Valens Semiconductor 6K Condensed Consolidated Financial Statements | VLN 9 Aug 23

Exhibit 99.1

VALENS SEMICONDUCTOR LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

JUNE 30, 2023

VALENS SEMICONDUCTOR LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

AS OF JUNE 30, 2023

CONTENTS

	Page

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)- IN U.S. DOLLARS ($):

Balance sheets	3-4
Statements of operations	5
Statements of changes in shareholder’s equity	6
Statements of cash flows	7
Notes to consolidated financial statements	8-18

VALENS SEMICONDUCTOR LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30, 2023		December 31, 2022
	U.S. dollars in thousands
Assets

CURRENT ASSETS:
Cash and cash equivalents		21,410		20,024
Short-term deposits		116,632		128,363
Trade accounts receivable		16,057		11,514
Prepaid expenses and other current assets		4,376		4,793
Inventories		19,017		23,816
TOTAL CURRENT ASSETS		177,492		188,510

LONG-TERM ASSETS:
Property and equipment, net		3,076		2,790
Operating lease right-of-use assets		3,274		3,824
Other assets		494		535
TOTAL LONG-TERM ASSETS		6,844		7,149
TOTAL ASSETS		184,336		195,659

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

VALENS SEMICONDUCTOR LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

	June 30, 2023			December 31, 2022
	U.S. dollars in thousands
Liabilities and Shareholders’ Equity
CURRENT LIABILITIES:
Trade accounts payable		3,896			10,651
Accrued compensation		5,198			6,206
Current maturities of operating leases liabilities		1,857			1,811
Other current liabilities		5,775			6,121
TOTAL CURRENT LIABILITIES		16,726			24,789

LONG-TERM LIABILITIES:
Forfeiture Shares, no par value: 1,006,250 shares authorized, issued and outstanding as of June 30, 2023, and December 31, 2022		222			1,751
Non-current operating leases liabilities		989			1,624
Other long-term liabilities		122			54
TOTAL LONG-TERM LIABILITIES		1,333			3,429
TOTAL LIABILITIES		18,059			28,218

COMMITMENTS AND CONTINGENT LIABILITIES (note 5)

SHAREHOLDERS’ EQUITY:
Ordinary shares, no par value: 700,000,000 shares authorized as of June 30, 2023, and December 31, 2022; 101,843,066, and 98,876,266 (excluding 1,006,250 ordinary shares subject to forfeiture) shares issued and outstanding as of June 30, 2023, and December 31, 2022, respectively		49			49
Additional paid-in capital		333,862			325,067
Accumulated deficit		(167,634	)		(157,675	)
TOTAL SHAREHOLDERS’ EQUITY		166,277			167,441
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		184,336			195,659

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

VALENS SEMICONDUCTOR LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Six months ended June 30						Three months ended June 30
	2023			2022			2023			2022
	U.S. dollars in thousands, except share and per share amounts

REVENUES		48,055			44,101			24,175			22,481
COST OF REVENUES		(17,328	)		(12,877	)		(9,241	)		(6,697	)
GROSS PROFIT		30,727			31,224			14,934			15,784

OPERATING EXPENSES:
Research and development expenses		(26,121	)		(29,031	)		(12,161	)		(14,904	)
Sales and marketing expenses		(9,315	)		(8,682	)		(4,255	)		(4,473	)
General and administrative expenses		(7,533	)		(8,641	)		(3,701	)		(4,340	)
TOTAL OPERATING EXPENSES		(42,969	)		(46,354	)		(20,117	)		(23,717	)
OPERATING LOSS		(12,242	)		(15,130	)		(5,183	)		(7,933	)
Change in fair value of Forfeiture Shares		1,529			4,142			22			1,538
Financial income (expenses), net		792			(3,675	)		601			(3,560	)
LOSS BEFORE INCOME TAXES		(9,921	)		(14,663	)		(4,560	)		(9,955	)
INCOME TAXES		(45	)		(389	)		(26	)		(43	)
LOSS AFTER INCOME TAXES		(9,966	)		(15,052	)		(4,586	)		(9,998	)
Equity in earnings of an investee		7			7			4			3
NET LOSS		(9,959	)		(15,045	)		(4,582	)		(9,995	)
Basic and diluted net loss per ordinary share		(0.10	)		(0.15	)		(0.05	)		(0.10	)
Weighted average number of shares used in computing net loss per ordinary share		101,381,153			97,296,206			101,685,915			97,442,359

