)(5)%
Depreciation and amortizationDepreciation and amortization2,064 %926 %4,094 %1,599 %
Goodwill impairmentGoodwill impairment14,503 42 %— — %14,503 22 %— — %
Operating lossOperating loss(17,872)(52)%(9,174)(28)%(26,086)(40)%(18,971)(32)%
Finance income, netFinance income, net(248)(1)%(13,306)(40)%(2,723)(4)%(15,617)(26)%
(Loss) income before taxes
(Loss) income before taxes
(17,624)(51)%4,132 12 %(23,363)(36)%(3,354)(6)%
Taxes on incomeTaxes on income839 %304 %634 %829 %Taxes on income1,335 %(168)(1)%4,159 %(205)— %
Net loss$(11,832)(34)%$(259)(1)%$(14,981)(16)%$(3,854)(6)%
Net (loss) incomeNet (loss) income$(18,959)(55)%$4,300 13 %$(27,522)(42)%$(3,149)(5)%
Revenues
The growth and scaling of CTV was the key driver of Innovid’s revenue growth.growth in the second quarter of 2023. As TV ad spend continues to shift from linear to CTV, we continue to benefit from the natural volume growth of CTV impressions we delivered for our existing and new customers.
Total revenue increased by 47% year-over-year,$1.5 million, or 4%, from $23.5$33.1 million in the three months ended SeptemberJune 30, 20212022 to $34.5 million in the three months ended SeptemberJune 30, 2022. 21% of total quarterly revenue, $7.2 million, was2023. The increase is attributed to TVS. the ad serving volume growth and the growth of the measurement offering. Cross-selling of the measurement solution to our core clients contributed to the overall increase in the measurement revenue.
Total revenue increased by 45% year-over-year,$6.0 million, or 10%, from $64.3$59.0 million in the ninesix months ended SeptemberJune 30, 20212022 to $93.4$65.0 million in the ninesix months ended SeptemberJune 30, 2022. 18%2023. Four months of total nine months revenue, $16.5 million,TVS activity was attributed to TVS.
Revenue excluding TVS was $27.3 millionincluded in our operations in the three months ended September 30,same period in 2022 an increasedue to the timing of 16% from the three months ended September 30, 2021. Revenue excluding TVS was $76.9 million in the nine months ended September 30, 2022, an increase of 20% from the nine months ended September 30, 2021. The increases are driven primarily by growth in ad impressions delivered on our platform for both existing and new clients.acquisition.
There was no meaningful impact of changes in average cost per impression on total revenue.
Cost of revenues (exclusive of depreciation, amortization and amortizationgoodwill impairment shown below)
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Cost of revenues$8,534 25 %$4,548 19 %$3,986 88 %
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Cost of revenues$8,591 25 %$7,351 22 %$1,240 17 %
26


Cost of revenue increased by $4.0$1.2 million, or 88%17%, from $4.5$7.4 million in the three months ended SeptemberJune 30, 2021,2022, to $8.5$8.6 million in the three months ended SeptemberJune 30, 2022,2023, primarily driven by a $2.3$1.8 million increase in servingrelated to hosting and hosting fees anddata costs associated with our integrated measurement solution. This was partially offset by a $1.3 million increasedecrease in personnel related costs due to a higherresulted from our operating efficiency measures including headcount both to support our increased volumes and reflecting our business following the TVS acquisition.reduction.

34


Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Cost of revenues$21,811 

23 %$12,359 19 %$9,452 76 %
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Cost of revenues$16,856 

26 %$13,277 23 %$3,579 27 %
Cost of revenue increased by $9.5$3.6 million, or 76%27%, from $12.4$13.3 million in the ninesix months ended SeptemberJune 30, 2021,2022, to $21.8$16.9 million in the ninesix months ended SeptemberJune 30, 2022,2023, primarily driven by a $4.3$3.6 million increase in servinghosting and hosting fees and a $3.7 million increasedata costs associated with our measurement solution included in personnel costs due to a higher headcount, both to support our increased volumes and reflecting our businessoperations following the TVS acquisition. This was partially offset by a decrease in personnel related costs resulted from our operating efficiency measures including headcount reduction.
Research and development (exclusive of depreciation, amortization and amortizationgoodwill impairment shown below)
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Research and development$7,312 21 %$5,342 23 %$1,970 37 %
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Research and development$6,876 20 %$9,710 29 %$(2,834)(29)%
Research and development expenses increaseddecreased by $2.0$(2.8) million, or 37%(29)%, from $5.3$9.7 million in the three months ended SeptemberJune 30, 2021,2022, to $7.3$6.9 million in the three months ended SeptemberJune 30, 2022. The increase was2023, primarily due to an increasedriven by a decrease of $2.6 million$1.9 million in personnel costs, following the TVS acquisition to supporta decrease of $0.5 million in technology infrastructure and hosting fees, and a decrease of $0.4 million in consulting fees resulted from our platform maintenance work as well as our product research efforts. In addition, toperating efficiency measures including headcount reduction.
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Research and development$13,993 

22 %$16,964 29 %$(2,971)(18)%
here was a $1.3 million increase in share-based compensation mostly due to Restricted Stock Units (“RSUs”) that were granted to employees. The increases were partially offset by an increase of $2.6 million capitalization of research and development expenses related to our development of new products and our platform enhancements.
Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Research and development$24,276 

