Innoviz Technologies - 20-F annual report 2024

 

CONTENTS

ABOUT THIS ANNUAL REPORT

 

Except where the context otherwise requires or where otherwise indicated in this annual report (this “Annual Report”), the terms “Innoviz,” the “Company,” or the “company,” “we,” “us,” “our,” “our company” and “our business” refer to Innoviz Technologies Ltd., together with its consolidated subsidiaries as a consolidated entity.

 

All references in this Annual Report to “Israeli currency” and “ILS” refer to Israeli New Shekels, the terms “dollar,” “USD” or “$” refer to U.S. dollars and the terms “€” or “euro” refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended.

 

 

Unless otherwise indicated, information contained in this Annual Report concerning Innoviz’s industry and the regions in which it operates, including Innoviz’s general expectations and market position, market opportunity, market share and other management estimates, is based on information obtained from various independent publicly available sources and other industry publications, surveys and forecasts. Innoviz has not independently verified the accuracy or completeness of any third-party information. Similarly, internal surveys, industry forecasts and market research, which Innoviz believes to be reliable based upon its management’s knowledge of the industry, have not been independently verified.

 

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

 

This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this Annual Report may appear without the ^® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this Annual Report may constitute “forward-looking statements” for purposes of the federal securities laws, including statements regarding the services offered by Innoviz, the anticipated technological capability of Innoviz’s products, the markets in which Innoviz operates and Innoviz’s projected future results. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “strategy”, “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “will be,” “will continue,” “is likely,” “will likely result,” “contemplate,” “possible,” or similar words. Statements regarding our future results of operations and financial position, growth strategy and plans and objectives of management for future operations, including, among others, expansion in new and existing markets, are forward-looking statements.

 

Our forward-looking statements are mainly based on our current expectations and estimates of future events and trends which affect or may affect our business, operations and industry. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties, including without limitation those described under the sections in this Annual Report entitled Item 3.D. “Key Information—Risk Factors” and Item 5. “Operating and Financial Review and Prospects” and elsewhere in this Annual Report.

Forward-looking statements may be influenced by factors including:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Many important factors, in addition to the factors described above and in other sections of this Annual Report, could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from estimates or forward-looking statements. We qualify all our estimates and forward-looking statements by these cautionary statements.

 

The estimates and forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report. Except as required by applicable law, we undertake no obligation to publicly update or revise any estimates or forward-looking statements whether as a result of new information, future events or otherwise, or to reflect the occurrence of unanticipated events.

PART I

 

 

Not applicable.

 

 

Not applicable.

 

 

A. Selected Financial Data

 

Reserved.

 

B. Capitalization and Indebtedness

 

Not applicable.

 

C. Reasons for the Offer and Use of Proceeds

 

Not applicable.

 

D. Risk Factors

 

You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this Annual Report.

 

Summary of Risk Factors

 

The following is a summary of certain, but not all, of the risks that could adversely affect our business, operations and financial results. If any of the risks actually occur, our business could be materially impaired, the trading price of our ordinary shares and warrants could decline, and you could lose all or part of your investment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risks Related to Our Business

 

Our limited operating history and evolving business model makes evaluating our business and future prospects difficult and may increase the risk of your investment.

 

Our company has been focused on developing LiDAR products, components, and software for autonomous driving systems since our inception in 2016. This relatively limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter. Further, because we have limited historical financial data and we operate in a rapidly evolving market, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market. In addition, our business model may evolve, which could render our historical operating history and financial data less useful in assessing our prospects. For example, in addition to our traditional model of selling LiDAR systems directly to customers, we are currently selling a chipset containing components to Magna Electronics Inc. (“Magna”), which then assembles the LiDAR system for one of our customers.

 

If we fail to address the risks and difficulties that we face, including those described elsewhere in this “Risk Factors” section, our business, financial condition and results of operations could be adversely affected. We have encountered in the past, and we will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition and results of operations could be adversely affected.

 

In addition, our revenue may be adversely affected for a number of reasons, including the development and/or market acceptance of new technology that competes with our LiDAR products, changes by OEMs or other market participants to their autonomous vehicle technology, failure of our customers to commercialize autonomous systems that include our LiDAR solutions, our inability to effectively manage our inventory or manufacture products at scale, our failure to enter new markets or to attract new customers or expand orders from existing customers, or due to increasing competition. Furthermore, it is difficult to predict the size and growth rate of our target markets, customer demand for our products, commercialization timelines, developments in autonomous sensing and related technology, the success of existing competitive products and services, or the entry of new competitive companies and products. Accordingly, we do not expect to achieve profitability over the near term. If our revenue does not grow over the long term, our ability to achieve and maintain profitability may be adversely affected, and the value of our business may significantly decrease.

 

Continued pricing pressures, automotive OEM cost reduction initiatives and the ability of automotive OEMs to re-source or cancel vehicle or technology programs may result in lower than anticipated margins, or in incremental losses, which may adversely affect our business.

 

Cost-cutting initiatives adopted by our customers often result in increased downward pressure on pricing. We expect that our agreements with automotive OEMs may require step-downs in pricing over the term of the agreements or, if commercialized, over the periods of production. In addition, our automotive OEM customers often reserve the right to terminate their supply contracts for convenience, which enhances their ability to obtain price reductions. Automotive OEMs possess significant leverage over their suppliers, including us, because the automotive component supply industry is highly competitive, serves a limited number of customers and has a high fixed cost base. Accordingly, we expect to be subject to substantial continuing pressure from automotive OEMs to reduce the price of our products. It is possible that pricing pressures beyond our expectations could intensify as our customers pursue restructuring, consolidation and cost-cutting initiatives. If we are unable to generate sufficient production cost savings in the future to offset price reductions, our gross margin and profitability would be adversely affected.

 

We are creating innovative technologies by designing and developing unique components. The high price of, or low yield in these components, may affect our ability to sell at competitive prices or may lead to losses.

 

Part of our technological approach to providing cost-efficient LiDAR-based autonomous driving solutions featuring superior performance involves using a multi-disciplinary approach to design some of our components. Many of these components are complex and contain multiple sophisticated elements. Volume production of these elements may require extreme precision and present challenges to their manufacturers. This can lead to increased costs of production of the components which the manufacturers may pass on to us, or a production run may yield fewer usable components than desired or anticipated. Any such increased components cost or suboptimal yield in the production of our components may significantly increase our production costs and thereby decrease our margins and potentially cause us losses.

 

 

We are leveraging our in-house knowledge developed via our engagement and development history, to approach and to supply customers directly. This approach means entering into direct agreements with customers and not having a Tier-1 “middleman” to take on some of the risks involved in such long-term engagements. These risks include the responsibilities associated with interacting directly with customers on complex tasks such as full design validation, direct customer support and vehicle integration. Each of these responsibilities includes additional operating costs, increased liabilities, and additional indemnification responsibilities. In addition, conflicts may arise when we compete with our existing customers for business as a Tier-1 supplier and this competition may adversely affect our existing business relationships with these other Tier-1s. Furthermore, as a Tier-1 supplier we are competing directly with more-established Tier-1s that have existing agreements and relationships with the automotive OEMs, which may provide them certain advantages as compared to us.

 

We expect to invest substantially in research and development for the purpose of developing and commercializing new products. These investments could significantly reduce our profitability or increase our losses and may not generate revenue for us.

 

Our future growth depends on maintaining our technological leadership in order to introduce new products that penetrate new markets and achieve market acceptance. We therefore plan to incur substantial research and development costs as part of our efforts to design, develop, manufacture, and commercialize new products and enhance existing products. Our research and development expenses were approximately $73.8 million, $92.7 million and $95.1 million during the years ended December 31, 2024, 2023 and 2022, respectively. Future research and development expenses may adversely affect the future results of our operations. In addition, our research and development program may not produce successful results, and even if it does successfully produce new products, those products may not achieve market acceptance, create additional revenue or become profitable.

 

We will likely need to obtain additional funds in the future in order to execute our business plan and these funds may not be available to us when we need them, which could negatively affect our business, prospects, financial condition and operating results.

 

We will likely require additional capital in the future in order to fund our growth strategy or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances. We may also determine to raise equity or debt financing for other reasons. For example, in order to further enhance business relationships with current or potential customers or partners, we may issue equity or equity-linked securities to such current or potential customers or partners.

 

We may not be able to timely secure additional financing (which may be in form of debt or equity and may be a strategic investment) on favorable terms, or at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing shareholders could experience significant dilution. In addition, any debt financing obtained by us in the future, whether in the form of a credit facility or otherwise, could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Further, downgrades by Moody’s, S&P and Fitch Rating agencies of the credit rating of Israel, as well as the downgrade by some of the agencies of their outlook rating from “stable” to “negative”, may also make it more difficult for us to obtain additional capital in the future. If we are unable to obtain adequate financing or to obtain financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In addition, because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts.

 

We may experience significant delays in the design, production and launch of our LiDAR products, which could harm our business, prospects, financial condition and operating results.

 

Some of our products are still in the development phase. Any delay in the design, production and commercial release of such products or of any other future products, could materially damage our brand, business, prospects, financial condition and operating results. There are often delays in the design, production and commercial release of new products. To the extent we delay the launch of any future product, our growth prospects could be adversely affected as we may fail to increase our market share.

 

Moreover, our products are technologically complex and require high standards to manufacture. In addition, our products require extensive and lengthy testing and validation cycles, particularly in connection with our sensors and software, to ensure safety of the autonomous systems prior to commercial deployment. We have experienced in the past and will likely experience in the future, defects, errors or bugs at various stages of development and manufacturing. We may be unable to timely release new products, manufacture existing products, correct problems that have arisen or correct such problems to our customers’ satisfaction. Such delays could damage our relationships with customers and lead them to seek alternative sources of supply. In addition, we could face material legal claims for breach of contract or tort as a result of such delays. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of us and our ability to deliver and our reliability. Further, our business liability insurance coverage could prove inadequate with respect to a claim, and future coverage may be unavailable, on acceptable terms or at all.

 

We are substantially dependent on a limited number of customers. The automotive industry is comprised of a relatively small number of players, which makes each design win material for us, and our business could be materially and adversely affected if any of our customers terminate our programs following such wins.

 

Historically, our business was substantially dependent on our design win with BMW. We are the supplier of LiDAR technology and software technology to the BMW Level 3 program (“BMW L3 Program”), through our Tier-1 partner, Magna. Our business is substantially dependent on our design wins with Cariad SE for the Volkswagen brands (“Volkswagen”) and our recently announced partnership with Mobileye Vision Technologies Ltd. (“Mobileye”).

 

There can be no assurance that we will be able to maintain our relationship with our customers and secure orders from them or that our design wins will result in increased revenues or profitability. If major customers terminate or significantly alter or delay our programs with them and/or alter their respective relationships with us in an adverse manner, our business would be materially and adversely affected.

 

Designing and manufacturing LiDARs and LiDAR components on a mass-production scale requires meeting stringent quality requirements and we may face significant challenges and complexities in this process.

 

In 2023, Magna began the series-production manufacturing of our LiDARs in connection with the BMW L3 Program. We expect in the future to begin manufacturing LiDARs on a mass-production scale in connection with our other design win programs. The design and manufacturing of LiDARs on a mass-production scale requires us to meet stringent quality requirements and obtain various certifications. To date, we have not manufactured LiDARs on a mass-production scale in connection with any of our programs, and we expect to face significant challenges and complexities which we will need to resolve expeditiously while continuing to develop new products. For example, since manufacturing LiDARs requires investing significant capital expense in complex and unique machinery, unexpected malfunctions of such machinery could affect our operational efficiency and may result in loss of production equipment. In addition, we may face various unexpected operational risks such as damage to production facilities, delays, environmental damage, and potential legal liabilities. As a result of these challenges and risks, we may not be able to manufacture LiDARs on a mass-production scale without delays or unexpected costs, among other factors, which could adversely affect our business.

 

Our transition to production with a contract manufacturer and our ramp-up towards mass production may encounter significant challenges, which could delay commercialization and increase costs.

 

We are transitioning from producing our InnovizTwo samples in-house to manufacturing samples with our contract manufacturer as we prepare for mass production. This transition presents several risks, including the need to validate production lines and achieve consistent quality and yield at scale. Significant delays or inefficiencies in this process could impact our ability to meet customer requirements, including timelines. The production of LiDAR sensors requires stringent quality control and manufacturing expertise. If our contract manufacturer encounters difficulties, we may experience quality issues, increased scrap rates, or delays in meeting our customers’ milestones and requirements. Additionally, as we ramp-up towards mass production, we may face unforeseen technical challenges, supply chain constraints, yield issues, or manufacturing process refinements that could extend the timeline to achieving stable, high-yield production. Reaching full manufacturing maturity—where production is optimized for cost efficiency, reliability, and scalability—can take longer than anticipated. If we are unable to transition effectively to mass production, or if we encounter prolonged challenges in achieving manufacturing maturity, our ability to fulfill customer demand, meet revenue targets, and establish a competitive cost structure could be adversely affected. Any disruption in this transition could delay commercialization, increase our costs, and could negatively impact our business, financial condition, and market position. 

 

The period of time from a design win to implementation is long and we are subject to the risk of cancellations or postponement of contracts, or failure to successfully meet customers’ requirements for SOP.

 

Prospective customers, including those in the automotive industry, generally must make significant commitments of resources to test and validate our products and confirm that they can integrate with other technologies before including them in any particular system, product or model. The development cycles of our products with new customers varies widely depending on the application, market, customer and the complexity of the product. In the automotive market, for example, this development cycle can be four to five years or more. As a result of these lengthy development cycles, we spend significant time and resources to have our products selected by automotive OEMs and their suppliers for use in a particular vehicle model, which is known as a design win or nomination. If we do not achieve a design win with respect to a particular vehicle model, we may not have an opportunity to supply our products to the automotive OEM for that vehicle model for a period of many years. If our products are not selected by an automotive OEM or its suppliers for one vehicle model or if our products are not successful in that vehicle model, it is unlikely that our products will be deployed in other vehicle models of that automotive OEM. Further, we are subject to the risk that customers might cancel or postpone either the entire program or the implementation of our technology, as well as the risk that we will not be able to integrate our hardware and software technologies successfully into a larger system with other sensing modalities. If we fail to win a significant number of vehicle model programs from one or more of automotive OEMs or their suppliers, or our customers cancel or postpone implementation, our business, results of operations and financial condition may be materially and adversely affected.

 

If market adoption of LiDAR for autonomous vehicles does not continue to develop, or develops more slowly than we expect, our business will be adversely affected.

 

While our LiDAR-based solutions are applied to different use cases across end markets, we have been and expect to continue to be focused on automotive applications. Despite the fact that the automotive industry has engaged in considerable effort to research and test LiDAR products for advanced driver assistance systems (“ADAS”) and autonomous driving applications, there is no guarantee that the automotive industry will continue to introduce LiDAR products in commercially available vehicles in the near future. LiDAR products are still relatively new to the market, and it is possible that other sensor technologies and devices, based on new or existing technology or a combination of technologies, will achieve acceptance or leadership in the ADAS and autonomous driving industries. Even if LiDAR products are used in initial generations of autonomous driving or ADAS technology, we cannot guarantee that LiDAR products will be designed into or included in subsequent generations of such commercialized technology. The speed of market growth for ADAS or autonomous vehicles is difficult, if not impossible, to predict, and it is more difficult to predict such market’s future growth in light of the economic consequences of, among other things, changes in inflation and interest rates in the U.S. and globally, the conflicts in the Middle East and the Ukraine-Russia war. In addition, to the extent that the market for autonomous vehicles develops successfully, we expect that there will be increasing competition from providers of sensing technology based on LiDAR and other modalities. If commercialization of LiDAR products is not successful, or not as successful as we expect or the market expects, our business, results of operations and financial condition will be materially and adversely affected. If other sensing modalities are to be preferred over our LiDAR product by either developers of autonomous driving systems or ADAS, OEMs, regulators, safety organizations or other market participants by the time autonomous vehicle technology achieves mass market adoption, our business, results of operations and financial condition will be materially and adversely affected.

 

We target many customers that are large companies with substantial negotiating power, exacting product standards and potentially competitive internal solutions. If we are unable to sell our products to these customers, our prospects and results of operations will be adversely affected.