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

VALENS SEMICONDUCTOR LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

	Six months ended June 30, 2023
	Ordinary shares				Additional paid-in		Accumulated
	Shares		Amount		capital		deficit			Total

Balance as of January 1, 2023		(*) 98,876,266		49		325,067		(157,675	)		167,441
Exercise of options and vesting of RSUs		2,966,800		-		986		-			986
Stock-based compensation		-		-		7,809		-			7,809
Net loss for the period		-		-		-		(9,959	)		(9,959	)
Balance as of June 30, 2023		(*) 101,843,066		49		333,862		(167,634	)		166,277

	Six months ended June 30, 2022
	Ordinary shares				Additional paid-in		Accumulated
	Shares		Amount		capital		deficit			Total

Balance as of January 1, 2022		(*) 97,122,405		49		312,156		(130,008	)		182,197
Exercise of options		542,264		-		150		-			150
Stock-based compensation		-		-		5,908		-			5,908
Net loss for the period		-		-		-		(15,045	)		(15,045	)
Balance as of June 30, 2022		(*) 97,664,669		49		318,214		(145,053	)		173,210

	Three months ended June 30, 2023
	Ordinary shares				Additional paid-in		Accumulated
	Shares		Amount		capital		deficit			Total

Balance as of April 1, 2023		(*) 101,465,926		49		329,817		(163,052	)		166,814
Exercise of options and vesting of RSUs		377,140		-		58		-			58
Stock-based compensation		-		-		3,987		-			3,987
Net loss for the period		-		-		-		(4,582	)		(4,582	)
Balance as of June 30, 2023		(*) 101,843,066		49		333,862		(167,634	)		166,277

	Three months ended June 30, 2022
	Ordinary shares				Additional paid-in		Accumulated
	Shares		Amount		capital		deficit			Total

Balance as of April 1, 2022		(*) 97,191,467		49		315,001		(135,058	)		179,992
Exercise of options		473,202		-		96		-			96
Stock-based compensation		-		-		3,117		-			3,117
Net loss for the period		-		-		-		(9,995	)		(9,995	)
Balance as of June 30, 2022		(*) 97,664,669		49		318,214		(145,053	)		173,210

(*)

Excluding 1,006,250 Forfeiture Shares

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

VALENS SEMICONDUCTOR LTD.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six months ended June 30						Three months ended June 30
	2023			2022			2023			2022
	U.S. dollars in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period		(9,959	)		(15,045	)		(4,582	)		(9,995	)
Adjustments to reconcile net loss to net cash used in operating activities:
Income and expense items not involving cash flows:
Depreciation		793			667			414			347
Stock-based compensation		7,809			5,908			3,987			3,117
Exchange rate differences		2,273			4,972			1,021			4,501
Interest on short-term deposits		(389	)		(295	)		177			(132	)
Change in fair value of Forfeiture Shares		(1,529	)		(4,142	)		(22	)		(1,538	)
Reduction in the carrying amount of ROU assets		986			844			522			424
Equity in earnings of investee, net of dividend received		7			7			4			3
Changes in operating assets and liabilities:
Trade accounts receivable		(4,575	)		(2,952	)		(3,176	)		166
Prepaid expenses and other current assets		403			3,763			1,042			3,245
Inventories		4,799			(7,996	)		4,549			(4,852	)
Other assets		34			183			(8	)		83
Trade accounts payable		(6,948	)		2,779			(1,475	)		1,691
Accrued compensation		(1,008	)		329			158			508
Other current liabilities		(216	)		(366	)		(1,797	)		(1,010	)
Change in operating lease liabilities		(859	)		(1,312	)		(457	)		(811	)
Other long-term liabilities		68			2			1			2
Net cash provided by (used in) operating activities		(8,311	)		(12,654	)		358			(4,251	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in short-term deposits		(109,153	)		(31,340	)		(68,428	)		(13,088	)
Maturities of short-term deposits		118,954			37,400			74,810			21,900
Purchase of property and equipment		(919	)		(424	)		(777	)		(244	)
Net cash provided by investing activities		8,882			5,636			5,605			8,568

CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options		986			150			58			96
Net cash provided by financing activities		986			150			58			96

Effect of exchange rate changes on cash and cash equivalents		(171	)		(3,346	)		(100	)		(2,830	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,386			(10,214	)		5,921			1,583
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		20,024			56,791			15,489			44,994
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		21,410			46,577			21,410			46,577

SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for taxes		252			121			213			65

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Trade accounts payable on account on property and equipment		160			73			35			-
Operating lease liabilities arising from obtaining operating right-of-use assets		436			350			152			104

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - GENERAL:

Valens Semiconductor Ltd. (hereafter “Valens”, and together with its wholly owned subsidiaries, the “Company”), was incorporated in Israel in 2006.

As of September 30, 2021, the Company began trading on the New York Stock Exchange under the Symbol “VLN”.

Please also refer to Note 1(c) in the consolidated financial statement for the year ended December 31, 2022.

Valens is a leading provider of semiconductor products (chips), operates in the Audio-Video and Automotive industries, renowned for its Physical Layer (PHY) technology, enabling resilient high-speed connectivity over simple, low-cost infrastructure. Valens is the inventor of the HDBaseT Technology, which enables the converged delivery of ultra-high-definition digital video and audio, Ethernet, control signals, USB and power through a single cable. In the audio-video space, Valens’ HDBaseT technology enables plug-and-play digital connectivity between ultra-HD video sources and remote displays. In the automotive domain, Valens’ product offering includes both symmetric and asymmetric connectivity technology for high bandwidth transmission of native interfaces over a single low-cost wires and connectors. Valens’ advanced PHY technology for the auto industry provides the safety and resilience required to handle the noisy automotive environment, addressing the needs of Advanced Driver Assistance Systems (ADAS), Automotive Data Solutions (ADS), infotainment, telematics and backbone connectivity.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position, cash flows, and shareholders’ equity. All such adjustments are of a normal, recurring nature.

The results of operations for the six and three months ended June 30, 2023, shown in these financial statements are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022.

The carrying value of cash and cash equivalents, accounts receivables, deposits and accounts payable (included in the condensed consolidated balance sheets) approximates their fair value because of their generally short maturities.

There have been no material changes in our significant accounting policies as described in our consolidated financial statements for the year ended December 31, 2022, other than as stated below.

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Accounts receivable, net

Trade accounts receivable are recorded at the invoiced amount and do not include finance charges. The Company performs ongoing credit evaluation of its customers and generally requires no collateral.

The Company’s accounts receivables accounting policy from January 1, 2023, following the adoption of the new CECL standard:

The Company estimates CECL on trade receivables at inception for estimated losses resulting from the inability of the Company’s customers to make required payments, based on estimated current expected credit losses. The allowance represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable considering historical information, current market conditions and reasonable and supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses, and future expectations.

There were no write-offs of accounts receivable for the six and three months ended June 30, 2023, and 2022, respectively. There are no expected credit losses recorded as of June 30, 2023, and December 31, 2022.

The Company’s accounts receivables accounting policy until December 31, 2022, prior to the adoption of the new CECL standard:

The Company assesses the need for allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments by considering factors such as historical collection experience, credit quality, aging of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

New Accounting Pronouncements

Recently Adopted accounting Standards:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (“ASC 326”): Measurement of Credit Losses on Financial Instruments to introduce a new model for recognizing credit losses on financial instruments based on estimated current expected credit losses, or CECL. Under the new standard, an entity is required to estimate CECL on trade receivables at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The guidance is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early application is permitted. The Company adopted ASC 326 on January 1, 2023, and there was no material impact on the Company’s consolidated balance sheet and the consolidated statements of operations upon adoption.