26 %$16,698 26 %$7,578 45 %
Research and development expenses increaseddecreased by $7.6$(3.0) million, or 45%(18)%, from $16.7$17.0 million in the ninesix months ended SeptemberJune 30, 2021,2022, to $24.3$14.0 million in the ninesix months ended SeptemberJune 30, 2022. The increase was2023, primarily due to an increasedriven by a decrease of $8.2 million$1.9 million in personnel costs, following the TVS acquisition and an increasea decrease of $0.6 million in technology infrastructure and hosting fees, both to supportand a decrease of $0.5 millions in consulting fees resulted from our platform maintenance work as well as our product research efforts. In addition, there was a $3.0 million increase in share-based compensation mostly due to RSUs that were granted to employees. The increases were partially offset by an increase of $6.5 million for capitalization of research and development expenses related to our development of new products and our platform enhancements.operating efficiency measures including headcount reduction.
Sales and marketing (exclusive of depreciation, amortization and amortizationgoodwill impairment shown below)
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Sales and marketing$13,726 40 %$8,689 37 %$5,037 58 %
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Sales and marketing$11,460 33 %$14,320 43 %$(2,860)(20)%
Sales and marketing expenses increaseddecreased by $5.0$(2.9) million, or 58%(20)%, from $8.7$14.3 million in the three months ended SeptemberJune 30, 2021,2022, to $13.7$11.5 million in the three months ended SeptemberJune 30, 2022. The increase was2023, primarily driven primarily by an increasea decrease in personnel costs of $3.1$1.9 million following the TVS acquisitiondue to support our long-term growth strategy.lower headcount. In addition, therethere was a $1.2$0.6 million increasedecrease in share-based compensation due to increase in headcount and RSUs that were granted to employees.

marketing expenses and other cost efficiency.
3527


Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Sales and marketing$38,397 

41 %$23,366 36 %$15,031 64 %
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Sales and marketing$23,097 

36 %$24,671 42 %$(1,574)(6)%
Sales and marketing expenses increaseddecreased by $15.0$(1.6) million, or 64%(6)%, from $23.4$24.7 million in the ninesix months ended SeptemberJune 30, 2021,2022, to $38.4$23.1 million in the ninesix months ended SeptemberJune 30, 2022. The increase was2023, primarily driven primarily by an increasea decrease in personnel costs of $8.0$0.5 million following the TVS acquisition and an increasedue to lower headcount. In addition, there was a decrease in marketing costs of $1.1$0.8 million both to support our long-term growth strategy. In addition, there was a $3.2 million increase in share-based compensation due to increase in headcount and RSUs that were granted to employees and a $1.2 million increase in commissions due to higher revenues.other cost efficiency.
General and administrative (exclusive of depreciation, amortization and amortizationgoodwill impairment shown below)
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
General and administrative$9,046 26 %$3,982 17 %$5,064 127 %
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
General and administrative$8,924 26 %$9,955 30 %$(1,031)(10)%
General and administrative expenses increaseddecreased by $5.1$(1.0) million, or 127%(10)%, from $4.0$10.0 million in the three months ended SeptemberJune 30, 2021,2022, to $9.0$8.9 million in the three months ended SeptemberJune 30, 2022. The increase was2023, primarily due an increasedriven by a decrease in personnel costsprofessional fees of $2.1$1.3 million and legal fees of $0.5 million related to the expansionTVS acquisition in the 2022 period. This was partially offset by an increase in executive bonuses of our operations following$0.7 million.
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
General and administrative$18,574 

29 %$21,410 36 %$(2,836)(13)%
General and administrative expenses decreased by $(2.8) million, or (13)%, from $21.4 million in the six months ended June 30, 2022, to $18.6 million in the six months ended June 30, 2023, primarily driven by a decrease in professional fees of $3.4 million and a decrease of $1.8 million in legal fees both related to the TVS acquisition andacquisition. In addition, there was a $1.0decrease of $1.1 million increase in Directors and Officers insurance expense during the period. ThereThis was alsopartially offset by an increase in legal feesstock compensation of $0.7 $1.8 million in connection with litigation. In addition, there was a $1.2 million increase in share-based compensation mostly due to RSUs that were granted to employees and an increase in headcount.executive bonuses and other personnel costs of $1.7 million.
Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
General and administrative$30,456 

33 %$10,561 16 %$19,895 188 %
Depreciation and amortization
General
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Depreciation and amortization$2,064 %$926 %$1,138 123 %
Depreciation and administrativeamortization expenses increased by $19.9$1.1 million, or 188%123%, from $10.6$0.9 million in the ninethree months ended SeptemberJune 30, 2021,2022, to $30.5$2.1 million in the ninethree months ended SeptemberJune 30, 2022.2023. The increase was primarily due an increase in personnel costsmostly driven by $0.7 million amortization expense of $5.3 million related to the expansion of our operations following the TVS acquisition and a $2.9 million increase in Directors and Officers insurance expenseinternal-use software projects during the period. There was also an increase in professional fees primarily consisting of $4.9 million related to the TVS Acquisition, $1.1 million for legal fees in connection with the litigation, $0.8 million for legal services related to SEC reporting, $0.8 million for audit fees and $0.6 million for accounting services related to company matters. In addition, there was a $1.6 million increase in share-based compensation mostly due to RSUs that were granted to employees, an increase in headcount and acceleration of stock options.
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Depreciation and amortization$4,094 %$1,599 %$2,495 156 %
Depreciation amortization and impairment
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Depreciation, amortization and impairment$1,882 %$156 %$1,726 1106 %
Depreciation, amortization and impairment expenses increased by $1.7$2.5 million, or 1106%156%, from $0.2$1.6 million in the threesix months ended SeptemberJune 30, 2021,2022, to $1.8$4.1 million in the threesix months ended September June 30, 2022.2023. The increase was driven primarily by additional amortization expense of $1.0 million for TVS intangible assets during the period as well as $0.5$1.5 million impairment charge related to the abandonmentamortization expense of certain projects related to our internalinternal-use software development.

projects.
3628



Goodwill impairment

Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Goodwill impairment$14,503 42 %$— — %$14,503 100 %

Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Depreciation, amortization and impairment$3,481 %$487 %$2,994 615 %
Depreciation and amortization expensesGoodwill impairment increased by $2.5$14.5 million, or 505%100%, from $0.5$0.0 million in the ninethree months ended SeptemberJune 30, 2021,2022, to $2.9$14.5 million in the ninethree months ended September June 30, 2022.2023. The increase was driven primarily by additional amortization expense for TVS intangible assetscontinued decline in the Company’s stock price during the periodsecond quarter of 2023 was viewed as wella triggering event, which required an assessment for possible goodwill impairment as $0.5 millionof June 30, 2023. We performed this assessment during the six months ended June 30, 2023 and determined that the fair value of the reporting unit exceed its carrying value during the three months ended June 30, 2023. The fair value was determined based on the market approach. As a result of this assessment, the Company recorded a goodwill impairment charge related toin the abandonmentamount of certain projects related to our internal software development.$14.5 million.
Finance expenses (income), net
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Goodwill impairment$14,503 22 %$— — %$14,503 100 %
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Finance expenses, net$4,962 14 %$707 %$4,255 602 %
Finance expenses (income)Goodwill impairment increased by $4.3$14.5 million, or 602%100%, from $0.7$0.0 million in the six months ended June 30, 2022, to $14.5 million in the six months ended June 30, 2023 for the reasons described above.
Finance income, net
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Finance income, net$(248)(1)%$(13,306)(40)%$13,058 (98)%
Finance income decreased by $13.1 million, or (98)%, from $(13.3) million in the three months ended SeptemberJune 30, 2021,2022, to $5.0$(0.2) million in the three months ended September June 30, 2022. The increase2023. This was predominantly driven primarily by an increase related to Public and Private Warrants, which were issued as a partdecrease of the Transaction. Their valuationfair value of our warrants. The fair value of the warrants is influenced by market volatility impacting Company’s share price which is an underlying input for the valuation.

Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Finance income, net$(2,723)

(4)%$(15,617)(26)%$12,894 (83)%
Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Finance expenses (income), net$(10,655)

(11)%$3,878 %$(14,533)(375)%
Finance expenses (income)income decreased by $14.5$12.9 million, or 375%(83)%, from $3.9$(15.6) million in the ninesix months ended SeptemberJune 30, 2021,2022, to $(10.7)$(2.7) million in the ninesix months ended September June 30, 2022. The decrease2023. This was predominantly driven primarily by a decrease related to Public and Private Warrants, which were issued as a part of the Transaction. Their valuationfair value of our warrants. The fair value of the warrants is influenced by market volatility impacting Company’s share price which is an underlying input for the valuation.
Taxes on income
Three months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Taxes on income$839 %$304 %$535 176 %
Tax expense increased by $0.5 million, or 176%, from $0.3 million in the three months ended September 30, 2021, to $0.8 million in the three months ended September 30, 2022. Most of the increase in expense results from the discrete impact related to the expected current tax expense for loss companies which are excluded from the forecasted tax rate.
Three months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Taxes on income$1,335 %$(168)(1)%$1,503 (895)%
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The Company’s effective tax rates were (7.6)% and (4.1)% for the three months ended June 30, 2023 and 2022, respectively.
Nine months ended September 30,
20222021
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Taxes on income$634 

%$829 %$(195)(24)%
Six months ended June 30,
20232022
(in thousands)% of Revenue(in thousands)% of Revenue$ Variance% Variance
Taxes on income$4,159 

%$(205)— %$4,364 (2129)%
Tax expense decreased increased by $0.2$4.4 million or 24%, from $0.8$(0.2) million in the ninesix months ended SeptemberJune 30, 2021,2022 to $0.6$4.2 million in the ninesix months ended SeptemberJune 30, 2022.2023. The decreaseCompany’s effective tax rates were (17.8)% and 6.1% for the six months ended June 30, 2023 and 2022, respectively.
The increase in year-to-date tax expense resultsprimarily resulted from thea shift in the geographic mixCompany’s foreign earnings, resulting in higher profitability and current tax expense, with no offsetting deferred tax benefit as a result of an overall valuation allowance.
In addition, certain temporary differences associated with the capitalization of research and development under IRC Section 174 and deductibility of stock compensation that would normally not impact the effective tax rate or overall tax expense, cause the US to generate current state tax expense with no corresponding deferred tax benefit. Unless the US tax rules around research and development (Section 174) are modified, there will continue to be an adverse impact on our effective rates for income taxes paid.
Lastly, the current tax expense is increased as relatedcompared to prior years, in both the foreign jurisdictions and the US, because of decreased net operating losses available due to prior year as well as the impact of loss companies which are excluded from the forecasted tax rate.utilization.