 

Many of our customers and potential customers are large, multinational companies with substantial negotiating power relative to us and, in some instances, they may even have internal solutions that are competitive to our products. These large, multinational companies also have significant resources, which may allow them to acquire or develop competitive technologies either independently or in partnership with others. Accordingly, even after investing significant resources to develop a product, we may not secure a design win or may not be able to commercialize a product on profitable terms because, among other things, these companies have extremely strong negotiation positions to demand terms that are beneficial for them, including reduced prices. If our products are not selected by these companies or if these companies develop or acquire competitive technology or negotiate terms that are disadvantageous to us, it will have an adverse effect on our business.

 

We continue to implement strategic initiatives designed to grow our business. These initiatives may prove more costly than we currently anticipate, and we may not succeed in increasing our revenues by an amount sufficient to offset the costs of these initiatives and to achieve and maintain profitability.

 

We continue to make investments and implement initiatives designed to grow our business, including:

 

 

 

 

These initiatives may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue, if at all, in an amount sufficient to offset these higher expenses and to achieve and maintain profitability. The market opportunities we are pursuing are at an early stage of development, and it may be many years before the markets we expect to serve generate significant demand for our products, if at all.

 

The markets in which we compete are characterized by rapid technological change, which requires us to continue to develop new products and product innovations and could adversely affect market adoption of our products.

 

While we intend to invest substantial resources in research and development, continuing technological changes in sensing technology, as well as changes in the ADAS and autonomous driving industries, could adversely affect adoption of LiDAR and/or our products. Our future success will depend on our ability to develop and introduce a variety of new capabilities and innovations to our existing product offerings, as well as to introduce a variety of new product offerings to address the changing needs of the markets in which we offer our products. We cannot guarantee that our new products will be released in a timely manner, or at all, or achieve market acceptance. In addition, we may in the future need to make strategic decisions to account for low market acceptance. These actions and any similar future actions may materially and adversely affect our business and results of operations. Delays in delivering new products that meet customer requirements could damage our relationships with customers and lead them to seek alternative sources of supply.

 

If we are unable to devote adequate resources to develop and improve our products or cannot otherwise successfully develop products or system configurations that meet customer requirements, including pricing, on a timely basis or that remain competitive with other technological alternatives, our products could lose market share, our revenue will decline, we may experience operating losses and our business and prospects will be adversely affected.

 

Certain of our strategic, development and supply arrangements could be terminated or may not materialize into long-term contract partnership arrangements.

 

We have arrangements with strategic, development and supply partners and collaborators. Some of these arrangements are evidenced by memorandums of understandings, term sheets, letters of intent, early-stage agreements that are used for design and development purposes that will require renegotiation at later stages of development or replacement by production or master agreements under separately negotiated statements of work, each of which could be terminated or may not materialize into next-stage contracts or long-term contract partnership arrangements. If these arrangements are terminated or if we are unable to enter into next-stage contracts or long-term operational contracts, our business, prospects, financial condition and operating results may be materially and adversely affected.

 

Adoption of LiDAR for other emerging markets may not occur or may occur much more slowly than we anticipate, which would adversely affect our business and prospects.

 

We are investing in and pursuing market opportunities outside of passenger cars and the light commercial vehicle markets, such as trucking, robotaxis, delivery vehicles and shuttles. Each of these markets presents distinct risks and, in many cases, requires us to address the particular requirements of that market.

 

Addressing these requirements can be time-consuming and costly. Adoption of LiDAR products, including our products for these segments, will depend on numerous factors, including: whether the technological capabilities of LiDAR and LiDAR-based products meet users’ current or anticipated needs, whether the benefits of designing LiDAR into larger sensing systems outweigh the costs, complexity and time needed to deploy such technology, or replace or modify existing systems that may have used other modalities such as cameras and/or radar, whether users in other applications can move beyond the testing and development phases and proceed to commercializing systems supported by LiDAR technology and whether LiDAR developers such as us can keep pace with rapid technological change in certain developing markets. If LiDAR technology does not achieve commercial success in such markets, or if the market develops at a pace slower than we expect, our business, results of operation and financial condition may be adversely affected.

 

Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.

 

Our business is directly affected by and significantly dependent on business cycles and other factors affecting the global automotive industry and global economy in general. Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rates and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives, regulatory requirements and political volatility, especially in energy-producing countries and growth markets. In addition, automotive production and sales can be affected by our automotive OEM customers’ ability to continue operating in response to challenging economic conditions and in response to regulatory requirements and other factors. The volume of automotive production in North America, Europe, China and the rest of the world has fluctuated, sometimes significantly, from year to year, and we expect any such fluctuations to give rise to fluctuations in the demand for our products. Any significant adverse change in any of these factors may result in a reduction in automotive sales and production by our automotive OEM customers and could have a material adverse effect on our business, results of operations and financial condition.

 

We may experience difficulties in expanding our operations.

 

Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls, compliance programs and reporting systems. We continue to strengthen our compliance programs, including our compliance programs related to export controls, privacy and cybersecurity and anti-corruption. We may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in existing controls, programs, systems and procedures, which could have an adverse effect on our business, reputation and financial results.

 

As part of growing our business, we may in the future make acquisitions. If we fail to successfully select, execute or integrate our acquisitions, then our business, results of operations and financial condition could be materially and adversely affected and the price of our ordinary shares and warrants could decline.

 

From time to time, we may in the future undertake acquisitions to add new products and technologies, acquire talent, gain new sales channels or enter into new markets or sales territories. Acquisitions involve numerous risks and challenges, including relating to the successful integration of the acquired business and its key personnel, entering into new territories or markets with which we have limited or no prior experience, establishing or maintaining business relationships with new customers, channel partners, vendors and suppliers, as well as unexpected liabilities and potential post-closing disputes. In addition, acquisitions may require a significant commitment of management time, capital investment and other resources.

 

To date, we have not grown our business through acquisitions and we do not have a history of integrating acquired technology and personnel. However, failure to successfully identify, complete, manage and integrate any future acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause the price of our ordinary shares and warrants to decline.

 

The first vehicles deploying our LiDAR technology and software became commercially available to end users in 2024. If any vehicles deploying our LiDAR technology and software are involved in traffic accidents or collisions actually or allegedly resulting from undetected defects, errors, or bugs in our products, or if our products actually or allegedly fail to perform as expected, we may be exposed to product liability, warranty and other claims, in addition to a decline in the market adoption of our products, damage to our reputation with current or prospective customers, or increased regulatory scrutiny of our solutions which would adversely affect our operating costs, business and prospects.

 

Our products are technologically complex and require high standards to manufacture and may, from time to time, have, or could be alleged to have, undetected errors or defects. As the first vehicles deploying our LiDAR technology and software became commercially available to end users in 2024, some errors or defects in our products could be, despite rigorous testing and stringent manufacturing standards, initially undetected and discovered only after they have commercialized and deployed by customers, which could result in serious injury, including fatalities, to the end users or those in the surrounding area; our customers not being able to commercialize technology incorporating our products; litigation against us; negative publicity; and other consequences. These risks are particularly prevalent in the highly competitive autonomous driving and ADAS markets. In accordance with customary practice in the automotive industry, we provide our customer with a time-limited warranty for our products. Currently, none such errors or defects have been detected, however, if such errors or defects occur in the future and within the respective warranty period, we may incur significant additional development costs, repair or replacement costs. Such problems may also result in claims against us, including class actions, by our customers or by third parties, and in some cases, may even lead to product recall and additional costs associated with such processes. Our reputation or brand may be damaged as a result of these problems and customers may be reluctant to buy our products, which could adversely affect our ability to retain existing customers and attract new customers and could adversely affect our financial results.

 

In addition, we could face material legal claims for breach of contract, product liability, tort or breach of warranty as a result of these problems. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of us and our products. In addition, our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all. These product-related issues could result in claims against us and our business could be adversely affected.

 

Moreover, enhanced publicity surrounding such claims may also increase the regulatory scrutiny of ADAS and autonomous driving solutions in general, and our products in particular, which could have a material adverse effect on our ability to achieve our business plans. Further, legislation and regulations may be adopted or changed over time to increase our liability associated with the use of our products, which may make our liability insurance coverage inadequate to fully mitigate such risks or rather make it significantly more costly, which could adversely affect our operating results and financial condition.

 

We operate in a highly competitive market against a large number of both established competitors and new market entrants, and some market participants have substantially greater resources than we do.

 

The markets for sensing technology applicable to autonomous solutions across numerous industries are highly competitive. Our future success will depend on our ability to lead by continuing to develop and protect from infringement advanced LiDAR technology in a timely manner, and to stay ahead of existing and new competitors. Our competitors are numerous and they compete with us directly by offering LiDAR products, and indirectly by attempting to solve some of the same challenges with different technology. We face competition from other developers of LiDAR products, Tier-1 suppliers and other technology and automotive supply companies, some of which have significantly greater resources than we do. Our competitors include, among others: Valeo SA, Hesai, Aeva, Robosense, Seyond (ex-Innovusion), Luminar and Cepton (acquired by Koito). In the automotive market, some of our competitors have commercialized non-LiDAR-based ADAS technology which has achieved market adoption, strong brand recognition and may continue to improve these and additional technologies, further enhancing their brand recognition and standing. Other competitors are working towards commercializing autonomous driving technology and either by themselves, or with a publicly announced partner, have substantial financial, marketing, research and development and other resources. Some of our customers in the autonomous vehicle and ADAS markets have announced development efforts or made acquisitions directed at creating their own LiDAR-based or other sensing technologies, which would compete with our solutions. We do not know how close these competitors are to commercializing autonomous driving systems or novel ADAS applications. Additionally, increased competition may result in pricing pressure and reduced margins and may impede our ability to increase the sales of our products or may cause us to lose market share, either of which will adversely affect our business, results of operations and financial condition.

 

Changes in tax laws or exposure to additional income tax liabilities could affect our future profitability.

 

Factors that could materially affect our future effective tax rates include but are not limited to:

 

 

 

 

 

Because we do not have a long history of operating at our present scale, our effective tax rate may fluctuate in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.

 

Changes in our product mix may impact our financial performance.

 

Our financial performance can be affected by the mix of products we sell during a given period. If our sales include more of our lower gross margin products, our results of operations and financial condition may be adversely affected. There can be no guarantee that we will be able to successfully alter our product mix. If actual results vary from this projected product mix of sales, our results of operations and financial condition could be adversely affected.

 

We are dependent on the services of Omer Keilaf, our Co-Founder, Chief Executive Officer and Director.

 

Our success depends to a significant degree upon the continued contributions of Omer Keilaf, our Co-Founder, Chief Executive Officer and director. Mr. Keilaf has been our Chief Executive Officer since the founding of the company in 2016, remains deeply involved in all aspects of our business, and is the name and face that customers, suppliers and investors associate with Innoviz. The loss of Mr. Keilaf would adversely affect our business, since his loss could make it more difficult to, among other things, compete with other market participants and retain existing customers or cultivate new ones. Further, such a loss could be negatively perceived in the marketplace and may make it more difficult to retain existing employees and members of management.

 

Our business depends on our ability to attract and retain highly skilled personnel and senior management. In addition, we are highly dependent on our skilled personnel to manage and meet deadlines for our products and programs.

 

We compete in a market marked by rapidly changing technologies and an evolving competitive landscape. In order for us to successfully compete and grow, we must attract, recruit, retain and develop personnel with requisite qualifications to provide expertise across the entire spectrum of our intellectual capital and business needs.

 

On January 31, 2024, we announced a strategic realignment of our operations to expand our cash runway and optimize our path towards profitability and free cash flow generation, which included a reduction in the company’s headcount by approximately 13% during the first quarter of 2024. Additionally, the workforce reduction may make it more difficult to preserve our company organizational culture and may negatively impact employees’ morale.

 

Our primary research and development activities as well as significant elements of our operations, general and administrative activities are conducted at our headquarters in Israel, and we face significant competition for suitably skilled employees in Israel. Many of the companies with which we compete for qualified personnel have greater resources than we do, and we may not succeed in recruiting additional experienced or professional personnel, in retaining personnel or in effectively replacing such current personnel who may depart with qualified or effective successors. Our efforts to attract, retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. Furthermore, in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the equity they are to receive in connection with their employment. Employees may be more likely to leave us if the shares they own or the shares underlying their equity incentive awards have significantly decreased in value.

 

While we utilize non-competition agreements with our employees as a means of improving our employee retention, those agreements may not help us retain employees. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. We may be unable to enforce these agreements under Israeli law, and it may be difficult for us to restrict our competitors from benefiting from the expertise of our former employees developed while working for us.

 

In addition, we rely on our skilled personnel, including our engineers, to meet deadlines associated with our numerous products and programs. As we continue to invest in our products and programs, we will rely more and more on our skilled personnel to ensure that we are meeting the development and commercialization targets we set internally and with our partners. As we invest in our products and programs, our skilled personnel may not be able to give the same level of attention to each product and program, and it may become more difficult for us to continue to meet the internal and external deadlines associated with such products and programs.

 

Considering the foregoing, there can be no assurance that qualified employees will remain in our employ or that we will be able to attract and retain highly skilled personnel and senior management in the future. Failure to retain or attract highly skilled personnel and senior management could have a material adverse effect on our business, financial condition and results of operations. Human resource changes could affect our internal knowledge and expertise, strategic relationships and future growth prospects.

 

Currency exchange rate fluctuations affect our results of operations, as reported in our financial statements.

 

We report our financial results in U.S. dollars. We collect our revenue primarily in U.S. dollars. A portion of the cost of revenue, research and development, sales and marketing and general and administrative expenses of our Israeli operations are incurred in ILS. As a result, we are exposed to exchange rate risks that may materially and adversely affect our financial results. If ILS appreciates against the USD or if the value of ILS declines against the USD at a time when the rate of inflation in the cost of Israeli goods and services exceeds the rate of decline in the relative value of ILS, then the USD cost of our operations in Israel would increase and our results of operations could be materially and adversely affected. Our Israeli operations also could be materially and adversely affected if we are unable to effectively hedge against currency fluctuations in the future. We cannot predict any future trends in the rate of inflation in Israel or the rate of appreciation (if any) of ILS against the USD. The Israeli annual rate of inflation amounted to 3.2%, 3.0%, and 5.3% for the years ended December 31, 2024, 2023 and 2022, respectively. The value of the USD appreciated against the value of the ILS by approximately 0.6%, 3.1% and 13.2% in 2024, 2023 and 2022, respectively.

 

We rely on third-party suppliers and are susceptible to supply shortages, long lead times for components and supply changes, any of which could disrupt our supply chain and could delay deliveries of our products to customers.

 

Some of the components that go into the manufacture of our solutions are sourced from third-party suppliers. Some of the key components used to manufacture our products come from limited or single source suppliers. We are therefore subject to the risk of shortages and long lead times in the supply of these components and the risks that our suppliers discontinue or modify components used in our products. Other global events, including political events and trade-related trends may also disrupt our supply chain and operations. For example, the Houthi movement, a terrorist group in Yemen that is limiting the movement of marine vessels traversing the Red Sea, has led to delays in shipping and to increased shipping and transport costs. These or other events may delay our future production, including our ability to timely set up a production line in Asia, which may require us to find alternative location for our production line due to such instabilities. In addition, our products depend on external semi-conductor foundries. Any disruptions to those foundries could materially and adversely affect our ability to manufacture our solutions. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. We have in the past experienced and may in the future experience component shortages and price fluctuations of certain key components and materials, and the predictability of the availability and pricing of these components may be limited. In the event of a component shortage, supply interruption or material pricing change from suppliers of these components, we may not be able to develop alternate sources in a timely manner or at all in the case of sole or limited sources. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, could adversely affect our relationships with our customers and could cause delays in shipment of our products and adversely affect our operating results. In addition, increased component costs could result in lower gross margins. Even where we are able to pass increased component costs along to our customers, there may be a lapse of time before we are able to do so, such that we must absorb the increased cost. If we are unable to buy these components in quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver products to our customers, which may result in loss of revenues, or such customers using competitors’ products instead of ours.

 

Our sales and operations in international markets expose us to operational, financial and regulatory risks.