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 3 – INVENTORIES:

	June 30, 2023		December 31, 2022
	U.S. dollars in thousands
Work in process		8,434		9,870
Finished goods		10,583		13,946
		19,017		23,816

Inventories write-downs amounted to $397 thousand and $0 thousand during the six months ended June 30, 2023, and 2022, respectively. Inventories write-downs amounted to $273 thousand and $0 thousand during the three months ended June 30, 2023, and 2022, respectively. Inventories write-downs are recorded in cost of revenues.

NOTE 4 - COMMITMENTS AND CONTINGENT LIABILITIES:

Noncancelable Purchase Obligations

The Company depends upon third party subcontractors for manufacturing of wafers, packaging and final tests. As of June 30, 2023, and December 31, 2022, the total value of open purchase orders for such manufacturing contractors was approximately $10,038 thousand and $19,418 thousand, respectively.

The Company has noncancelable purchase agreements for certain IP embedded in the Company products as well as certain agreement for the license of development tools used by the development team. As of June 30, 2023, and December 31, 2022, the value of non-paid amounts related to such agreements totaled to $1,502 thousand and $2,783 thousand, respectively.

Legal proceedings

As of June 30, 2023, and to date, the Company is not a party to, or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.

NOTE 5 - OTHER CURRENT LIABILITIES:

	June 30, 2023		December 31, 2022
	U.S. dollars in thousands

Accrued vacation		3,387		3,203
Taxes payable		37		514
Contract liabilities		32		175
Accrued expenses- related party		142		142
Other Accrued expenses		2,177		2,087
		5,775		6,121

The amounts of revenues that were included in the contract liabilities’ balance as of December 31, 2022 and December 31, 2021 and were recognized in the period of six months ended June 30, 2023, and June 30, 2022, were $175 and $0 respectively.

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 6 - FORFEITURE SHARES:

On September 29, 2021 (the “Closing Date”, please refer to note 1c of the financial statements as of December 31, 2022), 1,006,250 Ordinary Shares that PTK sponsor received in respect of its PTK common stock, are subject to forfeiture if certain price targets for the Valens Ordinary Shares are not achieved within a certain period of time (of up to four years), after the Closing Date or if an M&A Transaction (as defined in the Merger Agreement Closing, please refer to note 1c of the financial statements as of December 31, 2022), does not occur at a certain minimum price.

The Company performed a Monte-Carlo simulation to calculate the fair value of such shares.

The fair value of the Forfeiture Shares was computed using the following key assumptions:

	June 30, 2023			December 31, 2022
Stock price		2.53			5.37
Expected term (years)		1.25-2.25			1.75-2.75
Expected volatility		65.32%-68.22	%		51.37%-53.53	%
Risk-free interest rate		4.78%-5.27	%		4.27%-4.49	%

The table below sets forth a summary of the changes in the fair value of the Forfeiture Shares classified as Level 3:

	Six months ended June 30, 2023			Year ended December 31, 2022
	U.S. dollars in thousands
Balance at beginning of period		1,751			4,658
Changes in fair value		(1,529	)		(2,907	)
Balance at end of the period		222			1,751

NOTE 7 - STOCK-BASED COMPENSATION:

Stock Options

As of June 30, 2023, and December 31, 2022, the number of ordinary shares included in the Company’s option plans totaled to 30,666,212 and 28,383,788, respectively.

1,086,311 out of the outstanding options that have not yet vested as of June 30, 2023, have acceleration mechanisms according to certain terms set forth in the grant agreements primarily in the case of an M&A Transaction which constitutes a Liquidation Event.

As of June 30, 2023, the unrecognized compensation costs related to those unvested stock options are $3,048 thousand, which are expected to be recognized over a weighted-average period of 1.4 years.