Liquidity and Capital Resources
We have financed our operations, business acquisition and capital expenditures primarily through utilization of cash generated from operations and cash proceeds from the Transaction,ION’s transaction, as well as borrowings under our credit facilities.
As of SeptemberJune 30, 2022,2023, we had cash, cash equivalents and restricted cash of $46.9$43.8 million and net working capital, consisting of current assets less current liabilities, of $68.4$68.6 million. We paid net cash consideration of approximately $99.6 million for the acquisition of TVS. As of SeptemberJune 30, 2022,2023, we had an accumulated deficit of $147.5$178.4 million, $76.0 million thereof results from the cumulative accretion of preferred stock to redemption value prior to the conversion of all preferred stock into our common stock upon the closing of the Transaction.ION’s transaction.
We believe our existing cash and cash equivalents and anticipated net cash provided by operating activities, together with anticipated net cash provided by operating activities and available borrowings under our credit facility, will be sufficient to meet our cash needs and working capital requirements for at least the next 12 months. However, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We are closely monitoring the effect that current economic conditions may have on our working capital requirements. To date, the COVID-19 pandemic and other global events have not had a material negative impact on our cash flow or liquidity. Our future capital requirements and the adequacy of available funds will depend on many factors.
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that are unfavorable to equity investors. We cannot guarantee that we will be able to raise additional capital in the future on favorable terms, or at all. Any inability to raise capital could adversely affect our ability to achieve our business objectives.
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Sources of Liquidity
Revolving Line of Credit
On August 4, 2022, two of our wholly owned subsidiaries, Innovid LLC and TV Squared Inc, entered into an amended and restated loan and security agreement with Silicon Valley Bank (the “2022 A&R Agreement”), to increase the revolving line of credit from $15.0 million to $50.0 million (the “New Revolving Credit Facility”). The 2022 A&R Agreement and the New Revolving Credit Facility were amended by a First Loan Modification Agreement dated August 2, 2023 (the “2023 Modification Agreement”). The interest for the New Revolving Credit Facility is payable monthly in arrears. The New Revolving Credit Facility bears interest at an annual rate equal towhich is the greater of 4.25% and prime rate(a) WSJ Prime Rate plus 0.75%0.25% or (b) 4.25%, on the aggregate outstanding principal of each credit extension.balance. Additional fees include fees in an amount of 0.20% per annum of the average unused portion of the New Revolving Credit Facility to be paid quarterly in arrears. We will also pay non-refundable commitment fees of $0.0 million and $0.1 million at inception and the first anniversary date, respectively. The maturity date of the 2022 A&R Agreement, as amended by the 2023 Modification Agreement, is June 30, 2024.2025. The New Revolving Credit Facility is subject to certain customary conditions precedent to the credit extension as stated in the 2022 A&R Agreement.
The New Revolving Credit Facility requires usthe Company to comply with all covenants, primarily maintaining an adjusted quick ratio of at least 1.30 to 1.00. As defined in the 2022 A&R Agreement “adjusted quick ratio” is the ratio of (a) quick assets to (b) current liabilities minus the current portion of deferred revenue. “Quick assets” determinesare determined as ourthe Company’s unrestricted cash plus accounts receivable, net, and is determined according to US GAAP. We areThe Company is also required to maintain the minimum quarterly adjusted EBITDA as defined in the 2022 A&R Agreement, as amended by the 2023 Modification Agreement, if we dothe Company does not maintain the quarterly adjusted quick ratio of at least 1.50 to 1.00.
As of SeptemberJune 30, 2023, we were in compliance with all covenants.
As of June 30, 2023 and December 31, 2022, wethe Company utilized $15.0$20.0 million of the $50.0 million credit line. In January 2023, the Company repaid $5.0 million under the credit line $6.0 million of which was drawn during 2020 and $9.0$5.0 million was subsequently drawn duringin March 2023. In May 2023, the second quarter of 2022.Company repaid $5.0 million under the credit line and $5.0 million was subsequently drawn in June 2023.
Interest expenses for the ninesix months ended SeptemberJune 30, 2023, and 2022 and 2021 were $0.4$0.8 million and $0.2$0.1 million, respectively. They were recorded in the “Finance expenses (income),income, net” in the unaudited interim condensed consolidated statements of operations.

Cash Flows
NineSix months ended SeptemberJune 30, 2022,2023, compared to the ninesix months ended SeptemberJune 30, 20212022
The following table summarizes our cash flows for the periods presented:
Nine months ended September 30,
20222021
Net cash (used in)/ provided by operating activities$(10,089)$3,046 
Net cash used in investing activities(106,787)(1,944)
Net cash provided by/ (used in) financing activities6,632 (2,277)
Decrease in cash, cash equivalents and restricted cash
$(110,243)$(1,175)
Six months ended June 30,
20232022
Net cash provided by / (used in) operating activities$948 $(15,901)
Net cash provided by / (used in) investing activities4,247 (103,273)
Net cash provided by financing activities614 6,451 
Increase (decrease) in cash, cash equivalents and restricted cash
$5,809 $(112,723)
Operating Activities
Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our customers and payments to our vendors, as well as increases in personnel related expenses as we scale up our business. The timing of cash receipts from customers and payments to vendors and providers can significantly impact our cash flows from operating activities. In addition, we expect seasonality to impact quarterly cash flows from operating activities.
Cash provided by/(used inin) operating activities is calculated by adjusting our net loss for changes in working capital, as well as by excluding non-cash items such as depreciation and amortization, goodwill impairment, stock-based compensation and changeschange in fair value of warrants.
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For the nine-monthsix month period ended SeptemberJune 30, 2023, net cash provided by operating activities was $0.9 million, attributable to net loss of $(27.5), adjusted for non-cash charges of $25.2 and $3.3 cash provided by changes in working capital. Our non-cash charges primarily consisted of goodwill impairment and stock based compensation.
For the six month period ended June 30, 2022, net cash used in operating activities was $10.1$(15.9) million, comparedattributable to net loss of $(3.1), adjusted for non-cash charges of $(8.7) and $(4.0) use of cash provided by operating activities of $3.0 million for the nine month period ended September 30, 2021. The increasefrom changes in net cash used in operating activities was primarily attributable to increase in account receivable because of the expansion of our operations and non-cash adjustments.working capital. Our non-cash adjustments decreased by $3.9 million mostly driven by decreasecharges primarily consisted of change in valuation of warrants due to changes in our stock market price, offset by an increase in stock-based compensation as a result of RSUs granted in 2022 and amortization of intangible assets related to TVS acquisition.
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fair value warrants.
The changes in our working capital compared to the prior period in the amount of $3.9$7.3 million were thea result of an increasea decrease in trade receivables due to increased revenue and operating activities.a shorter collection period. This decrease was partially off-set by an increase in prepaid expenses due to the timing of payments for some of our subscriptions. The changes in working capital were also related to an increase in accrued expense, other current liabilities and trade payables due to accrual and the timing of payments for personnel costs, prepaid software subscription fees and changes due to the acquisition of TVS.
Investing Activities
For the nine-monthsix month period ended SeptemberJune 30, 2022, we used $106.82023, $4.2 million of net cash was provided by investing activities compared to net cash used in investing activities of $103.3 million for the six month period ended June 30, 2022, was primarily driven by net cash consideration paid of $99.6 million to acquire TVS in 2022. Further, the decrease of $10.0 million in short-term deposit, which was terminated in March, 2023, increased cash provided by investing activity. This impact was offset by cash acquiredan increase of $99.6$2.1 million and theof investment in internal software development work of $7.0 million.
For the nine-month period ended September 30, 2021, we used $1.9 million of net cash in investing activities, primarily driven by the investment in internal software development work of $1.0 million and the loan in the amount of $0.5 million issued to our founder.work.     
Financing Activities
For the nine-monthsix month period ended SeptemberJune 30, 2022,2023, $0.6 million of net cash was provided by financing activities of $6.6compared to $6.5 million for the six month period ended June 30, 2022. This decrease in cash provided was primarily due to a drawdown of our credit facility of $9.0 million and proceeds received for exercises of optionsin the prior period, offset by a decrease in the amount of $0.8 million, partially offset by payment of SPAC merger transaction costs of $3.2 million.
For the nine-month period ended September 30, 2021, net cash used in financing activities of $2.3 million was primarily due to repayment of Paycheck Protection Program Loan in the amount of $3.0 million partially offset by proceeds received for exercises of options in the amount of $0.9 million.