 

International sales comprise a significant amount of our overall revenue. Sales to international customers accounted for approximately 91.2%, 99.6% and 98% of our revenue in the years ended December 31, 2024, 2023 and 2022, respectively. We are committed to growing our international sales and, while we have committed resources to expanding our international operations and sales channels, these efforts may not be successful. International operations are subject to a number of other risks, including:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The occurrence of any of these risks could negatively affect our international business and consequently our business, operating results and financial condition.

 

Unforeseen eye safety issues could result in injuries to people which could result in adverse effects on our business and reputation.

 

Our LiDAR utilizes lasers for performing 3D sensing. While our LiDAR products are classified as Class 1 laser products, which are safe to use, and we have developed system components designed to prevent our LiDAR lasers from harming human eyes, in the event that an unforeseen issue arises that results in serious injury, our reputation or brand may be damaged and we could face material legal claims for breach of contract, product liability, tort or breach of warranty as a result of these problems. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of us and our products. In addition, our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all.

 

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, including events resulting from climate change, as well as global pandemics, and interruptions by man-made problems, such as network security breaches, computer viruses, terrorism and war. Material disruptions of our business or information systems resulting from these events could adversely affect our operating results.

 

A significant natural disaster, such as an earthquake, fire, flood or significant power outage or other similar events, such as infectious disease outbreaks or pandemic events, could have an adverse effect on our business and operating results. There are inherent physical climate-related risks wherever our business is conducted. Various meteorological phenomena and extreme weather events (including, but not limited to, storms, flooding, drought, wildfire, and extreme temperatures) may disrupt our operations or those of our suppliers and business partners, and may therefore require us to incur additional operating or capital expenditures, or otherwise adversely impact our business, financial condition, or results of operations. Climate change may impact the frequency and/or intensity of such events. Mitigating our business risks associated with climate change may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risks.

 

In addition, despite the implementation of network security measures, our networks and LiDAR products also may be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our solutions. In addition, natural disasters, acts of terrorism or war, could cause disruptions in our manufacturing operations, our customers’, suppliers’ or channel partners’ businesses, or the economy as a whole. We also rely on information technology systems to communicate among our workforce and with third parties. Any disruption to our communications, whether caused by a natural disaster or by manmade problems, such as power disruptions, could adversely affect our business. We do not currently have a formal disaster recovery plan. However, we are currently in the process of formalizing our plan, and auditing our suppliers’ plans by our quality personnel. However, to the extent that any such disruptions result in delays or cancellations of orders or impede our suppliers’ ability to timely deliver product components, or the deployment of our products, our business, operating results and financial condition would be adversely affected.

 

Risks Related to Our Intellectual Property

 

We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our solutions. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating our rights may be costly.

 

The success of our products and our business depends in part on our ability to obtain patents and other intellectual property rights and maintain adequate legal protection for our products in the United States and other international jurisdictions. We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We cannot assure you that any patents will be issued with respect to our currently pending patent applications or that any trademarks will be registered with respect to our currently pending applications in a manner that gives us adequate defensive protection or competitive advantages, if at all, or that any patents issued to us or any trademarks registered by it will not be challenged, invalidated or circumvented. We have filed for patents and trademarks in the United States and in certain international jurisdictions, but such protections may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights, or may be difficult to enforce in practice, particularly with respect to software patents, where infringement is significantly harder to prove, we are less likely to successfully assert our patents. Our currently issued patents and trademarks and any patents and trademarks that may be issued or registered, as applicable, in the future with respect to pending or future applications may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property.

 

Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and difficult, particularly internationally. We believe that our patents are foundational, and we intend to enforce the intellectual property portfolio we have built. Unauthorized parties may attempt to copy or reverse engineer our solutions or certain aspects of our solutions that we consider proprietary. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to prevent unauthorized parties from copying or reverse engineering our solutions, to determine the validity and scope of the proprietary rights of others or to block the importation of infringing products from one patent jurisdiction into another jurisdiction.

 

Effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our products are available, and competitors based in other countries may sell infringing products in one or more markets. An inability to adequately protect and enforce our intellectual property and other proprietary rights or an inability to prevent authorized parties from copying or reverse engineering our LiDAR solutions or certain aspects of our solutions that we consider proprietary could seriously adversely affect our business, operating results, financial condition and prospects.

In addition to patented technology, we rely on our unpatented proprietary technology, processes and know-how.

 

We rely on proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection, or that we believe is best protected by means that do not require public disclosure.

 

We generally seek to protect this proprietary information by entering into confidentiality agreements or consulting, services or employment agreements that contain non-disclosure and non-use provisions with our employees, consultants, contractors and third parties. However, we may fail to enter into the necessary agreements, and even if entered into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. In addition, our proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, contractors, advisors and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position.

 

We also rely on our trade secret policy, related employee training, and on physical and electronic security measures to protect our proprietary information, but we cannot provide assurance that these security measures will not be breached or provide adequate protection for our property. There is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights.

 

Third-party claims that we are infringing or misappropriating intellectual property, whether successful or not, could result in costly and time-consuming litigation or expensive licenses, and our business could be adversely affected.

 

Although we hold patents related to our products, a number of companies, both within and outside of the LiDAR industry, hold other patents covering aspects of LiDAR products. In addition to these patents, participants in this industry typically also protect their technology, especially embedded software, through copyrights and trade secrets. As a result, there is frequent litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. We may receive in the future inquiries from other intellectual property holders and may become subject to claims that we infringed or misappropriate their intellectual property rights, particularly as we expand our presence in the market. If such a claim were to prevail, we could incur high cost and time-consuming litigation and licensing fees. Alternatively, we may incur costly development of alternative technological solutions to work-around such patent-protected solutions. In addition, parties may claim that the names and branding of our products infringe their trademark rights in certain countries or territories. If such a claim were to prevail, we may have to change the names and branding of our products in the affected territories and it could incur other costs.

 

We currently have a number of agreements in effect pursuant to which we have agreed to defend, indemnify and hold harmless our customers, suppliers and partners from damages and costs which may arise from the infringement or misappropriation by our products of third-party patents or other intellectual property rights. The scope of these indemnity obligations varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. Our insurance may not cover all intellectual property infringement claims. A claim that our products infringe a third party’s intellectual property rights, even if untrue, could adversely affect our relationships with our customers, may deter future customers from purchasing our products and could expose us to costly litigation and settlement expenses. Even if we are not a party to any litigation between a customer and a third party relating to infringement by our products, an adverse outcome in any such litigation could make it more difficult for us to defend our products against intellectual property infringement claims in any subsequent litigation in which we are a named party. Any of these results could adversely affect our brand and operating results.

 

Our defense of intellectual property rights claims brought against us or our customers, suppliers and channel partners, with or without merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention and force us to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments and may not be available on acceptable terms or at all. Further, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages or obtain an injunction. An adverse determination could invalidate our intellectual property rights and adversely affect our ability to offer our products to our customers and may require that we procure or develop substitute products that do not infringe, which could require significant effort and expense. Any of these events could adversely affect our business, operating results, financial condition and prospects.

 

Legal and Regulatory Risks Related to Our Business

 

We are subject to, and must remain in compliance with, numerous laws and governmental regulations concerning the manufacturing, use, distribution and sale of our products. Some of our customers also require that we comply with their own unique requirements relating to these matters.

 

We manufacture and sell products that contain electronic components, and such components may contain materials that are subject to government regulation in both the locations where we manufacture and assemble our products, as well as the locations where we sell our products. For example, in the United States, laser-emitting products, including our LiDAR systems, are subject to regulation by the U.S. Food and Drug Administration (the “FDA”), under the Electronic Product Radiation Control Provisions of the Federal Food, Drug, and Cosmetic Act and its implementing regulations. Among other things, these laws and regulations require the submission of annual reports to the FDA certifying that such products comply with applicable performance standards, the maintenance of manufacturing, testing, and distribution records, and the reporting of certain product defects to the FDA and/or consumers. If our products fail to comply with applicable FDA regulations, we and/or our products could be subjected to a variety of enforcement actions or sanctions, such as product recalls, repairs or replacements, warning letters, untitled letters, safety alerts, injunctions, import alerts, administrative product detentions or seizures or civil penalties. The occurrence of any of the foregoing could harm our business, results of operations and financial condition.

 

Since we operate on a global basis, we must continually monitor applicable laws and regulations and engage in an ongoing compliance process to ensure that we and our suppliers comply in all material respects with the applicable laws and regulations. If there is an unanticipated or onerous new legislation or regulation that significantly impacts our use or marketing of various components or requires more expensive components, such legislation or regulation could materially and adversely affect our business, results of operations and financial condition.

 

Our products are also used for autonomous driving and ADAS applications, which are subject to complicated and rapidly evolving laws and regulatory schemes that vary from jurisdiction to jurisdiction at the state, federal and international levels, including requirements related to safety, data privacy and security, and product liability, among other areas. These are rapidly evolving areas in which new or changed requirements could impose limitations on the use of LiDAR generally or our products specifically. If we fail to adhere to these new laws and regulations or fail to continually monitor emerging developments, we may be subject to litigation, loss of customers or negative publicity and our business, and our results of operations and financial condition will be adversely affected.

 

Concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts on a global basis, and we believe this will continue both in scope and in the number of countries participating. These changes could directly increase the cost, of or access to, energy or water, which may have an effect on the way we manufacture products or utilizes energy or water to produce our products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or key components we use in our products. Environmental regulations require us to reduce product energy or water usage, monitor and exclude an expanding list of restricted substances and to participate in required recovery and recycling of its products. We are unable to predict how any future changes will impact us and if such impacts will be material to our business.

 

Reporting expectations are also increasing, with a variety of customers, capital providers, and regulators seeking increased information on climate-related risks and impacts. Various policymakers have adopted or are considering to adopt, requirements for companies to provide significantly expanded climate-related disclosures in their periodic reporting, including reporting requirements that require companies to monitor their third parties, any of which may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and board of directors. All of these risks may also impact our suppliers, business partners or customers, which may indirectly impact our business, financial condition, or results of operations.

Our business may be adversely affected by changes in automotive safety regulations or concerns that drive further regulation of the automobile safety market.

 

Government vehicle safety regulations are an important factor for our business. Historically, these regulations have imposed ever-more stringent safety regulations for vehicles. These safety regulations often require, or customers demand that, vehicles have more safety features per vehicle and more advanced safety products.

 

Although we believe increasing automotive safety standards will present a market opportunity for our products, government safety regulations are subject to change based on a number of factors that are not within our control, including but not limited to, new scientific or technological data, public concerns regarding alleged safety risks of ADAS or autonomous driving, adverse publicity generated by government safety investigations, industry recalls or accidents, domestic and foreign political developments or considerations, and litigation relating to our products and our competitors’ products. Changes in government regulations, as well as changes or evolution in court doctrines in interpreting those regulations, especially in the ADAS and autonomous driving industries, could adversely affect our business. If government priorities shift and we are unable to adapt to changing regulations or to court interpretations of those regulations, our business may be materially and adversely affected.

 

In the United States at the federal government level, regulation of ADAS and autonomous driving falls primarily within the purview of the National Highway Traffic Safety Administration (“NHTSA”) of the U.S. Department of Transportation (USDOT), although other USDOT divisions, such as, for example, the Federal Motor Carrier Safety Administration (FMCSA), also are engaged to a more limited extent. Other federal agencies also are involved in regulation as relevant to the agency’s mission; for example, the Federal Communications Commission (“FCC”) has jurisdiction over spectrum for communications technology that will allow vehicles to sense and communicate with each other and with other devices and environmental factors, such as infrastructure, pedestrians, and cyclists. USDOT envisions a division of responsibility between the federal government and the states whereby NHTSA regulates safety design and performance while states regulate human driver and vehicle operations. Both federal and state authorities in the U.S. have been actively engaged in regulatory scrutiny of ADAS and autonomous driving solutions in general. Such authorities may impose more stringent compliance and reporting requirements in response to product recalls and safety issues in the automotive industry.

 

For any of our products incorporated into vehicles, we are a vehicle equipment manufacturer subject to existing requirements under the National Traffic and Motor Vehicle Safety Act of 1966 (“Vehicle Safety Act”) and the Federal Motor Vehicle Safety Standards (FMVSS) and other regulations promulgated by the NHTSA pursuant thereto. These requirements include a duty to report, subject to strict timing requirements, any defect with our products that is related to motor vehicle safety. The Vehicle Safety Act imposes potentially significant civil penalties for violations, including for failure to report such defects. We are also subject to the Transportation Recall Enhancement, Accountability and Documentation Act (“TREAD”) and NHTSA’s implementing regulations and must comply with “Early Warning” requirements by reporting a wide range of information (e.g., consumer complaints, warranty claims, etc.) that could indicate a potential safety defect. TREAD imposes criminal liability for violating such requirements if a defect is confirmed subsequently and has caused death or bodily injury. In addition, the Vehicle Safety Act authorizes NHTSA to require a manufacturer to recall and repair vehicles with any safety defect or that fail to comply with any FMVSS, and this obligation would apply in the event our products had a safety defect and prompted such a recall and repair action. Our distribution into foreign countries may be subject to similar regulations. If we cannot rapidly address any safety concerns or defects with our products, our business may be adversely affected.

 

NHTSA also has taken a number of actions in the past several years specific to ADAS and autonomous driving. These actions include a Standing General Order, updated in August 2021, that requires identified manufacturers and operators to report certain crashes involving vehicles equipped with automated driving systems or SAE Level 2 advanced driver assistance systems. In addition, NHTSA expanded in January 2021 its Automated Vehicle Transparency and Engagement for Safe Testing (“AV TEST”) Initiative from a pilot to a full program, and through this Initiative a variety of stakeholders provide documentation covering specific topics, such as how automated systems detect objects on the road, how information is displayed to drivers, what cybersecurity measures are in place and the methods used to test the design and validation of autonomous driving systems. NHTSA has been utilizing this information to impose additional regulatory obligations on ADAS and automated driving systems. In particular, NHTSA has been engaged in rulemaking to update certain FMVSS to address ambiguities and other issues created by the application of FMVSS to innovative, non-conventional vehicle designs utilized, or anticipated to be utilized, in certain ADAS and autonomous driving vehicles. In 2023, NHTSA promulgated the “Occupant Protection for Vehicles with Automated Driving Systems” final rule to update several FMVSS to account for vehicles that are equipped with ADAS and do not have traditional manual controls associated with human drivers. It also jointly proposed a rule with FMCSA regarding advanced emergency breaking (“AEB”) test devices for heavy vehicles. In 2024, NHTSA finalized rules to update FMVSS for crash avoidance, safety messaging and passengerless vehicles  as well as a rule to require AEB by 2029 in all passenger and light duty vehicles. On January 15, 2025, NHTSA proposed a voluntary national framework for the evaluation and oversight of certain vehicles equipped with automated driving systems. The proposed framework, called ADS-Equipped Vehicle Safety, Transparency and Evaluation Program (“AV STEP”), would remove the 2,500 cap on driverless vehicles allowed on the roadways and expand as well as streamline the program for exemption from FVMSS for ADS-equipped vehicles, but would impose additional data reporting requirements on all vehicles participating in AV STEP.  The program would be available only for vehicles equipped with a defined level of self-driving capabilities. Specifically, participants must have vehicles equipped with ADS, defined as “hardware and software that are collectively capable of performing the entire dynamic driving task on a sustained basis, regardless of whether the system is limited to a specific operational design domain” and without any expectation of an attentive human driver. Driver support features, referred to as ADAS, would not be eligible for the program.  While the proposed program does not subscribe to the current SAE International Levels of Driving Automation, NHTSA indicates that certain vehicles operating at SAE Levels 3, 4, or 5 would likely be eligible for the AV STEP program. Comments on the proposed AV STEP program are due on March 17, 2025. It is currently uncertain how the Trump Administration, which came into office after the program was proposed, will handle it going forward.

 

To the extent such additional obligations apply to our products, our compliance obligations may increase, and to the extent such additional obligations require changes in the design or operation of our products, we could suffer adverse business consequences.

 

Failures, or perceived failures, to comply with privacy, data protection, and information security requirements in the variety of jurisdictions in which we operate may adversely impact our business, and such legal requirements are evolving, uncertain and may require improvements in, or changes to, our policies and operations.