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 7 - STOCK-BASED COMPENSATION (continued):

The following is a summary of the status of the Company’s share option plan as of June 30, 2023:

	Six months ended
	June 30, 2023
	Number of Options			Weighted-Average Exercise price
Options outstanding as of December 31, 2022		13,948,149		$	0.85
Granted during the period		212,329		$	4.97
Exercised during the period		(1,865,217	)	$	0.53
Expired during the period		(19,876	)	$	0.75
Forfeited during the period		(28,837	)	$	2.85
Options outstanding as of June 30, 2023		12,246,548		$	0.96
Options exercisable as of June 30, 2023		10,492,188		$	0.86

The following table summarizes information about stock options outstanding as of June 30, 2023:

Outstanding as of June 30, 2023										Exercisable as of June 30, 2023
Range of exercise prices		Number outstanding		Weighted average remaining contractual term		Weighted average exercise price		Aggregate intrinsic value (U.S. dollars in thousands)		Number Exercisable		Weighted average remaining contractual term		Weighted Average exercise price		Aggregate intrinsic value (U.S. dollars in thousands)
$	0.15-$0.86		11,761,752		5.25	$	0.67		20,598		10,292,067		4.97	$	0.77		18,144
$	1.87		4,803		7.53	$	1.87		3		3,353		7.53	$	1.87		2
$	2.10		33,126		1.20	$	2.10		14		33,126		1.20	$	2.10		14
$	2.40		1,474		7.00	$	2.40		-		-		-		-		-
$	4.99		200,183		6.55	$	4.99		-		24,906		6.55	$	4.99		-
$	5.36		140,000		6.00	$	5.36		-		35,000		6.00	$	5.36		-
$	7.58		99,610		5.55	$	7.58		-		99,610		5.55	$	7.58		-
$	9.07		5,600		5.46	$	9.07		-		4,126		5.46	$	9.07		-

The calculated fair value of option grants was estimated using the Black-Scholes option-pricing model with the following assumptions:

	For the Six months ended on June 30, 2023			For the six months ended on June 30, 2022
Expected term		3-5			4-6
Expected volatility		48.35%-63.84	%		46.73%-47.71	%
Expected dividend rate		0	%		0	%
Risk-free rate		3.62%-4.21	%		1.37%-3.00	%

During the six months period ended on June 30, 2023, 212,329 options were granted to related parties (please refer to Note 11 for further information).

As of June 30, 2023, the unrecognized compensation costs related to unvested stock options was $5,985 thousand, which are expected to be recognized over a weighted-average period of 1.55 years.

The weighted-average fair value of the options that were granted during the period ended June 30, 2023 was $2.25 at the grant date.

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 7 - STOCK-BASED COMPENSATION (continued):

The total intrinsic value of options exercised during the period of six months ended June 30, 2023 was $7,965 thousand.

The following table presents the classification of the stock options expenses for the periods indicated:

	Six months ended June 30				Three months ended June 30
	2023		2022		2023		2022
	U.S. dollars in thousands

Cost of revenue		96		114		46		60
Research and development		631		907		309		456
Sales and marketing		570		655		278		329
General and administrative		1,350		1,404		671		715
Total stock-based compensation		2,647		3,080		1,304		1,560

Restricted Stock Units

The following is a summary of the status of the Company’s RSU’s as of June 30, 2023, as well as changes during the period of six months ended June 30, 2023:

	Number of RSUs			Weighted-Average Grant Date Fair Value
RSUs outstanding at the beginning of the year		3,779,716		$	6.08
Granted during the period		3,772,631		$	5.17
Vested during the period		(1,101,583	)	$	6.26
Forfeited during the period		(130,311	)	$	5.56
Outstanding at the end of the period		6,320,453		$	5.52
RSUs exercisable as of June 30, 2023		5,947,712		$	5.52

As of June 30, 2023, the unrecognized compensation cost related to unvested RSUs totaled to approximately $29,410 thousand and is expected to be expensed over a weighted-average recognition period of approximately 3.1 years.

During the six months ended on June 30, 2023, 490,529 RSU’s were granted to several related parties (please refer to Note 11 regarding Related Parties).