Contractual Obligations and Known Future Cash Requirements
Lease Commitments
We rent our facilities under operating lease agreements that expire on various dates, the latest of which is in 2025 excluding any options for renewal. The minimum rental payments under operating leases for rental of premises as of June 30, 2023 for the next five years totaled $2.7 million, which is comprised of $1.6 million and $1.1 million in the next 12 months and more than 12 months, respectively.
Pledges and Bank Guarantees
In connection with the credit agreement and its amendments,2022 A&R Agreement, we pledged 65,000 shares of common stock of our Israeli subsidiary, NIS 0.01 par value each.
We have a total of $0.9$0.6 million of pledged bank deposits as of SeptemberJune 30, 2022,2023, related to office leases and credit cards.
We obtained bank guarantees in an aggregate amount of $0.2 million in connection with our office lease agreements in the US as of September 30, 2022.
Legal contingenciesagreements.
On March 4, 2022, a lawsuit was filed in the United States District Court for the Western District of Texas by the Nielsen, Claim was filed by Nielsen,Company (US) LLC against TVS. TVS has filed its answer to the complaint and has also filed an opposed motionalleging infringement of US Patent No.10,063,378. On June 1, 2022, TVS moved to transfer venuethe case to the Southern District of New York. On February 24, 2023, the case was transferred to the Southern District of New York. On March 23, 2023, the parties jointly filed their proposed case management plan and scheduling order, which the Court entered and thereafter opened discovery. That motion is scheduled to be heard on November 14, 2022order sets the close of fact discovery for October 23, 2023, and if unsuccessful the following hearing in the current venue would be scheduledclose of expert discovery for January 2023.23, 2024, but does not set a date for trial. On the same day, TV Squared filed a motion for judgment on the pleadings under Federal Rule 12(c) arguing invalidity of all asserted patent claims. Briefing concluded on April 24, 2023, and the motion remains pending. The plaintiff has not specified the amount sought in the litigation.
Cash compensation arrangements
In addition Given the uncertainty of litigation and the preliminary stage of the lawsuit, the Company is unable at this time to give an estimate of the amount or range of potential loss, if any, which might result to the purchase consideration forCompany if the acquisitionoutcome in such litigation was unfavorable. As of TVS, we entered cash compensation arrangements with certain employees, which amounted to $9.7 million in aggregate and are subject to certain performance and employment conditions followingJune 30, 2023, the closing of the Acquisition.Company did not record a loss contingency.

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Key Metrics and Non-GAAP Financial Measures
Adjusted EBITDA
In addition to our results determined in accordance with US GAAP, we believe that certain non-GAAP financial measures, including Adjusted EBITDAearnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA Margin are useful in evaluating our business. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. The following table presents a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to the most directly comparable financial measure prepared in accordance with US GAAP.
Three months ended September 30,Nine months ended September 30,
(in thousands)2022202120222021
Net loss$(11,832)$(259)$(14,981)$(3,854)
Net loss margin(34)%(1)%(16)%(6)%
Depreciation, amortization and impairment (a)1,882 156 3,481 487 
Stock-based compensation4,322 591 10,052 2,311 
Finance expense (income), net (b)4,962 707 (10,655)3,878 
Transaction related expenses (c)— — 392 — 
Acquisition related expenses (d)— — 4,971 — 
Retention bonus expenses (e)1,290 — 2,290 — 
Legal claims664 — 1,099 — 
Other (f)739 — 915 — 
Taxes on income839 304 634 829 
Adjusted EBITDA
$2,866 $1,499 $(1,802)$3,651 
Adjusted EBITDA margin
%%(2)%%
Three months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
Net (loss) income$(18,959)$4,300 $(27,522)$(3,149)
Net (loss) income margin(55)%13 %(42)%(5)%
Depreciation and amortization2,064 926 4,094 1,599 
Goodwill impairment14,503 — 14,503 — 
Stock-based compensation5,334 4,138 9,958 5,730 
Finance income, net (a)(248)(13,306)(2,723)(15,617)
Transaction related expenses (b)— 164 — 392 
Acquisition related expenses (c)— 768 — 4,971 
Retention bonus expenses (d)148 1,000 445 1,000 
Legal claims342 435 656 435 
Severance cost (e)— — 845 — 
Other23 83 272 175 
Taxes on income1,335 (168)4,159 (205)
Adjusted EBITDA
$4,542 $(1,660)$4,687 $(4,669)
Adjusted EBITDA margin
13.1 %(5.0)%7.2 %(7.9)%
(a) In third quarter, 2022, the Company recorded impairment chargesFinance income, net consists mostly of $0.5 millionremeasurement related to the abandonmentrevaluation of certain projects related to our internal software development.
(b) Finance expense (income), net consists primarywarrants, remeasurement of remeasurement expense related to our foreign subsidiaries’subsidiary’s monetary
assets, liabilities and operating results, and our interest expense and revaluation of our warrants. The unrealized loss from changes in the fair value of our warrants for the three months period ended September 30, 2022, was $4.6 million. The unrealized gain from changes in the fair value of our warrants for the nine months period ended September 30, 2022, was $11.4 million. The unrealized loss from changes in the fair value of our warrants for the three months and nine months period ended September 30, 2021, was $0.5 million and $3.2 million, respectively.expense.
(c)(b) Transaction related expenses consist of professional fees associated withcost related to the SPAC merger transaction and PIPE related SEC filings.transaction.
(d)(c) Acquisition related expenses consists of professional fees associated with the acquisition of TVS.
(e)(d) Retention bonus expenses consists of retention bonusbonuses for TVS employees.
(f) For(e) Severance cost is related to the three months and nine months ended September 30, 2022, “other” consists predominantlypersonnel reductions that occurred during the first quarter of exit costs for a former TVS employee. In previous quarters, retention bonus and legal claims were included in “other”.2023.