 

Our current and potential future operations and sales involve the processing of information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Information”) and thus subject us, and may subject our customers and vendors, to a variety of federal, state, and foreign data privacy laws, rules, industry standards, regulations, and other requirements addressing privacy and the collection, use, storage, processing, disclosure, transfer and protection of a variety of types of Personal Information data. These requirements, and their application, interpretation and amendment are constantly evolving and developing. For example, the UK and EU General Data Protection Regulations are directly applicable across the UK and European Economic Area; China has adopted a stringent new data privacy and security framework; Japan has amended its regime, California has enacted the California Consumer Privacy Act (which has prompted a wave of similar laws in other states); and the IL Protection of Privacy law, 5741-1981 has been recently significantly amended (effective as of August 2025). Each of these regimes provide for potentially material penalties for non-compliance and may, among other things, impose data security requirements, disclosure and contracting requirements, and restrictions on data collection, uses, transfers and sharing that may impact our operations and the development of our business. While, generally, we do not have access to, neither do we collect, store, process, or share Personal Information collected by our solutions in the course of their use by our end users or customers, unless our customers choose to proactively provide such Personal Information to us, our products may evolve both to address potential customer requirements or to add new features and functionality. Therefore, the full impact of these privacy regimes on our business is rapidly evolving across jurisdictions and remains uncertain at this time.

 

Even though we and our vendors periodically assess the continually evolving privacy and data security regimes and consider measures we believe are appropriate to take in response, these laws are in some cases relatively new and their interpretation and application are uncertain. In addition, we are subject to our customers’ privacy and data security requirements and audits and are working to enhance our privacy and data security measures as a result. Since these privacy and data security regimes and requirements are evolving, uncertain and complex, especially for a global business like ours, we may need to update or enhance our compliance measures even further as our products, markets and customer demands further develop, and these updates or enhancements may require implementation costs. Moreover, the compliance measures we adopt may prove ineffective. Any failure, or perceived failure, by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in significant proceedings or actions against us by individuals, consumer rights groups, government agencies, or others. We could incur significant costs (including the costs of mitigation and recovery) in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. Further, these proceedings and any subsequent adverse outcomes may subject us to material loss of revenue resulting from the adverse impact on our reputation and brand, loss of proprietary information and data, disruption to our business and relationships, and diminished ability to retain or attract customers and business partners and a breach of our commitments to our customers. If any of these events were to occur, they could have an adverse effect on our financial condition, results of operations, reputation, and business.

 

We are subject to cybersecurity risks to operational systems, security systems, infrastructure, firmware and software in our LiDAR and customer data and other information processed by us or third-party vendors or suppliers, and any material failure, weakness, interruption, cyber event, or incident, or breach of security could prevent us from effectively operating our business.

 

We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”). We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services. We and certain of our third-party providers store, handle, transmit and otherwise process data that includes Personal Information as well as proprietary information such as trade secrets (collectively, “Confidential Information”).

 

We are subject to evolving laws on cybersecurity and face numerous and evolving cyber risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors, such as insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors), as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, and as a result of malicious code embedded in open-source software, or misconfigurations, bugs or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services. Threat actors are becoming increasingly sophisticated in using techniques and tools—including artificial intelligence—that circumvent any infrastructure we use to protect our network, evade detection and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact to our IT Systems, Confidential Information or business. Such cyber incidents could materially disrupt operational systems and cause disruption to our business; result in loss of Confidential Information; jeopardize the security of our facilities; impact our financial results; or affect the performance of in-product technology and the integrated software in our LiDAR solutions. In addition, we rely on third-party service providers to host or otherwise process our Confidential Information, and any failure by a third party, or any other entity in our collective supply chain, to prevent or mitigate data security breaches or improper access to, or use, acquisition, disclosure, alteration, or destruction of, such Confidential Information could have similar adverse consequences for us.

 

For instance, cyber criminals or insiders may target us or third parties with which we have business relationships in an effort to obtain Confidential Information, or in a manner that disrupts our operations or our development tools or compromises our products or IT Systems into which our products are integrated. Cyber criminals could also target accessing our IT Systems in a manner which could impact our sensor data or the development process. Remote and hybrid working arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing and controlling remote computing assets and security vulnerabilities that are present in many non-corporate and home network devices. Additionally, any integration of artificial intelligence in our or any service providers’ operations, products or services is expected to pose new or unknown cybersecurity risks and challenges. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. We have experienced and expect to continue to experience actual and attempted cyber-attacks of our IT networks, such as through phishing scams and ransomware. Although, to our knowledge, none of these actual or attempted cyber-attacks have had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future. We are also at risk for cyber incidents resulting from interruptions, outages and breaches of: operational systems, including business, corporate, human resources, financial, accounting, product development, data processing or production processes, owned by us or our third-party vendors or suppliers; facility security systems, owned by us or our third-party vendors or suppliers; in-product technology owned by us or our third-party vendors or suppliers; the integrated software in our LiDAR solutions or development tools; or customer or driver data that we process or our third-party vendors or suppliers process on our behalf.

 

Although we maintain information technology measures designed to protect our IT Systems and Confidential Information, such measures will require updates and improvements, and we cannot guarantee that such measures, including our policies, controls or procedures, will be fully implemented, complied with or effective in detecting, preventing or mitigating cyber incidents. Furthermore, given the nature of complex systems, software and services like ours, and the scanning tools that we deploy across our networks and products, we regularly identify and track security vulnerabilities.  We are unable to comprehensively apply patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities are exploited by a threat actor. The implementation, maintenance, segregation and ongoing improvement of our IT Systems requires significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current IT Systems, including the disruption of our data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and inventory, procure parts or supplies or produce, sell, deliver and service our solutions, adequately protect our Confidential Information or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. If we do not successfully implement, maintain or expand these IT Systems as planned, our operations may be disrupted, our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results. Further, our Confidential Information could be compromised or misappropriated, and our reputation may be adversely affected. If these IT Systems do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

 

Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information could impact production capability and our ongoing operations, harm our reputation, cause us to breach our contracts with other parties or subject us to regulatory investigations, enforcement actions, fines and penalties, litigation (including class actions), negative reputational impacts that may cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially affect our business, prospects, financial condition and operating results. Any problems with our third-party cloud hosting providers, whether due to cyber security failures or other causes, could result in lengthy interruptions in our business. Finally, we cannot guarantee that any costs and liabilities incurred in relation to a cybersecurity attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.

 

We are subject to the U.S. Foreign Corrupt Practices Act and other U.S. and foreign anti-corruption anti-money laundering, export control, sanctions, and other trade laws and regulations, and any determination that we violated these laws could have a material adverse effect on our business.

 

We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, and possibly other anti-bribery and anti-money laundering laws in countries outside of the United States in which we conduct our activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting, or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector. Our activities may create the risk of unauthorized payments or offers of payments by employees, consultants, sales agents or distributors, even though they may not always be subject to our control. It is our policy to prohibit these practices by our employees, consultants, sales agents and distributors. However, we cannot guarantee our policies and controls will prevent all violations by our employees, consultants, sales agents, or distributors who may engage in conduct for which we might be held responsible, even if we do not explicitly authorize such activities.

 

Noncompliance with anti-corruption, anti-money laundering, export control, sanctions, and other trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. Responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. As a general matter, enforcement actions and sanctions could harm our business, results of operations, and financial condition.

 

We may be subject to securities litigation, class action and derivative lawsuits, which could result in substantial costs and could divert management attention away from other business concerns.

 

The market price of our securities may be volatile and, in the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We have been in the past and may be in the future the target of this type of litigation. Additionally, securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources from other business concerns, which could seriously harm our business. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. For example, on March 28, 2024, Sheadrick Richards, a purported stockholder of Collective Growth Corporation, a Delaware corporation (“Collective Growth”), filed a lawsuit against Collective Growth’s directors and affiliates in the Court of Chancery for the State of Delaware (the “Lawsuit”). The lawsuit alleges that Collective Growth’s disclosures in connection with its Business Combination (defined herein) with Innoviz (completed in April 2021) were materially incomplete and misleading, and that the directors breached their fiduciary duties.

 

We have entered into indemnification agreements with each of our current and former directors, certain of our current and former officers and certain third parties, and, in connection with the Business Combination, agreed to indemnify certain former directors and officers of Collective Growth. Although we maintain insurance and run-off coverages in amounts and with deductibles that we believe are appropriate for our operations, and our insurance and run-off coverages may not cover all claims that have been or may be brought against us, and insurance coverage may not continue to be available to us at a reasonable cost. As a result, we may be exposed to substantial uninsured liabilities, including pursuant to our indemnification obligations, which could result in substantial costs and could divert management attention away from other business concerns.

 

Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products.

 

We are subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, that requires us to determine, disclose and report whether our products contain tin, tantalum, tungsten and gold, referred to as conflict minerals. The implementation of these requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in or necessary to the production of our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such verification activities. It is also possible that our reputation may be adversely affected if we determine that certain of our products contain minerals not determined to be conflict-free as defined in the Dodd-Frank Act or if we are unable to alter our products, processes or sources of supply to avoid use of such materials.

 

 

 

A market for our securities may not be sustained, which would adversely affect the liquidity and price of our securities.

 

An active trading market for our securities may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, the increasing interest rate, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq and are quoted on the OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange), the liquidity and price of our securities may be more limited than if we were quoted or listed on the NYSE, Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our ordinary shares.

 

Our business is subject to the reporting requirements of the Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules and regulations of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.

 

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting.

 

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results or cause it to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that it is required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information.

 

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipates that we will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially and adversely affect our ability to operate our business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the price of our ordinary shares and warrants could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to maintain our listing on Nasdaq.

 

Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting until after we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results.

 

Risks Related to Ownership of Our Ordinary Shares and Warrants

 

Our amended and restated articles of association (the “Articles”) and Israeli law could prevent a takeover that shareholders consider favorable and could also reduce the market price of our ordinary shares and warrants.

 

Certain provisions of Israeli law and our Articles could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or for our shareholders to elect different individuals to our board of directors, even if doing so would be beneficial to our shareholders and warrantholders, and may limit the price that investors may be willing to pay in the future for the our ordinary shares and warrants. For example, the Israeli Companies Law, 5759-1999 (the “Companies Law”) regulates mergers, requires that a tender offer be effected when certain thresholds of percentage ownership of voting power in a company are exceeded (subject to certain conditions) and establishes a high ownership threshold to squeeze out minority shareholders in a full tender offer. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. See Item 10.E. “Taxation – Taxation and Government Programs – Israeli Tax Considerations and Government Programs”.

 

Our private placement warrants are accounted for as liabilities, and the changes in value of our private placement warrants could impact our financial results.

 

On April 12, 2021, the Staff of the SEC issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies titled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”).

 

The SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination. The terms described in the SEC Statement are common in SPACs and are similar to the terms contained in the Warrant Agreement dated as of April 30, 2020, between Continental Stock Transfer & Trust Company and Collective Growth (the “Warrant Agreement”) governing our warrants. Following the SEC Statement, we examined the accounting treatment of our public warrants and private placement warrants, and determined to classify the private placement warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings, while the public warrants are classified as equity.

 

As a result, included on our balance sheet as of December 31, 2024 contained elsewhere in this Annual Report are private placement warrants. Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the re-measurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our private placement warrants each reporting period and that the amount of such gains or losses could be material.

 

We do not intend to pay dividends in the foreseeable future.

 

We have never declared or paid any cash dividends on our ordinary shares, and we currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our ordinary shares in the foreseeable future. Any future determination to pay dividends on our ordinary shares will be at the discretion of our board of directors, subject to applicable law, and would depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant. Consequently, you may be unable to realize a gain on your investment except by selling our ordinary shares after price appreciation, which may never occur.

 

Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Companies Law imposes restrictions on our ability to declare and pay dividends. See the section titled “Description of our Ordinary Shares—Dividend and Liquidation Rights” in Exhibit 2.1 of this Annual Report for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See Item 10.E. “Taxation – Taxation and Government Programs – Israeli Tax Considerations and Government Programs” for additional information.

 

Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our ordinary shares.

 

Our ordinary shares are currently listed for trading on Nasdaq. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum bid price requirement of $1.00 per ordinary share or risk delisting.

 

On July 30, 2024, we received a letter from the Listing Qualifications Department indicating that for the thirty consecutive business days prior, the bid price for the ordinary shares had closed below the minimum $1.00 per ordinary share requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5450(a)(1). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until January 27, 2025, to regain compliance. The letter stated that the Listing Qualifications Department staff will provide written notification that we have achieved compliance with Rule 5450(a)(1) if at any time before January 27, 2025, the bid price of the ordinary shares closed at $1.00 per ordinary share or more for a minimum of ten consecutive business days.

 

On January 2, 2025, we announced that we received formal written confirmation from Nasdaq confirming that the Company regained compliance with Nasdaq’s minimum bid price requirement. The closing bid price of the ordinary shares was at $1.00 per share or greater for 10 consecutive business days from December 16 to December 30, 2024. Accordingly, Nasdaq Listing Qualifications Staff notified the Company that it determined that the Company regained compliance with Nasdaq Listing Rule 5550(a)(2), and that the matter was closed.

 

No assurance can be given that the price of the ordinary shares will not again be in violation of Nasdaq’s minimum bid price requirement in the future. Our failure to meet this or other requirements may result in our securities being delisted from Nasdaq. A delisting could substantially decrease trading in the ordinary shares, adversely affect the market liquidity of the ordinary shares as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws, adversely affect our ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. Additionally, the market price of the ordinary shares may decline further, and shareholders may lose some or all of their investment.

 

Our ordinary shares and warrants may not continue to be listed on a national securities exchange, which could limit investors’ ability to make transactions in such securities and subject us to additional trading restrictions.

 

We may be unable to maintain the listing of our ordinary shares and warrants on Nasdaq in the future. If we fail to meet the listing requirements and Nasdaq does not list our ordinary shares and warrants, we could face significant material adverse consequences, including:

 

 

 

 

 

 

The market price and trading volume of our ordinary shares and warrants may be volatile and could decline significantly.

 

Nasdaq, the stock market on which our ordinary shares and warrants are listed under the symbols “INVZ,” and “INVZW,” respectively, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market is sustained for our ordinary shares and warrants, the market price of our ordinary shares and warrants may be volatile and could decline significantly. In addition, the trading volume in our ordinary shares and warrants may fluctuate and cause significant price variations to occur. We cannot assure you that the market price of our ordinary shares and warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.

 

We expect our results of operations to fluctuate on a quarterly and annual basis, which could cause the price of our ordinary shares and warrants to fluctuate or decline.

 

Our quarterly and annual results of operations have fluctuated in the past and may vary significantly in the future. As such, historical comparisons of our operating results may not be meaningful. In the past, our sales were primarily to customers making purchases for research and development projects. Following our strategic transition to become a Tier-1 automotive supplier, non-recurring engineering or application engineering services (“NRE”) became another incremental source of revenue during the pre-production phase of the programs. Additionally, in connection with our BMW L3 Program, we are selling components to Magna at lower average production sales prices. Therefore, our revenues from sales and NRE in any given quarter can fluctuate based on the timing and success of our customers’ programs and the stage of the program. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and may not fully reflect the underlying performance of our business. These fluctuations could adversely affect our ability to meet our expectations or those of securities analysts or investors. If we do not meet these expectations for any period, the value of our business and our securities could decline significantly. Factors that may cause these quarterly or annual fluctuations include, without limitation, those listed below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our ordinary shares and warrants adversely, or if we fail to meet, or significantly exceed, the financial guidance we publicly announce on a periodic basis, then the price and trading volume of our ordinary shares and warrants could decline.

 

The trading market for our ordinary shares and warrants is influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts, or the content and opinions included in their reports. As a relatively new public company, analysts who publish information about our ordinary shares will have had relatively little experience with us, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. If any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding us, the price of our ordinary shares and warrants could decline.

 

In addition, the share prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our ordinary shares and warrants or publish unfavorable research about us and our securities. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause the price of our ordinary shares and warrants or trading volume to decline.

 

We qualify as an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

 

We are eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. We intend to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.

 

For as long as we continue to be an emerging growth company, we may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies and not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years from the consummation of the Business Combination, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws.

 

We cannot predict if investors will find our ordinary shares and warrants less attractive because we may rely on these exemptions. If some investors find our ordinary shares and warrants less attractive as a result, there may be a less active trading market for our ordinary shares and warrants and the price for our ordinary shares and warrants may be more volatile. Further, there is no guarantee that the exemptions available to us under the JOBS Act will result in significant savings. To the extent that we choose not to use exemptions from various reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact our financial condition.