The following table presents the classification of RSU’s expenses for the periods indicated:

	Six months ended June 30				Three months ended June 30
	2023		2022		2023		2022
	U.S. dollars in thousands

Cost of revenue		288		155		151		84
Research and development		2,779		1,467		1,462		809
Sales and marketing		1,197		614		613		344
General and administrative		898		592		457		320
Total stock-based compensation-RSUs		5,162		2,828		2,683		1,557

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 8 - NET INCOME (LOSS) PER ORDINARY SHARE:

The following table sets forth the computation of basic and diluted net income (loss) per ordinary share for the periods indicated:

	Six months ended						Three months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Basic net loss per ordinary share
Numerator:
Net loss		(9,959	)		(15,045	)		(4,582	)		(9,995	)

Denominator:
Weighted average common shares – basic and diluted		101,381,153			97, 296,206			101,685,915			97,442,359
Basic and dilutive net loss per common share		(0.10	)		(0.15	)		(0.05	)		(0.10	)

The following weighted-average shares of securities were not included in the computation of diluted net income (loss) per common share as their effect would have been anti-dilutive:

	Six months ended				Three months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Options		13,097,348		15,378,561		12,315,780		15,300,870
Restricted Stock Units		5,050,085		2,748,135		6,486,973		3,649,756
Private Warrants		3,330,000		3,330,000		3,330,000		3,330,000
Public Warrants		5,750,000		5,750,000		5,750,000		5,750,000
Forfeiture Shares		1,006,250		1,006,250		1,006,250		1,006,250

NOTE 9 - FINANCIAL INCOME (EXPENSES), NET:

	Six months ended June 30						Three months ended June 30
	2023			2022			2023			2022
	U.S. dollars in thousands

Foreign currency exchange differences		(2,273	)		(3,865	)		(1,021	)		(3,554	)
Interest income on short-term deposits		3,090			404			1,630			199
Other		(25	)		(214	)		(8	)		(205	)
Total financial income (expenses), net		792			(3,675	)		601			(3,560	)

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 10 - SEGMENT AND REVENUE BY GEOGRAPHY AND BY MAJOR CUSTOMER:

For the purpose of evaluating financial performance and allocating resources, the CODM reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues, gross profit and operating loss by the two identified reportable segments, to make decisions about resources to be allocated to the segments and assess their performance. Assets information is not provided to the CODM and is not being reviewed. Revenues and cost of goods sold are directly associated with the activities of a specific segment. Direct operating expenses, including general and administrative expenses, associated with the activities of a specific segment are charged to that segment. General and administrative expenses which cannot be attributed directly, are allocated evenly between segments. Other operating expenses are allocated to segments based on headcount ratio.

	Six months ended on June 30, 2023
	Audio-Video		Automotive			Consolidated
	U.S. dollars in thousands
Revenues		31,828		16,227			48,055
Gross profit		24,734		5,993			30,727
Research and development expenses		11,094		15,027			26,121
Sales and marketing expenses		4,009		5,306			9,315
General and administrative expenses		3,756		3,777			7,533
Segment operating profit (loss)		5,875		(18,117	)		(12,242	)
Change in fair value of Forfeiture Shares							1,529
Financial expenses, net							792
Loss before taxes on income							(9,921	)

Depreciation expenses		352		441			793
Stock-based compensation		3,287		4,522			7,809

	Six months ended on June 30, 2022
	Audio-Video		Automotive			Consolidated
	U.S. dollars in thousands
Revenues		35,067		9,034			44,101
Gross profit		27,881		3,343			31,224
Research and development expenses		11,392		17,639			29,031
Sales and marketing expenses		3,695		4,987			8,682
General and administrative expenses		4,244		4,397			8,641
Segment operating profit (loss)		8,550		(23,680	)		(15,130	)
Change in fair value of Forfeiture Shares							4,142
Financial expenses, net							(3,675	)
Loss before taxes on income							(14,663	)

Depreciation expenses		303		364			667
Stock-based compensation		2,517		3,391			5,908

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 10 - SEGMENT AND REVENUE BY GEOGRAPHY AND BY MAJOR CUSTOMER (continued):