We use Adjusted EBITDA and Adjusted EBITDA Margin as measures of operational efficiency to understand and evaluate our core business operations. We believe that these non-GAAP financial measures are also useful to investors for period-to-periodperiod to period comparisons of our core business and forbusiness. Additionally, these figures provide an understanding and evaluatingevaluation of our trends inwhen comparing our operating results, on a consistent basis, by excluding items that we do not believe are indicative of our core operating performance.
These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under US GAAP. Some of the limitations of these measures are:
they do not reflect changes in, or cash requirements for, our working capital needs;
Adjusted EBITDA does not reflect our capital expenditures or future requirements for capital expenditures or contractual commitments.commitments;
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they do not reflect costs of acquiring and integrating businesses, which will continue to be a part of our growth strategy.strategy;
they do not reflect one-time, non-recurring, bonus costs and third party costs associated with the SPAC merger transaction and regulatory filings.filings;
they do not reflect goodwill impairment;
they do not reflect severance costs;
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they do not reflect income tax expense.
they do not reflect impairments.expense or the cash requirements to pay income taxes;
they do not reflect our interest expense;expense or the cash requirements necessary to service interest or principal payments on our debt; and
although depreciation and amortization are non-cash charges related mainly to intangible assets, certain assets being depreciated and amortized will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.
In addition, otherOther companies in our industry may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure. You should compensate for these limitations by relying primarily on our US GAAP results and using the non-GAAP financial measures only supplementally. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue.
Operational Metrics
In addition, Innovid’s management considers the number of core clients, annual core clients retention and annual core clients net revenue retention in evaluating the performance of the business. These metrics are reported annually. Prior to our acquisition of TVS in 2022, our definition of a core client included only advertisers that generated at least $100,000 revenue in a twelfth-months period. Following our acquisition of TVS, we have included publishers as core clients.

Off-Balance Sheet Arrangements
As of SeptemberJune 30, 2022,2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our auditedunaudited interim condensed consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported in our condensed consolidated financial statements and the accompanying notes to condensed consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, including the ongoing and potential impacts of the COVID-19 pandemic and other global events.circumstances. Actual results may differ from these estimates.
While our significant accounting policies are described in more detail in Note 2,Summary of Significant Accounting Policies of our unaudited interim condensed consolidated financial statements included in Item 1. “Financial Statements and Supplementary Data”, we believe the following accounting policies to be the most critical to the judgments and estimates used in the preparation of our interim condensed consolidated financial statements.
Revenue Recognition
The Company generatesMost of the Company’s revenues are derived from providing Advertising ServicesAd serving solutions to advertisers, publishers,media agencies and media agencies.publishers. 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
The Company also provides measurement services relate to advertisers and agencies, streaming platforms and publishers. The measurement service provides analytics and the ability to track performance of advertising campaigns. The measurement service provides insights into the effectiveness of TV and digital advertising.
The Company also provides creative services for 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.
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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,customer; (2) identify the performance obligations in the contract,contract; (3) determine the transaction price,price; (4) allocate the transaction price to the performance obligations in the contract,contract; and (5) recognize revenue when a performance obligation is satisfied.
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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 SSP.standalone 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.basis.
Revenues related to ad serving services are recognized at a point in time.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 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.
Revenues related to creative servicesprojects 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 are recognized over time or at a point in time. If the customer simultaneously receives and consumes the benefits provided by the Company’s performance, revenues for these measurement services are recognized over the period during which the performance obligations are satisfied, and control of the service is transferred to the customer. This is the case when the customer has access to the measurement application in real time. The performance obligation is satisfied over the contract period on a straight-line basis. If the Company delivers the measurement report, the revenues are recognized at the point in time the report is delivered.
The Company’s accounts receivable, consistsconsist primarily of receivables related to providing ad serving, measurement and creative and measurement services, infor 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 monthly based on actual delivery. The payment terms vary, mainly with terms of net 60 days or less.
The typical contract term is 12 months or less for ASC 606 purposes. SomeMost of the Company’s contracts can be cancelledcanceled 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.
Costs to obtain a contract
Contract costs include commission programs to compensate sales employeesDeferred revenues represent mostly unrecognized fees billed or collected 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.
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 warrantsmeasurement platform services. Deferred revenues are recognized in “Financial expenses, net” inas (or when) we perform under the condensed consolidated statements of operations.
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contract.
Fair value of financial instruments
The Company applies a fair value framework 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 termlong-term debts. Their historical carrying amounts arerepresent the approximate fair valuesvalue due to the short-term maturities of these instruments.
The Company measures itsCompany’s investments in money market funds are classified as cash equivalents and warrantsmeasured at fair value. The Company measures its warrant liability at fair value.
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The Private Placementgoodwill impairment recorded in the second quarter of 2023 was estimated using the Company's stock price, a Level 1 input, adjusted for an estimated control premium.
As of June 30, 2023, the Company’s warrant liability includes the Warrants, that were originally issued in connection with ION’s initial public offering, the “ION IPO,” which were transferred to the Company as part of the ION’s Transaction. The Company’s Warrants are recorded on the balance sheet at fair value with changes in fair value recognized through earnings. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement the valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.
The Company has determined that the fair value of the Public Warrants and Transferred Private Warrants, at the balance sheet date is determined by the closing price of the Company’s warrants, and are within Level 1 of the fair value hierarchy.
The Transferred Private Warrants are no longer classified as Level 3 in the fair value hierarchy and continue to be valued using the Black-Scholes option pricing model. as of June 30, 2023.
Gains and losses from the remeasurement of the warrantsPublic and Private Warrants’ liability areis recognized in “Finance expenses (income), net”finance income, net in the condensed consolidated statements of operations.
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.
Impairment of long-lived assets
Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. If there are indications of an impairment, the Company tests for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss. During the three month period and six months ended June 30, 2023 (unaudited), the Company tested its long-lived assets for recoverability and concluded that no impairment should be recognized.
Goodwill and intangible assets
Goodwill and certain other purchasedacquired intangible assets have been recorded in the Company’s condensed consolidatedCompany's financial statements because of the acquisitions.resulting from     various business combinations. 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 annual 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 iswould be reassigned using a relative fair value allocation approach. The Company currently has one reporting unit.
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 itits 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 itits 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. During the three months ended June 30, 2023, the Company recorded Goodwill impairment in the amount of $14,503.
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.
TechnologyCustomer relationships, acquired technology and trade name are being amortized over the estimated useful life of approximately 11 years, 6 years, and 84 years, respectively, using straight-line amortization method.
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The amortization of ourcustomer relationships, acquired technology and trade name customer relationships and technology will beis presented within depreciation and amortization in the condensed consolidated statementstatements of operations.
Software
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Capitalized software development costs
Software development costs, which are included in property and equipment, net, consists of capitalized costs related to the purchase and developdevelopment of 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 relatedpersonnel-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 beis presented within depreciation and amortization in the condensed consolidated statements of operations.
Income taxes and tax contingencies
Income taxes are computed using a balance sheet approach reflecting both current and deferred taxes. Current and deferred taxes reflect the tax impact of all of the events included in the financial statements. The basic principles employed in the balance sheet approach are to reflect a current tax liability or asset that is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years, a deferred tax liability or asset that is recognized for the estimated future tax effects attributable to temporary differences and carryforwards, the measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law of which the effects of future changes in tax laws or rates are not anticipated, and the measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. There are certain situations in which deferred taxes are not provided. Some basis differences are not temporary differences because their reversals are not expected to result in taxable or deductible amounts.
The Company regularly evaluates deferred tax assets for future realization and establishes a valuation allowance to the extent that a portion is not more likely than not to be realized. The Company considers whether it is more likely than not that the deferred tax assets will be realized, including existing cumulative losses in recent years, expectations of future taxable income, carryforward periods and other relevant quantitative and qualitative factors. The recoverability of the deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely on estimates.
ASC 740, Income Taxes (“ASC 740”) contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative basis) likely to be realized upon ultimate settlement. The Company classifies interest related to unrecognized tax benefits in taxes on income.
On December 20, 2017, Congress passed the “US Tax Act.” The US Tax Act requires complex computations to be performed that were not previously required by US tax law, significant judgments to be made in interpretation of the provisions of the US Tax Act, significant estimates in calculations and the preparation and analysis of information not previously relevant or regularly produced. The US Tax Act provides that a person who is a US shareholder of any CFC is required to include its GILTI in gross income for the tax year in a manner generally similar to that for Subpart F inclusions. The term “global intangible low taxed income” is defined as the excess (if any) of the US shareholder’s net CFC tested income for that tax year, over the US shareholder’s net deemed tangible income return for that tax year. The Company’s policy is to treat GILTI as a period expense in the provision for income taxes.