 

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

 

We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations with regard to notice of shareholder meetings and intends to furnish comparable quarterly financial information and proxy statements on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, our shareholders may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

 

We may lose our “foreign private issuer” status in the future, which could result in significant additional costs and expenses.

 

We are a foreign private issuer, and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2025. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.

 

As we are a “foreign private issuer” and follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

 

As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following and describe the home country practice we are following. We rely on this “foreign private issuer exemption”, among others, with respect to the Nasdaq rules for shareholder meeting quorums and Nasdaq rules requiring shareholder approval for certain corporate actions. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

 

Risks Related to Our Incorporation and Location in Israel

 

The war in Israel and other conditions in Israel could materially and adversely affect our business.

 

Most of our employees, including certain management members, operate from our offices that are located in Rosh HaAin, Israel. In addition, most of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations.

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Following the attacks, Israel declared war against Hamas and a military campaign against the terrorist organization commenced.

 

In addition, Hezbollah has also launched attacks against Israeli military sites and troops, and against Israeli towns in Israel. In response to these attacks, the Israel Defense Force (“IDF”) has carried out a military operation in Lebanon, including raids on territories controlled by Hezbollah in Lebanon and strikes on sites belonging to Hezbollah in Lebanon. On a separate border, Israel conducted preemptive military actions in Southern Syria in light of the fall of the Assad regime and the takeover of Syria by the Syrian rebels.

 

Further, Israel faces threats from more distant territories, in particular, Iran which conducted two direct attacks on Israel, and may be developing nuclear weapons and targeted cyber-attacks against Israeli entities; and the Houthi movement, which controls parts of Yemen and launched, among others, a number of attacks on Israel and marine vessels traversing the Red Sea. The Red Sea is a vital maritime route for international trade traveling to and from Israel. As a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased cost of freight, increased insurance costs, increased purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions may result in delayed deliveries of our products and may also have adverse impact on economic conditions in Israel.

 

Further, many Israeli citizens are obligated by law to perform up to several weeks of annual military reserve duty each year. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Since October 7, 2023, the IDF has called up hundreds of thousands of its reserve forces to serve, many of them, for more prolonged periods. A number of our management and non-management employees are currently subject to military service in the IDF and many of them have been called to serve. In addition, the family members of many of our Israeli team members are currently serving in the IDF. Such disruption could materially and adversely affect our business, prospects, financial condition, and results of operations.

 

Although certain ceasefire agreements have been reached with Hamas and Lebanon (with respect to Hezbollah), and some Iranian proxies have declared a halt to their attacks, there is no assurance that these agreements will be upheld, military activity and hostilities continue to exist at varying levels of intensity, and the situation remains volatile, with the potential for escalation into a broader regional conflict involving additional terrorist organizations and possibly other countries. 

 

The intensity and duration of Israel’s current military endeavors on multiple fronts are difficult to predict, as are the economic implications of the foregoing on our business and operations in particular and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s economic standing, that may involve an additional downgrade in Israel’s credit rating by rating agencies (such as the downgrade of the credit rating of Israel by Moody’s, S&P and Fitch), which may have a material adverse effect on our company and its ability to effectively conduct its operations.

 

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

 

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our results of operations, financial condition or the expansion of our business. A campaign of boycotts, divestment, and sanctions has been undertaken against Israel, which could also adversely affect our business. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations, and prospects.

 

Finally, prior to October 2023, the current elected government in Israel pursued certain reforms to Israel’s judicial system and has recently renewed its efforts to effect such changes. Certain financial, legal and commercial organizations and entities have claimed that such changes, if adopted, could adversely affect the macroeconomic condition in which we operate. At this stage, the proposed legislation has not become effective, and its scope has not been fully determined; we cannot assess the potential impacts of these changes and their likelihood on our business, prospects, financial condition, and results of operation.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.

 

A significant portion of our intellectual property has been developed by our employees in the course of their employment by us. Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived by an employee in the course and as a result of his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the “Royalties Committee”), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions. Case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit. The Royalties Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Royalties Committee has not yet determined one specific formula for calculating this remuneration, but rather uses the criteria specified in the Patent Law. Although we generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.

 

The tax benefits that are available to us require that we continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.

 

We may be eligible for certain tax benefits provided to “Preferred Technology Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”). In order to remain eligible for the tax benefits for “Preferred Technology Enterprises” we must continue to meet certain conditions stipulated in the Investment Law and applicable regulations, as amended. If these tax benefits are reduced, cancelled or discontinued, our Israeli taxable income from the approved enterprise would be subject to regular Israeli corporate tax rates. The standard corporate tax rate for Israeli companies since 2018 is 23%. Additionally, if we increase our activities outside of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs. See Item 10.E. “Taxation – Taxation and Government Programs – Israeli Tax Considerations and Government Programs”.

 

It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this Annual Report in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts.

 

Most of our directors or officers are not residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive officers may be difficult to obtain within the United States. It may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors. In addition, there is no bilateral treaty between Israel and the United States for the enforcement of civil judgments.

 

Moreover, among other reasons, including but not limited to, fraud or absence of due process, or the existence of a judgment which is at variance with another judgment that was given in the same matter or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if our enforcement is likely to prejudice the sovereignty or security of the State of Israel.

The rights and responsibilities of our shareholders are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.

 

We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our Articles and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders and class meetings, on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers, and transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the company or has other powers toward the company has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. There is limited case law available to assist in understanding the implications of these provisions that govern shareholder behavior.

 

U.S. holders of our ordinary shares and/or warrants may suffer adverse tax consequences if we are treated as a passive foreign investment company.

 

A non-U.S. corporation generally will be treated as a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income (such as interest income) or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. We believe we were a PFIC for our taxable year ending December 31, 2024. However, as discussed below, whether we were a PFIC for any given taxable year is based on a complex and factual determination and there is no assurance that the Internal Revenue Service (“IRS”) will agree with our determination. Based on the current and anticipated composition of the income, assets and operations of our company and our subsidiaries, we cannot be sure as to whether we will be a PFIC for U.S. federal income tax purposes for our taxable year ending December 31, 2025 or in future taxable years. Moreover, because PFIC status is based on our income, assets and activities for the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for our current taxable year or future taxable years until after the close of the applicable taxable year. This is an annual factual determination that depends on, among other things, the composition of our income (including the relative size of our gross operating loss and our passive income) and assets, and the market value of our shares and assets (including unbooked goodwill), including the composition of income and assets of our subsidiaries, from time to time, and thus a determination can only be made annually after the close of each taxable year. Moreover, the value of our assets (including unbooked goodwill) for purposes of the PFIC determination may be determined by reference to the trading value of our ordinary shares, which could fluctuate significantly. If we are a PFIC for any taxable year, a U.S. Holder (as defined below under “Taxation – United States Federal Income Taxation”) of our ordinary shares or warrants may be subject to adverse tax consequences and may incur certain information reporting obligations, even if we cease to be a PFIC in the subsequent years. Under the generally applicable PFIC rules, a U.S. Holder generally would be subject to U.S. federal income tax at the then prevailing maximum rates on ordinary income and possibly an “interest” charge, in respect of “excess distributions” and upon any gain from the disposition of our ordinary shares or warrants, as applicable, as if the excess distribution or gain had been recognized ratably over such U.S. Holder’s holding period of our ordinary shares or warrants, as applicable. Certain elections (including a qualified electing fund or a mark-to-market election) may be available to U.S. Holders of our ordinary shares to mitigate some of the adverse tax consequences resulting from PFIC treatment, however, are not available with respect to the warrants. For a further discussion, see “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company Considerations.”

 

U.S. Holders of our ordinary shares and/or warrants are strongly encouraged to consult their own tax advisors regarding the potential application of these rules to us and the ownership of our ordinary shares and/or our warrants.

 

If a United States person is treated as owning at least 10% of our shares, such person may be subject to adverse U.S. federal income tax consequences.

 

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a “United States shareholder” with respect to us and any of our direct and indirect foreign affiliates (“Innoviz Group”) that is a “controlled foreign corporation” as defined in Section 957 of the Code. Because the Innoviz Group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries will be treated as controlled foreign corporations regardless of whether we are treated as a controlled foreign corporation.

 

A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of the controlled foreign corporation’s “Subpart F income” and, in computing its “global intangible low-taxed income,” ”tested income” and a pro rata share of the amount of U.S. property (including certain stock in U.S. corporations and certain tangible assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation makes any distributions. The amount includable by a United States shareholder under these rules is based on a number of factors, including potentially, but not limited to, the controlled foreign corporation’s current earnings and profits (if any), tax basis in the controlled foreign corporation’s assets, and foreign taxes paid by the controlled foreign corporation on its underlying income. Failure to comply with these reporting obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year for which reporting (or payment of tax) was due from starting. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist holders in determining whether any of our non-U.S. subsidiaries is treated as a controlled foreign corporation or whether any holder is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations.

 

U.S. Holders of our ordinary shares and/or warrants are strongly encouraged to consult their own tax advisors regarding the potential application of these rules to us and the ownership of our ordinary shares and/or warrants.

 

 

A. History and Development of the Company

 

On December 10, 2020, we entered into that certain Business Combination Agreement (the “Business Combination Agreement”) by and among Collective Growth, Perception Capital Partners, LLC, a Delaware limited liability company (“Perception”), Antara Capital LP, a Delaware limited partnership and investment manager acting on behalf of certain funds it manages and/or designees (“Antara Capital”), and Hatzata Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Innoviz (“Merger Sub”). Pursuant to the Business Combination Agreement, on April 5, 2021, Merger Sub merged with and into Collective Growth, with Collective Growth surviving the merger as a wholly owned subsidiary of us (the “Business Combination”).

 

For a description of our principal capital expenditures and divestitures for the three years ended December 31, 2024, 2023 and 2022, see Item 5. “Operating and Financial Review and Prospects.”

 

B. Business Overview

 

Company Overview

 

We are a leading Tier-1 direct supplier of high-performance, automotive grade LiDAR sensors and perception software that feature technological breakthroughs across core components and bring enhanced vision and superior performance to enable safe autonomous driving at a mass scale. We believe that we provide a complete and comprehensive solution for OEMs and Tier-1 partners that are developing and marketing autonomous driving vehicles to the passenger car and other relevant markets, such as robotaxis, shuttles, delivery vehicles and trucks.

 

We were founded in 2016. From our founding, our culture drew from our core values of solving sophisticated technological problems through creativity and agile thinking. We have relied on these values to address the needs of autonomous vehicles in a manner that strikes the desired balance between performance and cost. We created a new type of LiDAR sensor from the chip-level up, including a suite of powerful and sophisticated software applications for high-performance computer vision to allow superior perception. In 2018, we achieved a design win to power BMW’s Level 3 autonomous platform, a program which reached maturity during 2024 and with vehicles already being sold with our LiDARs and perception software.

 

Since 2021, we have funded the development of two production path programs: the InnovizOne and InnovizTwo LiDAR sensor and perception software suites. With the InnovizOne program transitioned from the development phase into full series production in 2024, we eliminated duplicative cost structures and significantly reduced spending on InnovizOne development, while reinvesting a portion of the savings into the InnovizTwo sensor and perception software platform. All quoting and bidding activity in our request for information and request for quotation pipeline is now focused on the InnovizTwo platform.

 

During 2022, we made the strategic decision to become a Tier-1 supplier of LiDAR and perception software to the automotive industry. This decision allows us to have direct technical discussions with end customers and to improve pricing to automotive OEMs with the goal of continuing to strengthen our position in the automotive market. This strategic decision has played a significant role in our subsequent major OEM program wins, as discussed below.

 

In 2022, following more than two years of extensive diligence and qualification, we were selected by Volkswagen as its direct LiDAR supplier for automated vehicles within the Volkswagen brands with our InnovizTwo next generation high-performance automotive-grade LiDAR sensor, and in 2023, we announced that Volkswagen aims to expand its use of our InnovizTwo LiDAR to its existing light commercial vehicle program, the I.D Buzz.

 

In 2024, we announced that Mobileye will use the InnovizTwo Long-Range and the new InnovizTwo Short- to Mid-Range LiDARs for the Mobileye Drive™ platform. The new InnovizTwo Short- to Mid-Range leverages InnovizTwo Long-Range’s industrialization maturity and is designed to meet the requirements for light commercial vehicles, shuttles, robotaxis, and can be customized to suit a wide array of vehicular design and functionality requirements. We believe that the combination of our LiDARs and Mobileye’s platform is critical to enabling comprehensive sensing capabilities for navigating complex urban environments and enhancing the overall safety and reliability of autonomous driving systems, and that this partnership showcases the flexibility of our LiDARs to work across a variety of vehicle platforms to further testing and deployment of autonomous vehicles. Our partners are leaders in deploying new technologies into the automotive industry. We believe that our close cooperation with these partners and OEMs positions us well to make Level 3 and Level 4 autonomous driving a commercial reality.

 

The sustained cooperation with our customers provides our engineers and other research and development personnel with a valuable competitive edge. These engineers and other research and development personnel have been meticulously trained to design, operate, and verify our many ground-breaking innovations in accordance and in compliance with the ISO26262 standard for Functional Safety in the automotive industry, and the IATF 16949:2016 certification for Quality Management in the automotive industry. Compliance with these and other standards have been enforced by regular ongoing audits of Innoviz and rigorous testing by our key suppliers, existing customers and prospective customers that thoroughly review the performance of various elements of our operations. As a result, our products have been constructed from the bottom up with hardware and software technology that meets the most stringent automotive safety, quality, environmental, manufacturing, and other standards.

 

Our innovation has produced LiDAR solutions that deliver market leading performance and that meet the current demanding safety requirements for Level 2+ through Level 5 autonomous vehicles at price points suitable for mass produced passenger vehicles.

 

Our robust software suite enables our ~905nm wavelength laser-based LiDAR architecture to be easily leveraged to provide compelling solutions for Level 2+ through Level 4 (and Level 5 when applicable), using both our long- and medium-range LiDARs. Our integrated custom design of advanced hardware and software components, which leverages the multidisciplinary expertise and experience of our team, enables us to provide autonomous solutions that we believe will accelerate widespread adoption across automakers at serial production scale. This means that we are positioned to penetrate the current market, which is focused primarily on Level 2+, Level 3 and Level 4 production, and to continue to capture and extend our market share to 5 as the market continues to mature.

 

We are currently expanding our third-party manufacturing capacity through contract manufacturers to meet an anticipated increase in customer demand for our products.

 

Recent Developments

 

Entered into Multi-Year NRE Payment Plan with Key Customers

 

On December 23, 2024, we announced a multi-year NRE (Non-Recurring Engineering services) payment plan of approximately $80 million with key existing customers. NREs are expected to be paid between 2025 and 2027, of which over $40 million are expected to be paid in 2025 with further amounts expected in 2026 and 2027. These payments would be incremental to revenues generated from ongoing sales of LiDAR products based on existing and expected new orders coming from new programs. There can be no assurances, however, that we will enter into definitive agreements, orders or receive payments with respect to the NRE payment plan.

 

Regained Compliance with Nasdaq’s Minimum Bid Price Requirement

 

On January 2, 2025, we announced that we received formal written confirmation from Nasdaq confirming that the Company has regained compliance with Nasdaq’s minimum bid price requirement. The closing bid price of the ordinary shares was at $1.00 per share or greater for 10 consecutive business days from December 16 to December 30, 2024. Accordingly, Nasdaq Listing Qualifications Staff notified the Company that it determined that the Company regained compliance with Nasdaq Listing Rule 5550(a)(2), and that the matter was closed.

 

Integration of Perception Software with NVIDIA DRIVE AGX Orin

 

On January 7, 2025, we announced our collaboration with NVIDIA to allow our perception software to run seamlessly with the NVIDIA DRIVE AGX Orin platform, offering a range of software-driven features designed to accelerate autonomous driving applications by allowing for real-time processing and advanced understanding of the vehicle’s environment, enabling exceptional object detection, classification, and tracking capabilities.

 

Optimization of Operations

 

On February 4, 2025, we announced an optimization of our operations to extend our cash runway and accelerate progress towards profitability and free cash flow generation, which includes a reduction in our employee headcount by approximately 9% during the first quarter of 2025.