	Three months ended on June 30, 2023
	Audio-Video		Automotive			Consolidated
	U.S. dollars in thousands
Revenues		15,469		8,706			24,175
Gross profit		11,644		3,290			14,934
Research and development expenses		4822		7,339			12,161
Sales and marketing expenses		1,892		2,363			4,255
General and administrative expenses		1,857		1,844			3,701
Segment operating profit (loss)		3,072		(8,255	)		(5,183	)
Change in fair value of Forfeiture Shares							22
Financial expenses, net							601
Loss before taxes on income							(4,560	)

Depreciation expenses		173		241			414
Stock-based compensation		1,678		2,309			3,987

	Three months ended on June 30, 2022
	Audio-Video		Automotive			Consolidated
	U.S. dollars in thousands
Revenues		18,335		4,146			22,481
Gross profit		14,414		1,370			15,784
Research and development expenses		5,122		9,782			14,904
Sales and marketing expenses		1,917		2,556			4,473
General and administrative expenses		2,081		2,259			4,340
Segment operating profit (loss)		5,294		(13,227	)		(7,933	)
Change in fair value of Forfeiture Shares							1,538
Financial expenses, net							(3,560	)
Loss before taxes on income							(9,955	)

Depreciation expenses		161		186			347
Stock-based compensation		1,326		1,791			3,117

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 10 - SEGMENT AND REVENUE BY GEOGRAPHY AND BY MAJOR CUSTOMER (continued):

Geographic Revenues

The following table shows revenue by geography, based on the customers’ “bill to” location:

	Six months ended June 30				Three months ended June 30
	2023		2022		2023		2022
	U.S. dollars in thousands

Israel		1,266		1,279		543		749
China		4,755		5,339		2,332		2,533
United States		3,441		7,238		1,981		3,681
Hong Kong		4,134		7,286		2,383		3,965
Hungary		13,013		6,399		6,955		2,486
Japan		4,605		5,274		2,248		3,239
Germany		5,637		2,807		2,989		965
Taiwan		4,992		4,030		1,748		2,679
Other		6,212		4,449		2,996		2,184
		48,055		44,101		24,175		22,481

Supplemental data - Major Customers:

The following tables summarize the significant customers’ (including distributors) accounts receivable and revenues as a percentage of total accounts receivable and total revenues, respectively:

	June 30, 2023			December 31, 2022
Accounts Receivable	% of accounts receivable
Customer A		30	%		10	%
Customer B		13	%		26	%
Customer C		0	%		16	%

	Six months ended June 30,						Three months ended June 30,
	2023			2022			2023			2022
Revenues	% of revenues						% of revenues
Customer A		19	%		10	%		21	%		10	%
Customer B		11	%		12	%		11	%		15	%
Customer D		9	%		11	%		9	%		14	%
Customer E		8	%		6	%		6	%		7	%

VALENS SEMICONDUCTOR LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 10 - SEGMENT AND REVENUE BY GEOGRAPHY AND BY MAJOR CUSTOMER (continued):

Long-lived assets by Geography:

	June 30, 2023		December 31, 2022
	U.S. dollars in thousands
Domestic (Israel)		5,459		5,827
Taiwan		417		184
China		206		225
USA		154		217
Singapore		98		124
Other		16		37
		6,350		6,614

NOTE 11 - RELATED PARTY TRANSACTIONS

During the six months ended June 30, 2023, the Company granted 212,329 stock options, at a weighted average exercise price of $4.97 to several executive officers, and Board of Directors (“Board”) members of the Company. In addition, during the six months ended June 30, 2023 the Company granted 490,529 RSUs to several executive officers and Board members of the Company.

The fair value of the stock options that were granted during the six months ended June 30, 2023 is $438 thousand, which is expected to be recognized over a 1-4 years vesting period, and the fair value of the granted RSUs is $2,354 thousand, which is expected to be recognized over a 1-4-years vesting period.

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Valens Semiconductor (VLN) 6-KCondensed Consolidated Financial Statements