Recent Accounting Pronouncements
For information on recent accounting standards, see “Part I - Item 1. Financial Statements and Supplementary Data - Note 2.2. Summary of Significant Accounting Policies”.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, we are not required to provide this information.

Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management’s Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended as of SeptemberJune 30, 2022.2023. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II
Item 1. Legal Proceedings
We are not presently party to any legal proceedings or aware of any claims which we believe would have, individually or in the aggregate, a material adverse effect on our consolidated business prospects, financial condition, liquidity, results of operation, cash flows, or capital levels. We may from time to time be party to litigation and subject to claims incident to the ordinary course of business.
On March 4, 2022, the Nielsen Claima lawsuit was filed in the United States District Court for the Western District of Texas by The Nielsen, Company (US) LLC against TVS. TVS has filed its answer to the complaint and has also filed an opposed motionalleging infringement of US Patent No.10,063,378. On June 1, 2022, TVS moved to transfer venuethe case to the Southern District of New York. On February 24, 2023, the case was transferred to the Southern District of New York. On March 23, 2023, the parties jointly filed their proposed case management plan and scheduling order, which the Court entered and thereafter opened discovery. That motion is scheduled to be heard on November 14, 2022order sets the close of fact discovery for October 23, 2023, and if unsuccessful the following hearing in the current venue would be scheduledclose of expert discovery for January 2023.23, 2024, but does not set a date for trial. On the same day, TV Squared filed a motion for judgment on the pleadings under Federal Rule 12(c) arguing invalidity of all asserted patent claims. Briefing concluded on April 24, 2023, and the motion remains pending. The plaintiff has not specified the amount sought in the litigation. Given the uncertainty of litigation and the preliminary stage of the lawsuit, the Company is unable at this time to give an estimate of the amount or range of potential loss, if any, which might result to the Company if the outcome in such litigation was unfavorable. As of June 30, 2023, the Company did not record a loss contingency.