 

Registered Direct Offering

 

On February 10, 2025, we entered into a securities purchase agreement (“Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”). Pursuant to the Securities Purchase Agreement, we agreed to sell in a registered direct offering (the “Offering”) 28,776,978 units to the Purchasers at a purchase price of $1.39 per unit, with each unit consisting of one ordinary share and eight tenths of a warrant to purchase one ordinary share. The Offering was consummated on February 12, 2025. We received net proceeds of approximately $37.3 million, after deducting the placement agent fees and offering expenses. The ordinary shares and warrants were issued separately. The warrants are exercisable at $1.69 per share and will expire on February 12, 2030. A holder of the warrants will not have the right to exercise any portion of its warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates or any other persons whose beneficial ownership of ordinary shares would be aggregated with the holder’s or any of the holder’s affiliates), would beneficially own ordinary shares in excess of 4.99% (or, at the election of the holder, 9.99%) of the number of the ordinary shares outstanding immediately after giving effect to such exercise.

 

Appointment of Ido Luski

 

Udy Gal-On, the Company’s Chief Operating Officer, will transition into the role of Co-Chief Operating Officer during the second quarter of 2025. Ido Luski, currently the Company’s VP Delivery, will assume the role of Co-Chief Operating Officer alongside Mr. Gal-On during the second quarter of 2025.

 

Market Outlook

 

The automotive industry is increasingly harnessing sophisticated technologies in its push to develop and introduce autonomous driving vehicles. Significant investment and rapid growth in this industry are being driven by the need to assure human safety and in parallel, the potential recapture of drivers’ time for work, rest and relaxation while the vehicle drives itself. The technologies and products needed for autonomous driving require long development and validation cycles and must ensure safety of the autonomous systems prior to commercial deployment.

 

Recognizing the different levels of innovation and autonomy and the need to standardize the approaches across the spectrum of possibilities for the sake of safety, the Society of Automotive Engineers has developed and defined six levels of automation for autonomous vehicles: Level 0 through Level 5. These levels have been adopted by the U.S. Department of Transportation.

 

 

 

 

 

 

 

 

In addition to these six levels, certain industry participants have also identified a gap between Level 2 and Level 3, which it calls Level 2+. The move from Level 2 to Level 3 is essentially the crossover from driver-assist to some level of autonomy. In the jump between these two levels, it is expected that liability will shift from the driver to the system, meaning that responsibility and liability for driving is shifted from the driver to the OEM. This gap can be partially bridged by systems that offer more than Level 2 but less than Level 3, or an enhanced ADAS offering, which has created the industry terminology of “Level 2+”.

 

Currently, ADAS, or Advanced Driver Assistance Systems, which are not considered “autonomous driving” but have important active safety features, have been successfully commercialized. ADAS-equipped vehicles are not fully autonomous as, although the vehicle can control both steering and acceleration/deceleration, a human sits in the driver’s seat and needs to monitor the driving at all times (i.e., have “eyes on the road”). Therefore, the advancement from vehicles with ADAS (Levels 1 through 2+) to autonomous driving systems (Levels 3 through 5) requires “environmental detection” capabilities, or the capability to detect the environment in which the vehicle is operating, including speed, weather, density of traffic and every other condition that affects driving decisions. Autonomous driving systems also require high-definition maps, a highway or urban setting, and the ability for the system to make informed decisions independently, without the need for human supervision.

 

The ADAS+/ Level 2+ segment of the consumer automotive market is expected to grow significantly over the short to medium term. ADAS+/Level 2+ systems are still technically in the driver-assist realm but incorporate a whole new layer of functionality on top of the traditional ADAS features. For instance, in Level 2+ vehicles, map data may enable lane-centering functions to remain effective even in areas where sensing-only lane centering systems may face difficulties, such as in areas without visible lane marks or low-quality lane markings, ramps with sharp turns, junctions, roundabouts, newly paved roads or urban settings. Level 2+ also supports automatic lane changes by providing information such as lane-marking types and adjusting the drive speed according to road speed/curvature.

 

In Level 3 through Level 5 autonomous vehicles, the system is expected to take on the full task of driving, either in defined-use cases (Level 3 and Level 4) or all use cases (Level 5). Accordingly, the OEM is defined as the legal driver, retains full responsibility and the autonomous vehicle system must comply with the highest level of functional safety (ISO26262 ASIL D). This is to guarantee a failure probability low enough that automakers, consumers and regulators will be able to agree that the vehicle can handle driving without any supervision by a human driver in given areas and at given times. Level 3 through Level 5 systems accordingly require a robust sensing suite, which necessitates the use of high-performance LiDAR sensors. High performance LiDAR sensors were initially too expensive for mass market applications. However, our products feature reliability, automotive-grade assurance, low cost and distributed sensing advantages and we believe our products are well-positioned to achieve widespread deployment in this segment.

 

Beyond the autonomous driving industry, there exist numerous other applications in which a high-performance automotive-grade LiDAR with wide operating range and high reliability can add significant value. For example, numerous off-highway driving applications significantly benefit from the safety features available with use of LiDAR solutions. These include the mining and construction industries, ports and airports, and material handling in factories, all of which deploy vehicles and machines in restricted environments, at low speeds, and which require autonomous driving not only for cost saving, but also to prevent costly accidents caused by distracted drivers. The major applications currently relevant to our company beyond autonomous driving are:

 

Our LiDAR Applications in Shuttles and Robotaxis

 

The automated shuttle business model is reliant on full autonomy. Shuttles drive repetitively over the same, well mapped (“geo-fenced”) routes, with the possibility of software orchestration for specific difficulties, such as a high-traffic intersection.

 

Similarly, the robotaxi business model is also reliant on full autonomy. However, similar to human-driven taxis, robotaxis travel on constantly changing routes with dynamic pick-up and drop-off locations for passengers that order the robotaxi service. This more complex and dynamic driving environment makes the autonomy challenge for robotaxis harder to solve compared to that of shuttles. Nevertheless, the use-case is compelling as it will drive costs for passengers down to a small part of the current taxi price, when taking into account the elimination of drivers, increased safety, and other savings.

 

In both shuttles and robotaxis, autonomy calls for a comprehensive sensor suite that has 360-degree surround-perception in the most trying circumstances, including busy city streets with pedestrians, dogs, bicycles, erratic traffic behavior, construction sites and others. Sensors need to be precise in regard to location and timing, see all around the vehicle and detect obstacles at various heights with minimal delay. In addition, localization is needed to locate the shuttle or robotaxi precisely, to leverage high-definition maps.

 

Our LiDAR is uniquely suited to the shuttle and robotaxi applications. By deploying LiDARs around the perimeter of the vehicle, shuttle and robotaxi designers can avoid both occlusion and blind spots. Just as a human driver would cautiously move forward to peek around the truck, software can creep, allowing a corner mounted LiDAR to see over the intersection and decide to go around the truck when traffic is clear.

 

Our LiDAR Applications in Trucks

 

Fully autonomous trucks may weigh 20-tons or more and have a stopping distance of several hundred meters. Full autonomy in this space is not only dependent on long-range sensors, but also on advanced and validated software that has to be proved to work at highway speed. This is further complicated by traffic diversions, construction and debris on the freeway, accident sites, traffic cones and other common highway occurrences. Development of fully autonomous trucks is supported by our current LiDARs.

 

In addition to the application of a fully autonomous truck driving alone, LiDAR sensors can enable a platoon of leader-follower trucks, where the lead vehicle has a human driver, and the follower vehicles are autonomous. For this application, LiDAR sensors are critical in maintaining distance between leader and follower(s). A gap will allow other vehicles to cut-in, disturbing the truck platoon formation. Our high precision LiDARs range sensing allows a tight platoon to drive at highway speed with safety.

 

Our Technological Differentiation

 

The first level of automation that requires sensors beyond radars or cameras is Level 2. Level 2 autonomous vehicles use cameras and radars as the sensors for making actuation decisions for the vehicle (changes in car speed and trajectory). However, the driver is essential to meet functional safety targets. The driver is used as a second observer to the camera and is expected to keep his or her eyes on the road so that he or she can take over in case the car’s driving decision-making system makes an error.

 

A system which complies with the highest level of functional safety (ISO26262 ASIL D) requires the “smart” redundancy of critical elements. The sensor suite is defined as a critical part of the autonomous driving system, as it is not possible to make correct driving decisions without an accurate understanding of the vehicle’s surroundings. “Smart” redundancy does not mean multiplying the same sensors to deal with sensor malfunction but rather adding different types of sensors to ensure that, in any given situation where conditions are challenging for certain types of sensors, other sensors will perform well and enable correct driving decision-making. Ideally, sensors should complement each other.

 

Cameras and radars are ubiquitous today. Both have advantages for use in ADAS and autonomous driving applications, and both are relatively mature technologies with price points that are accessible for almost all new cars. Nevertheless, cameras and radars have known disadvantages that make them inadequate for use in Level 3 through Level 5 systems without a LiDAR. In addition, even Level 2 ADAS systems, which are not considered “autonomous driving” but have important active safety features, can greatly benefit from the addition of LiDARs for detecting and classifying objects and making emergency decisions to avoid accidents. This is especially true of Level 2+ systems offering enhanced ADAS that can empower pseudo-autonomy, such as hands-free highway driving where the driver still retains primary responsibility. This trend will likely be driven by lower cost LiDAR systems.

 

Camera-based ADAS systems rely heavily on perception software, as the sensor itself provides 2D data that requires perception algorithms in order to translate the data into a 3D perception model of the road. The ability of cameras to detect range is limited since 2D information does not include a measurement of range. Although range can be deduced from a 2D picture using perception algorithms, that process has limited accuracy. Furthermore, camera performance is limited under low-lighting situations, especially at night, and during sudden exposure to extreme light, and its performance is limited by challenging weather conditions such as rain.

 

Radar, on the other hand, is limited by its low angular resolution compared to other sensors such as camera or LiDAR. For example, radar may have difficulty differentiating between reflections from a car that is 50 meters away, the fence next to it or a parked car along the way. It may also have issues distinguishing objects that are close together and determining object size and shape.

 

Real life road conditions may present autonomous vehicles with objects, or a combination of objects, that the vehicles’ perception algorithms are not able to classify, as every perception algorithm is only designed to support a limited set of object classes. The value of having a LiDAR as part of the vehicle’s sensing suite in this situation is that the LiDAR provides a physical measurement in a high-resolution 3D representation of the driving scene. The perception software layer can then use this 3D representation to determine the existence of an object in the driving path of the vehicle, without the need to classify the type of object. Therefore, safe driving can be maintained.

 

Most LiDAR lasers work at either around ~905nm or ~1550nm wavelengths. The choice of wavelength impacts, among other things, the type of laser and optical detector used in the system, which are two of the main components that influence performance, cost and power consumption of the LiDAR. ~1550nm wavelength LiDAR lasers can potentially send stronger light pulses than ~905nm wavelength LiDAR lasers while still maintaining eye-safety limitations and therefore provide longer range measurements than ~905nm lasers, but certain factors prevent them from being as cost or energy efficient as ~905nm wavelength-based systems. Specifically, ~1550nm based systems may use fiber-coupled lasers that are significantly more expensive than the diode lasers used with ~905nm wavelength-based systems. Furthermore, deploying the higher peak optical power used in ~1550nm systems may consume more electrical power than that used by ~905nm systems, which also causes the LiDAR to heat up considerably. This is a critical physical limitation, especially when many new cars are electric cars. Since electrical-to-optical power conversion efficiency is similar at both wavelengths, ~1550nm systems generally require more electrical power than ~905nm systems. The increased power consumption may also lead to a greater burden on the car’s electric power supply (which is an important factor, especially for electric vehicles) and to size and form factor issues, as it takes a larger mechanical design to manage heat dissipation. Larger components are also harder to fit on the outside of the car from a design perspective. In addition, as silicon detectors cannot detect ~1550nm light efficiently, the detectors for a ~1550nm LiDAR often include compounds such as indium gallium arsenide which are more expensive to source and manufacture relative to silicon, which is ubiquitous in ~905nm detectors.

 

Our Technological Approach

 

Recognizing the limitations on the use of ~1550nm lasers in the automotive industry, we have, from our inception, focused on the development of a commercially viable LiDAR solution that utilizes an eye-safe ~905nm-based laser designed to outperform more expensive ~1550nm based LiDARs.

 

In order to minimize the performance limitations resulting from the stricter eye-safety limitations of ~905nm wavelength lasers compared to ~1550nm wavelength lasers, we have used a multidisciplinary approach to design the key system components from the ground up, including:

 

 

 

 

The integration of MEMS-based and other unique scanning mechanisms in the LiDAR reduces form-factor and improves robustness. The reduced form-factor allows our LiDAR to be deployed around the perimeter of the autonomous vehicle, thereby reducing blind spots and improving efficacy of perception in a manner that is consistent with higher levels of autonomy.

 

InnovizOne, featuring a form factor of 0.5 liters and weight of 0.5 kilograms, is capable of beaming laser signals off obstacles as far as 250 meters away. The signals are then collected in a high sensitivity detector and processed by advanced analog and digital circuits in an ASIC. Each of these is custom designed by us. Each reflection represents a point, or reflection of an individual laser beam. A scanner deflects the laser to scan the field of view (“FOV”). The time-of-flight of each reflection, or point, is measured to yield distance and reflectivity information. The accumulation of all the points in the FOV results in a point-cloud that is transmitted from the LiDAR. Based on the speed of light, the time-of-flight measurement provides an accurate 3D representation of all objects and obstacles in the FOV.

 

InnovizTwo features a unique technology that is distinct from InnovizOne. The primary target market for InnovizTwo is automotive customers as it provides scalability and expansion to offer LiDAR capabilities across different automotive segments, while building on lessons learned and synergistic advantages which Innoviz has gained through its historical creation of products, including InnovizOne. In addition to its unique hardware solutions, Innoviz’s LiDAR solutions include a unique perception software application that turns raw point cloud data from Innoviz LiDAR products into perception outputs. The outputs can serve as a standalone, functionally safe perception software, or can be integrated into the vehicle’s existing perception stack at different levels to support various sensor fusion architectures. Our software leverages the rich data derived from our LiDAR products, coupled with proprietary state-of-the-art artificial intelligence-based algorithms, to provide superior scene perception and deliver an automotive-grade ASIL B(D) solution.

 

 

We believe that the following strengths differentiate us from our competitors and will enable us to successfully compete in our target markets to maintain our leadership position.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our products provide a good understanding of the location of the vehicle in a broad range of driving environments and allow for confident detection and planning at varying vehicle speeds. Our product portfolio encompasses sensor hardware and perception and decision-making software that improve existing vehicle features and enable new levels of vehicle automation for passenger car and commercial applications.

 

Our product offerings include:

 

 

 

 

Commercial Traction

 

The early start with BMW’s Level 3 series production program resulted in our team becoming deeply engaged in ISO26262 compliance and functional safety adherence. With active participation, including a resident team, in the BMW program at Unterschleißheim in Germany, our team delivered InnovizOne LiDARs to the integration teams at Magna and BMW and learned a lot from the extensive validation testing that is needed in order to conform to applicable standards.

 

Recognizing the long path to volume ramp in the automotive industry, with additional complexity due to demanding safety standards for autonomous vehicles, such as ISO26262-ASIL-B, we have taken a broad-based approach to potential LiDAR market opportunities. Instead of treating adjacent markets in an opportunistic manner, we have placed considerable focus on discovering applications and cultivating customers and resellers in these markets. Accordingly, we focus our business development activity on both the consumer automotive market and on other markets:

 

 

We are working closely with leading OEMs in Europe, Asia and North America that define Level 2+, Level 3 and Level 4 programs and consider the adoption of InnovizTwo Long-Range and InnovizTwo Short- to Mid-Range to such programs and thereby bring significant additional value to the ADAS+ and autonomous applications.

 

We are in discussions with a number of robotaxi, shuttle, truck and delivery robots potential customers to incorporate InnovizTwo Long-Range and InnovizTwo Short- to Mid-Range into their upcoming builds. We believe the form factor, field-of-view and range of these products is well suited to sensing applications on the perimeter of these Level 4 platforms.