Item 1A. Risk Factors
Our business, financial condition and operating results can be affected by a numberExcept as described in Item 1A of factors, whether currently known or unknown, including but not limitedPart II of our Form 10-Q filed for the quarterly period ended March 31 2023, there have been no material changes to theour risk factors as previously disclosed in Item 1A of Part I of our 20212022 Annual Report and as updated in Item 1A of Part II of our Quarterly Report on Form 10-Q for the first quarter 2022 and in item 1A of Part II of our Quarterly Report on Form 10-Q for the second quarter 2022, which are incorporated herein by reference. Other than such updates, there have been no material changes to the Company’s risk factors since the 2021 Annual Report.
If the use of digital advertising is rejected by consumers, through opt-in or opt-out means, or made more difficult through ad-blocking technologies or other means, it could have an adverse effect on Innovid’s business, results of operations, and financial condition.
Consumers can, with increasing ease, implement technologies that limit Innovid’s ability to collect and use data to deliver advertisements, or otherwise limit the effectiveness of its platform. Cookies may be deleted or blocked by consumers. Cookies have not been available on iPhone, nor across Safari or Firefox browsers for several years and we anticipate that other browsers, including Google Chrome and others will follow suit. While such limitations have not, to date, materially impacted Innovid’s business as a result of Innovid’s cross-channel, cross-device dynamic creative campaigns, which are not solely reliant on cookies or device IDs, Innovid’s ability to continue to respond to changes in ad-blocking technologies will have an impact on its business, results of operations, and financial condition.
To the extent cookies remain relevant to Innovid’s business, most commonly used internet browsers allow consumers to modify their browser settings to block first-party cookies (placed directly by the publisher or website owner that the consumer intends to interact with) or third-party cookies (placed by parties, like us, that have no direct relationship with the consumer), and some browsers block third-party cookies by default. For example, Apple’s privacy relay was released in late 2021 and Apple has announced its intention to move to “opt-in” privacy models, requiring users to voluntarily choose to receive targeted ads, which may reduce the value of ad impressions on its iOS mobile application platform. Privacy relay is is not enabled in all geographies, and Apple may enable/disable the feature on specific devices using criteria not stated. These changes may adversely affect our ability to measure advertising through the Safari browser. Many applications and other devices allow consumers to avoid receiving advertisements by paying for subscriptions or other downloads. Mobile devices using Android and iOS operating systems limit the ability of cookies to track consumers while they are using applications other than their web browser on the device. As a consequence, fewer of Innovid’s cookies or publishers’ cookies may be set in browsers or be accessible in mobile devices, which may adversely affect Innovid’s business. Some consumers also download free or paid “ad blocking” software on their computers or mobile devices, not only for privacy reasons, but also to counteract the adverse effect advertisements can have on the consumer experience, including increased load times, data consumption, and screen overcrowding. Ad-blocking technologies and other global privacy controls may prevent some third-party cookies, or other tracking technologies, from being stored on a consumer’s computer or mobile device. If more consumers adopt these measures, and Innovid’s alternative approaches prove unsuccessful, Innovid’s business, results of operations, and financial condition could be adversely affected. Ad-blocking technologies could have an adverse effect on Innovid’s business, results of operations, and financial condition if they reduce the volume, effectiveness or value of advertising. In addition, some ad blocking technologies block only ads that are targeted through use of third-party data, while allowing ads based on first party data (i.e., data owned by the publisher). Even if ad blockers do not ultimately have an adverse effect on Innovid’s business, investor concerns about ad blockers could cause Innovid’s stock price to decline.
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If the ability to collect, use, and disclose data is limited by consumer tools, regulatory restrictions or technology limitations such as those imposed by mobile operating system or browser providers, certain advertising offerings could be impacted and Innovid’s business may be adversely affected.
As Innovid processes transactions through its platform, it collects large amounts of data about advertisements and where they are placed, such as advertiser preferences for media and advertising content. Innovid collects data on consumers that does not identify the individual, including browser, device location and characteristics, online browsing behavior, exposure to and interaction with advertisements, and inferential data about purchase intentions, and preferences. Innovid collects this data through various means, including from its own platform and measurement tracking capabilities. Innovid’s advertisers, publishers, and data providers may choose to provide Innovid with their proprietary data about consumers. Innovid aggregates this data and analyzes it in order to enhance its services, including the pricing, placement, and scheduling of advertisements.
As part of Innovid’s real-time analytics service offering, it also shares the data, or analyses based on it, with its advertisers. There are many technical challenges relating to Innovid’s ability to collect, aggregate and associate the data, and Innovid cannot assure that it will be able to do so effectively. In addition, system and browser providers, such as Apple and Google, have implemented product changes to limit the ability of websites and application developers to collect and use data to target and measure advertising and such product changes may continue to evolve. Evolving regulatory standards could also place restrictions on the collection, management, aggregation and use of information, which could result in a material increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the ways in which Innovid may use or disclose information. Internet users can, with increasing ease, implement practices or technologies that may limit Innovid’s ability to collect and use data to deliver advertisements, or otherwise inhibit the effectiveness of its platform. Although Innovid’s advertisers generally permit it to aggregate and use data from advertising placements, subject to certain restrictions, advertisers might decide to restrict Innovid’s collection or use of their data. Any limitations on this ability could impair Innovid’s ability to deliver certain advertising offerings, which could adversely affect its business, results of operations, and financial condition.10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds
On November 30, 2021, Innovid, Inc. consummated the Merger Agreement dated June 24, 2021, with Innovid surviving the merger. Approximately $149.3 million in cash proceeds were received net of transaction costs paid. On February 28, 2022, the Company completed the acquisition of TVS. The Company acquired all the equity of TVS for an aggregate amount of $100.0 million in cash, 11,549,465 shares of the Company common stock, and the issuance of 949,893 fully vested stock option of the Company, subject to certain adjustments as defined in the Stock Purchase Agreement. For greater detail, see Note 3, “Transaction and Business Combination" to our unaudited interim condensed consolidated financial statements included under Item 1, " Financial Statements and Supplementary Data.”
The remainder of the proceeds from the Transaction is being used to fund our operations.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
N/A.
Item 6. Exhibits
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Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling dateFiled furnished herewith
2.18-K001-400482.106/29/21
3.110-K001-400483.103/18/22
3.28-K001-400483.212/06/21
4.18-K001-400484.112/06/21
4.28-K001-400484.212/06/21
4.38-K001-400484.102/18/21
10.110-Q001-4004810.108/10/22
31.1*
31.2*
32.1**
32.2**
*Filed herewith.
**Furnished herewith.
Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling dateFiled furnished herewith
2.18-K001-400482.106/29/21
3.110-K001-400483.103/18/22
3.28-K001-400483.212/06/21
4.18-K001-400484.112/06/21
4.28-K001-400484.212/06/21
4.38-K001-400484.102/18/21
31.1*
31.2*
32.1**
32.2**
10.1*
10.210-Q001-4004810.108/10/22
10.3*
*Filed herewith.
**Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INNOVID CORP.

Date: November 14, 2022August 8, 2023By:/s/ Zvika Netter
Zvika Netter
Chief Executive Officer
Date: November 14, 2022August 8, 2023By:/s/ Tanya Andreev-Kaspin
Tanya Andreev-Kaspin
Chief Financial Officer

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