 

 

 

We currently market and sell our LiDAR solutions through a direct sales organization as well as through our distribution channels. Our technology and product focus since inception has been on the automotive OEM opportunity for high performance LiDAR solutions in the autonomous driving industry. This focus has also informed and guided our sales and marketing activities, which led to early contact with OEMs and Tier-1 suppliers and also led to our sales team acting as a bridge between our research and development team and these partners. Our sales and marketing team continues to focus on expanding our relationships with OEMs and seeks to leverage our existing relationships as well as new commercial agreements, to expand our market to other industries.

 

Research and Development

 

We have invested a significant amount of time and expense into research and development of LiDAR-based technologies. Our research and development team is the largest department in the company and, as of December 31, 2024, was comprised of 340 employees. Our ability to maintain a leadership position in the industry depends to a great degree on our ongoing research and development activities. Our research and development team includes engineers and researchers with a diverse range of expertise and diverse levels of experience and academic backgrounds, including holders of B.Sc., M.Sc. and PhD degrees from leading academic institutions. Our research and development activities are largely conducted at our headquarters in Rosh HaAin, Israel.

 

Creating an automotive-grade, eye-safe and cost efficient ~905nm wavelength LiDAR solution and the accompanying perception software required the efforts of a multi-disciplinary team with expertise spanning optics, lasers, mechanical engineering, micro-electronics, chip design, complex IC packaging, algorithms, neural networks, systems engineering and software architecture and engineering.

Intellectual Property

 

Our success and competitive advantage depend in part upon our ability to develop and protect our core technology and intellectual property. We own a portfolio of intellectual property, including registered patents, registered trademarks, registered designs, confidential technical information, and expertise in the development of LiDAR technology and software for, among others, autonomous vehicles.

 

We have filed patent and trademark applications in order to further secure these rights and strengthen our ability to defend against third parties who may infringe on our rights. We also rely on design and manufacturing know-how, continuing technological innovations, and licensing and exclusivity opportunities to maintain and improve our competitive position. Additionally, we protect our proprietary rights through agreements with our commercial partners, supply-chain vendors, employees, and consultants, as well as close monitoring of developments and products in our industry.

 

As of December 31, 2024, we owned 66 issued patents and had 128 pending patent applications. The portfolio includes U.S. and foreign patent applications filed in Israel, Europe (including Germany, France and the United Kingdom), China, Japan and Korea. In addition, our company has registered U.S. and foreign trademarks. Our patents and patent applications cover a broad range of system level and component level aspects of our key technology including, among other things, LiDAR systems, laser, scanner, receivers, optical devices, and perception technology.

 

Competition

 

The market for competitive automotive sensing solutions that enable autonomous driving is an emerging one with many potential applications in the development stage. As a result, we face competition from a range of companies seeking to have their products incorporated into these developing applications and it may take a period of time for our primary competitors to emerge.

 

Our competitors are also working to advance technology, reliability, and innovation in their development of new and improved solutions. Although we believe that we have market leading technology, we continue to face competition from existing competitors and new companies emerging in the LiDAR, camera and radar industries. Within the LiDAR segment of the industry, where competition is based significantly on performance and cost and energy efficiency, we face competition from companies utilizing a variety of laser wavelengths such as ~905nm and ~1550nm lasers, as well as a variety of steering mechanisms, such as MEMS, mechanical, Optical Phased Array, and non-scanning LiDARs (Flash). We believe that it may take new, smaller companies a substantial period of time to gain the recognition and trust of top-tier automotive OEMs and Tier-1 suppliers.

 

Many of our competitors offer more limited solutions for niche applications. Some competitors are currently selling solutions that offer lower levels of performance in ADAS and new autonomous driving markets. In the passenger car ADAS market, a number of competitors have already achieved substantial market share using camera and radar-based perception sensing solutions.

 

 Our LiDAR product empowers higher performance ADAS at price points that we believe we can displace current solutions. Our early engagement with a premium OEM and with Tier-1 partners also differentiate us from other LiDAR makers.

 

While LiDAR competitors will continue to emerge and recede, we believe that our high-performance LiDARs, strong intellectual property portfolio, software products, and design wins with leading OEMs, have established barriers to those who follow. We expect that our technology and continuing innovation, our longstanding cooperation with leading OEMs as well as our recent collaboration with Mobileye, a leader in ADAS and autonomous driving technology, will support our position as a leader in advancing LiDAR technology in the market based on several market differentiators.

 

Manufacturing

 

Our proprietary LiDAR architecture focuses on developing a full LiDAR autonomous driving solution that utilizes a ~905nm wavelength laser. In order to break through the performance limitations resulting from optical peak power limitations, we have used a multi-disciplinary approach to design the key system components, such as our unique scanning systems, silicon detectors and the signal processing ASIC, in order to improve the optical link budget of the system while acquiring the best possible detection capabilities for a given optical link budget. Designing critical components in-house rather than using off-the-shelf commodity components provides for protectable and sustainable technology differentiation from LiDAR competitors or alternative technologies. We believe one of the significant barriers to entry for automotive LiDAR is the processes and know-how to manufacture a compact and intricate sensing product in high volumes.

 

At the same time, we have focused on operating in accordance with the rigorous manufacturing standards of the automotive industry from the company’s earliest days. Therefore, we have utilized an automotive-level contract manufacturer and vendors to manufacture our products and sub-components from an early stage. Working with such an experienced contract manufacturer and vendors added to our manufacturing knowhow and instilled discipline and quality in our development process.

 

InnovizOne is manufactured at Magna’s automotive grade facility in Holly, Michigan to meet demand for our LiDAR product. In this context, please see reference herein to the Magna Agreement (as defined herein). Currently, our InnovizTwo samples are manufactured at our headquarters; however, we are also ramping-up manufacturing activities for the InnovizTwo at our new contract manufacturing mass-production site in Asia. The first InnovizTwo samples are expected to be manufactured at the new site during 2025.

 

Although manufacturing of some of our products and sub-components is outsourced, our operations and quality assurance teams manage the sourcing of specialized equipment required for assembly, calibration and testing of our LiDAR systems. These teams also manage our quality control and assurance operations and work with our suppliers to monitor quality and improve yield.

 

We source our components from a variety of third-party manufacturers. The prices and availability of our components may be impacted by changes in supply and demand, as well as market uncertainty and other factors. Historically, we have been able to source our components at prices satisfactory to our Company; however, we may be unable to do so in the future.

 

 

We are a global company focused on creating a positive social impact by promoting the future of mobility and increasing road-traffic safety and welfare, all through the values of excellence, education, creation and innovation. As such, we recognize the importance of creating shared values for our different stakeholders and translating those values into measurable goals in order to guide our long-term success. We also have a responsibility to meet high standards of quality, safety and sustainability as a service provider to the automotive industry.

 

In June 2024, we published our first Impact Report, which covers the company’s initiatives and activities for 2022 to 2023. The report demonstrates our ongoing efforts to creating a positive impact for our stakeholders through our business, products and operations. The report relates both to the unique impact of our products and technology, aiming to redefine the landscape of automotive safety, as well as to our efforts to implement sustainable, inclusive and safe business practices in our operations.

 

Our operations and day-to-day business activities take place under the supervision of our dedicated nominating, environmental, social and governance committee of the board of directors, and with the assistance of a reputable independent ESG consulting firm.

 

 

 

Autonomous vehicles are subject to emerging regulatory frameworks in the United States at the federal and state levels. In general, at both the federal and state level, the United States has supported testing and development of autonomous functionality through open information exchange. For example, in January 2021, NHTSA expanded its AV TEST Initiative from a pilot to a full program, and through this Initiative a variety of stakeholders provide documentation covering specific topics, such as how automated systems detect objects on the road, how information is displayed to drivers, what cybersecurity measures are in place and the methods used to test the design and validation of autonomous driving systems. NHTSA has been utilizing this information to impose additional regulatory obligations on ADAS and autonomous driving systems.  In particular, NHTSA has been engaged in rulemaking to update certain FMVSS to address ambiguities and other issues created by the application of FMVSS to innovative, non-conventional vehicle designs utilized, or anticipated to be utilized, in certain ADAS and autonomous driving vehicles. In 2023, NHTSA promulgated the “Occupant Protection for Vehicles with Automated Driving Systems” final rule to update several FMVSS to account for vehicles that are equipped with ADAS and do not have traditional manual controls associated with human drivers. It also jointly proposed a rule with FMCSA regarding AEB test devices for heavy vehicles. In 2024, NHTSA finalized rules to update FMVSS for crash avoidance, safety messaging and passengerless vehicles as well as a rule to require AEB by 2029 in all passenger and light duty vehicles. On January 15, 2025, NHTSA proposed a voluntary national framework for the evaluation and oversight of certain vehicles equipped with automated driving systems.  The proposed framework, called AV STEP, that would remove the 2,500 cap on driverless vehicles allowed on the roadways and expand as well as streamline the program for exemption from FVMSS for ADS-equipped vehicles, but would impose additional data reporting requirements on all vehicles participating in AV STEP. Although we do not anticipate any near-term impediments to our technology and products, the situation is an evolving one with some uncertainties and elements beyond our control. Many states in the U.S. have long imposed various requirements on autonomous vehicle development and testing, including operational, registration and financial assurance requirements for certain autonomous vehicle functions and activities. For example, California has been regulating autonomous vehicles in some fashion since 2012 through various restrictions and appears poised to continue to do so, as in December 2022, California introduced new legislation that would prohibit full self-driving marketing claims. It is possible that restrictions at the state level in the U.S. will ease or be removed as the data and experience supporting the safety of autonomous functionality continues to grow, but we cannot predict when or whether that might happen.

 

Foreign markets such as the China and the EU also continue to develop their respective standards to define deployment requirements for higher levels of autonomy. In China, for example, the government has undertaken numerous efforts to promote AV development, including its February 2020 release of the Strategies for Innovation and Development of Autonomous Vehicles by China’s National Development and Reform Commission and ten other agencies. This initiative sets forth an ambitious plan to create a systematic framework for technical innovation, industrial ecology, infrastructure, regulations and standards, product regulation and network security in the AV market by 2025, and from 2035 to 2050, to fully establish an ecosystem for autonomous vehicles. Much of the emerging regulatory and legislative activity around autonomous vehicles in the EU has been focused on data privacy and security, given the volume and types of data collected, stored and transmitted by autonomous vehicles. A key part of Europe’s emerging AV strategy is the creation of a common European mobility data space, to be further developed in the EU’s “Smart and Sustainable Transport Strategy”. Given the intense work in these areas, we expect a workable path forward in the near-term in these markets.

 

As vehicles equipped with our sensors are deployed on public roads in the United States, we will increasingly be subject to the legal and regulatory authority of various federal agencies, including NHTSA, which is part of USDOT. Currently, NHTSA’s TREAD reporting process, as well as its strict recall and reporting requirements for any defects related to vehicle safety or any FMVSS non-compliance provide the principal legal framework for identifying and addressing safety issues. Similar reporting and recall requirements may apply in other markets outside of the U.S.

 

However, the regulatory landscape in the U.S. and elsewhere is an evolving one. To date, NHTSA’s guidance to industry generally has been supportive of AV technology development, testing and implementation. More generally, NHTSA has established six automation principles that will be applied to its oversight of AV development: (1) prioritizing safety; (2) remaining technology neutral; (3) modernizing regulations; (4) encouraging consistent federal and state regulatory environments; (5) providing guidance, research and best practices to government and industry partners; and (6) protecting consumers’ ability to choose conventional and autonomous vehicles. More specifically, NHTSA has been granting exemptions from FMVSS compliance for ADAS-equipped and AVs where it is satisfied that the non-compliance will not impose public safety issues and as a tool for encouraging technology development, testing and innovation. At the same time, NHTSA is actively reviewing other potential regulatory barriers to AV development as it proceeds to promulgate new regulations and to update certain FMVSS to address ambiguities and other issues created by the application of FMVSS to innovative, non-conventional vehicle designs utilized, or anticipated to be utilized, in certain ADAS and autonomous driving vehicles. In 2023, NHTSA promulgated the “Occupant Protection for Vehicles with Automated Driving Systems” final rule to update several FMVSS to account for vehicles that are equipped with ADAS and do not have traditional manual controls associated with human drivers. NHTSA also proposed rules to update FMVSS for crash avoidance, safety messaging and passengerless vehicles as well as jointly proposed a rule with FMCSA regarding AEB test devices for heavy vehicles.

 

As noted above, many states have instituted restrictions and requirements for autonomous vehicle technologies. At least 29 states and the District of Columbia have enacted some type of autonomous vehicle regulations, and a number of state governors have also issued executive orders. These efforts largely focus on safety and regulate commercial activity through permitting and reporting regimes.

 

Overall, the regulatory landscape is still evolving rapidly, and uncertainties exist in the U.S. due to the recent change in Presidential Administration. As legal frameworks around autonomous vehicles continue to develop and change in the U.S. and elsewhere, we may become subject to additional regulatory schemes and requirements.

 

As a LiDAR technology company, we also are subject to the laws and regulations beyond those specific to vehicle safety standards and highway safety. For example, our products are governed by the Electronic Product Radiation Control Program administered by the FDA. This Program establishes performance standards and imposes requirements for registration, labelling, testing and reporting. Failure to comply with the Program may result a variety of consequences, including product recalls or replacements, warning letters, untitled letters, safety alerts, injunctions, import alerts, administrative product detentions or seizures, or civil penalties. LiDAR technologies also may need to comply with certain state radiation control licensing and other requirements.

 

Similarly, as a global company deploying cutting-edge technology, we are also subject to trade, export controls, customs product classification, hazard labelling and warning, and other sourcing and product regulations. Our operations also are subject to various federal, state and local laws and regulations pertaining to our employees, such as wage and hour, worker’s compensation and occupational health and safety regulations.

 

Like all companies operating in similar industries, we are subject to a wide range of environmental laws and regulation at the federal and state level pertaining to matters such as emissions to air and water, manufacture, processing, use, storage and distribution of chemical substances, hazardous waste generation and disposal, and remediation of environmental contamination. Compliance with these rules may include the need to obtain permits and licenses and to allow inspections of our facilities and products.

 

Legal Proceedings

 

From time to time, we may become involved in actions, claims, suits, and other legal proceedings arising in the ordinary course of our business, including assertions by third parties relating to intellectual property infringement, breaches of contract or warranties or employment-related matters. We are currently not a party to any material actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to it, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations. See Note 9 of our consolidated financial statements included elsewhere in this Annual Report, which is incorporated by reference in this Item 4.B., for additional information regarding the Lawsuit.

 

 

The legal name of our company is Innoviz Technologies Ltd. and we are organized under the laws of the State of Israel. We have four wholly owned subsidiaries: Innoviz Technologies Inc., which is incorporated in the United States; Innoviz Technologies GmbH, which is incorporated under the laws of Germany; Innoviz Software Centre Bucharest S.R.L, which is incorporated under the laws of Romania; and Innoviz Technologies Trading Shanghai Co., Ltd., which is incorporated under the laws of the People’s Republic of China.

 

Innoviz Technologies BY LLC, formerly a wholly owned subsidiary incorporated under the laws of Belarus, was liquidated in November 2024 following the cessation of its operations in 2022.

 

D. Property, Plant and Equipment

 

Our corporate headquarters are located in Rosh HaAin, Israel, where we currently lease an office with approximately 16,350 square meters pursuant to a lease agreement dated November 1, 2021 (the “Lease Agreement”) (incorporated by reference to Exhibit 4.14 to the Company’s Annual Report on Form 20-F for the Year Ended December 31, 2021 filed with the SEC on March 30, 2022). This facility contains engineering, research and development, testing, product, sales and administrative functions. The initial term under the Lease Agreement is for 67 months and expires on January 31, 2028. We have an option under the Lease Agreement to renew the lease for additional 60 months, which will be exercised automatically unless we inform the lessor in advance. We also lease a small office space in Santa Clara, California, pursuant to a lease agreement that is in effect until July 31, 2025, and a small office in Munich, Germany, pursuant to a lease agreement that is in effect until November 15, 2027.

 

Unless otherwise stated, all our facilities are utilized. We believe that our offices and facilities (as currently conducted and in accordance with future plans) are adequate for our current needs and that suitable additional or substitute space will be available when needed.

 

 

None.

 

 

You should read the following discussion and analysis of our financial condition and results of operations together with the audited annual consolidated financial statements and the related notes included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled Item 3.D. “Key Information—Risk Factors” of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

 

We are a leading Tier-1 direct supplier of high-performance, automotive grade LiDAR sensors and perception software that feature technological breakthroughs across core components and bring enhanced vision and superior performance to enable safe autonomous driving at a mass scale. We believe that we provide a comprehensive solution for OEMs and Tier-1 partners that are developing and marketing autonomous driving vehicles to the passenger car and other relevant markets, such as robotaxis, shuttles, delivery vehicles and trucks.

 

We were founded in 2016. From our founding, our culture drew from our core values of solving sophisticated technological problems through creativity and agile thinking. We have relied on these values to address the needs of autonomous vehicles in a manner that strikes the desired balance between performance and cost. We created a new type of LiDAR sensor from the chip-level up, including a suite of powerful and sophisticated software applications for high-performance computer vision to allow superior perception. In 2018, we achieved a design win to power BMW’s Level 3 autonomous platform, a program which reached maturity during 2024 and with vehicles already being sold with our LiDARs and perception software.

 

Since 2021, we have funded the development of two production path programs: the InnovizOne and InnovizTwo LiDAR sensor and perception software suites. With the InnovizOne program transitioned from the development phase into full series production in 2024, we eliminated duplicative cost structures and reduced spending on InnovizOne development, while reinvesting a portion of the savings into the InnovizTwo sensor and perception software platform. All quoting and bidding activity in our request for information and request for quotation pipeline is now focused on the InnovizTwo platform.

 

During 2022, we made the strategic decision to become a Tier-1 supplier of LiDAR and perception software to the automotive industry. This decision allows us to have direct technical discussions with end customers and to improve pricing to automotive OEMs with the goal of continuing to strengthen our position in the automotive market. This strategic decision has played a significant role in our subsequent major OEM program wins, as discussed below.

 

In 2022, following more than two years of extensive diligence and qualification, we were selected by Volkswagen as its direct LiDAR supplier for automated vehicles within the Volkswagen brands with our InnovizTwo next generation high-performance automotive-grade LiDAR sensor, and in 2023, we announced that Volkswagen aims to expand its use of our InnovizTwo LiDAR to its existing light commercial vehicle program, the I.D Buzz.

 

In 2024, we announced that Mobileye will use the InnovizTwo Long-Range and the new InnovizTwo Short- to Mid-Range LiDARs for the Mobileye Drive™ platform. The new InnovizTwo Short- to Mid-Range leverages InnovizTwo Long-Range’s maturity and is designed to meet the requirements for light commercial vehicles, shuttles, robotaxis, and can be customized to suit a wide array of vehicular design and functionality requirements. We believe that the combination of our LiDARs and Mobileye’s platform is critical to enabling comprehensive sensing capabilities for navigating complex urban environments and enhancing the overall safety and reliability of autonomous driving systems, and that this partnership showcases the flexibility of our LiDARs to work across a variety of vehicle platforms to further testing and deployment of autonomous vehicles. Our partners are leaders in deploying new technologies into the automotive industry. We believe that our close cooperation with these partners and OEMs positions us well to make Level 3 and Level 4 autonomous driving a commercial reality.

 

The sustained cooperation with our customers provides our engineers and other research and development personnel with a valuable competitive edge. These engineers and other research and development personnel have been meticulously trained to design, operate, and verify our many ground-breaking innovations in accordance and in compliance with the ISO26262 standard for Functional Safety in the automotive industry, and the IATF 16949:2016 certification for Quality Management in the automotive industry. Compliance with these and other standards have been enforced by regular ongoing audits of Innoviz and rigorous testing by our key suppliers, existing customers and prospective customers that thoroughly review the performance of various elements of our operations. As a result, our products have been constructed from the bottom up with hardware and software technology that meets the most stringent automotive safety, quality, environmental, manufacturing, and other standards.

 

Our innovation has produced LiDAR solutions that deliver market leading performance and that meet the current demanding safety requirements for Level 2+ through Level 5 autonomous vehicles at price points suitable for mass produced passenger vehicles.

 

Our robust software suite enables our ~905nm wavelength laser-based LiDAR architecture to be easily leveraged to provide compelling solutions for Level 2+ through Level 4 (and Level 5 when applicable), using both our long- and medium-range LiDARs. Our integrated custom design of advanced hardware and software components, which leverages the multidisciplinary expertise and experience of our team, enables us to provide autonomous solutions that we believe will accelerate widespread adoption across automakers at serial production scale. This means that we are positioned to penetrate the current market, which is focused primarily on Level 2+, Level 3 and Level 4 production, and to continue to capture and extend our market share to 5 as the market continues to mature.

 

We are currently expanding our third-party manufacturing capacity through contract manufacturers to meet an anticipated increase in customer demand for our products.

 

Entered into Multi-Year NRE Payment Plan with Key Customers

 

On December 23, 2024, we announced a multi-year NRE payment plan of approximately $80 million with key existing customers. NREs are expected to be paid between 2025 and 2027, of which over $40 million are expected to be paid in 2025 with further amounts expected in 2026 and 2027. These payments would be incremental to revenues generated from ongoing sales of LiDAR products based on existing and expected new orders coming from new programs. There can be no assurances, however, that we will enter into definitive agreements, orders or receive payments with respect to the NRE payment plan.

 

Regained Compliance with Nasdaq’s Minimum Bid Price Requirement

 

On January 2, 2025, we announced that we received formal written confirmation from Nasdaq confirming that the Company has regained compliance with Nasdaq’s minimum bid price requirement. The closing bid price of the ordinary shares was at $1.00 per share or greater for 10 consecutive business days from December 16 to December 30, 2024. Accordingly, Nasdaq Listing Qualifications Staff notified the Company that it determined that the Company regained compliance with Nasdaq Listing Rule 5550(a)(2), and that the matter was closed.

 

Integration of Perception Software with NVIDIA DRIVE AGX Orin

 

On January 7, 2025, we announced our collaboration with NVIDIA to allow our perception software to run seamlessly with the NVIDIA DRIVE AGX Orin platform, offering a range of software-driven features designed to accelerate autonomous driving applications by allowing for real-time processing and advanced understanding of the vehicle’s environment, enabling exceptional object detection, classification, and tracking capabilities.

 

Optimization of Operations

 

On February 4, 2025, we announced an optimization of our operations to extend our cash runway and accelerate progress towards profitability and free cash flow generation, which includes a reduction in our employee headcount by approximately 9% during the first quarter of 2025.

 

Registered Direct Offering

 

On February 10, 2025, we entered into the Securities Purchase Agreement with the Purchasers. Pursuant to the Securities Purchase Agreement, we agreed to sell in the Offering 28,776,978 units to the Purchasers at a purchase price of $1.39 per unit, with each unit consisting of one ordinary share and eight tenths of a warrant to purchase one ordinary share. The Offering was consummated on February 12, 2025. We received net proceeds of approximately $37.3 million, after deducting the placement agent fees and offering expenses. The ordinary shares and warrants were issued separately. The warrants are exercisable at $1.69 per share and will expire on February 12, 2030. A holder of the warrants will not have the right to exercise any portion of its warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates or any other persons whose beneficial ownership of ordinary shares would be aggregated with the holder’s or any of the holder’s affiliates), would beneficially own ordinary shares in excess of 4.99% (or, at the election of the holder, 9.99%) of the number of the ordinary shares outstanding immediately after giving effect to such exercise.

 

Appointment of Ido Luski

 

Udy Gal-On, the Company’s Chief Operating Officer, will transition into the role of Co-Chief Operating Officer during the second quarter of 2025. Ido Luski, currently the Company’s VP Delivery, will assume the role of Co-Chief Operating Officer alongside Mr. Gal-On during the second quarter of 2025.

We believe that our future performance and success depends to a substantial extent on the following factors, each of which is in turn subject to significant risks and challenges, including those discussed below and in the section of this Annual Report entitled Item 3.D. ”Key Information—Risk Factors.”

 

Market Adoption

 

We believe that widespread adoption of LiDAR across applications for autonomy is approaching and that we are well-positioned in both automotive and nonautomotive markets to take advantage of this opportunity. Nevertheless, automotive OEMs and their suppliers have commenced the commercialization of autonomous systems that rely on LiDAR technology. Accordingly, we expect the rate of actual adoption and commercialization of LiDAR-based solutions by automotive OEMs and their suppliers to impact our results of operations, including revenue and gross margins, for the foreseeable future. Given the focus of the consumer automotive market on Level 4, 3 and 2+ segments, we expect these verticals to continue to grow over the short to medium term, we are aligning our focus and efforts on these segments, specifically via our InnovizTwo product.

 

We believe that InnovizTwo will drive significant revenue growth in the near to medium term. We also believe that market penetration of InnovizTwo will drive revenues in the Level 4 and 3 segments of the market. This is because the architecture of our products, which feature agile configuration of multiple components, allow us to offer different product configurations based on the same hardware with only software modification. Accordingly, we can address multiple market needs and niches without the need to develop several hardware configurations. Therefore, our LiDAR solution enables upgrade from Level 2+ to Level 3 through a vehicle software update without changes to the hardware components or the need of new hardware.

 

We also target markets such as robotaxis, shuttles, delivery vehicles, trucks and, potentially, others. We believe that LiDAR-based solutions in these emerging markets are still in the pre-commercial development stage and, as a result, our future success also depends on customers in these industries adopting and bringing these solutions to commercial scale.

 

Design Wins

 

Our solutions are designed to be key enabling technologies for OEMs in automotive and other applications. Because our solutions must be integrated into a broader platform by the OEM, it is critical that we achieve design wins with these customers. The time necessary to achieve design wins varies based on the market and application. The design cycle in the automotive market tends to be substantially longer and more onerous than in other markets. Even within the automotive market, achieving a design win with an automotive OEM takes considerably longer than a design cycle for an aftermarket application. We consider design wins to be critical to our future success, although the revenue generated by each design win and the time necessary to achieve such a win can vary significantly making it difficult to predict our financial performance.

 

Product Cost and Margins

 

Our results of operations will depend on our ability to leverage the fixed costs involved in production of our current products and our ability to improve gross margins on the basis of volume and manufacturing efficiencies.

 

InnovizTwo platform is based on an improved design, which allows: (i) lower bill of materials, and (ii) more efficient manufacturing process, which together may allow for a significant cost reduction and improved gross margins.

 

Continued Investment and Innovation

 

Our unique LiDAR and perception solutions feature technological breakthroughs across core components and allow us to act as one of the leading suppliers in a competitive market. We believe that our financial performance is significantly dependent on our ability to maintain this position. This in turn will depend on our future research and development investments and our ability to attract and retain highly qualified and experienced research and development personnel. These are necessary to both continue the work required on our current products and future products to full commercialization, and to identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products and enhance and service existing products. Failure to do this could adversely affect our market position and our revenue, and our research and development investments may not be recovered.

 

Components of Results of Operations

 

Revenues

 

Our revenues derive primarily from sales of LiDAR sensors, critical components and NRE to customers.

 

Revenue from LiDAR sensors and critical components is recognized at a point in time when the control of the goods is transferred to the customer, generally upon delivery.

 

NRE to certain customers may require substantive customer acceptance due to performance acceptance criteria that is considered more than a formality. For these services, revenue is recognized at a point in time upon customer acceptance.

 

Cost of Revenues

 

Cost of revenues include the manufacturing cost of LiDAR sensors, which primarily consists of components costs, sub-assembly costs and personnel-related costs, and amounts paid to third-party contract manufacturers and vendors. Cost of revenues also includes depreciation, costs of providing NRE, an allocated portion of overhead, warranty costs, excess and obsolete inventory and shipping costs. We expect cost of revenue to increase in absolute dollars in future periods to the extent revenue increases, however we expect our products’ unit cost to decrease as sales increase thereby leveraging economies of scale achievable due to our business model and higher production efficiencies.

 

Operating Expenses

 

Research and Development

 

Our research and development efforts are focused on enhancing and developing cost efficient LiDAR solutions and the accompanying software suite.

 

Research and development expenses include:

 

 

 

 

 

We expense research and development costs as incurred until the point that technological feasibility is reached, which for our software products is generally shortly before the products are released to production. We expect that our research and development expenses will continue to be significant for the foreseeable future as we invest in research and development activities to improve and enhance our product portfolio.

 

Sales and Marketing

 

Sales and marketing expenses include:

 

 

 

 

 

General and Administrative

 

General and administrative expenses include:

 

 

 

 

 

Financial Income, Net

 

Financial income, net consists primarily of interest on cash and cash equivalents deposited in our bank account, exchange rate differences arising from our ILS denominated lease liabilities under ASC 842, marketable securities remeasurement and private placement warrants remeasurement. The deposits will vary based on cash and cash equivalents, and with market rates. Our marketable securities have an average credit rating of “A” and a maturity of up to three years. We do not intend to invest more than 5% of our investment portfolio in a single security at time of purchase. In addition, financial income, net includes the fluctuation in value due to foreign exchange differences between cash and cash equivalent and monetary assets and liabilities denominated in foreign currency, mainly in ILS and EUR.

 

Recent Accounting Pronouncements

 

See Note 2 to our consolidated financial statements included elsewhere in this Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.

 

A. Results of Operations

 

For a discussion of our results of operations for the year ended December 31, 2022, including a year-to-year comparison between the years ended December 31, 2023 and December 31, 2022, as well as a discussion of our liquidity and capital resources for the year ended December 31, 2022, refer to Item 5. “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2023, filed with the SEC on March 12, 2024.

 

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report. The following table sets forth our consolidated results of operations data for the periods presented:

 

 

Comparison of the Years Ended December 31, 2024 and 2023

 

Revenues

 

 

Revenues increased by approximately $3.4 million, or 16%, to approximately $24.3 million for the year ended December 31, 2024, from approximately $20.9 million for the year ended December 31, 2023.

 

The increase in revenues was primarily due to increased sales of NRE, which contributed $18.0 million in revenues during the year ended December 31, 2024 compared to $15.2 million in revenues during the year ended December 31, 2023, as well as increased sales of LiDAR sensors and critical components.

 

Cost of Revenues and Gross Margin

 

 

Cost of revenues decreased by approximately $7.1 million, or 22%, to approximately $25.4 million for the year ended December 31, 2024, from approximately $32.5 million for the year ended December 31, 2023.

 

 

Operating Expenses

 

Research and Development

 

Research and development expenses decreased by approximately $18.9 million, or 20%, to approximately $73.8 million for the year ended December 31, 2024, from approximately $92.7 million for the year ended December 31, 2023.

 

The decrease was primarily attributable to decreased payroll of $8.7 million (primarily related to allocation of direct costs related to sales of NRE and decreased personnel expenses), decreased materials purchases and prototype expenses of $3.7 million, decreased third-party consulting services and software expenses of $3.6 million and decreased stock-based compensation of $2.5 million.

 

Sales and Marketing

 

Sales and marketing expenses decreased by approximately $1.3 million, or 15%, to approximately $7.5 million for the year ended December 31, 2024, from approximately $8.8 million for the year ended December 31, 2023.

 

The decrease was primarily attributable to decreased payroll of $0.8 million (primarily attributed to a decrease in headcount), decreased consulting services expenses of $0.2 million and decreased stock-based compensation of $0.2 million.

 

General and Administrative

 

General and administrative expenses were approximately $19.5 million for the year ended December 31, 2024, compared to General and administrative expenses of approximately $19.5 million for the year ended December 31, 2023.

 

 The difference was primarily related to decreased stock-based compensation of $1.1 million, offset by increased consulting services (primarily legal) of $0.9 million and increased payroll of $0.2 million.

 

Financial Income, net

 

 

Financial income, net was approximately $7.3 million for the year ended December 31, 2024, compared to financial income, net of approximately $9.8 million for the year ended December 31, 2023.

 

 

Quantitative and Qualitative Disclosures About Market Risk

 

 

Foreign Currency Risk

 

 

 

Interest Rate Risk

 

 

 

 

Other Market Risks

 

 

B. Liquidity and Capital Resources

 

Sources of Liquidity

 

 

 

Cash Flow Summary

 

The following table summarizes our cash flows for the periods presented:

 

Operating Activities

 

 

During the year ended December 31, 2023, operating activities used approximately $93.1 million. The primary factors affecting operating cash flows during the year ended December 31, 2023, were the net loss of approximately $123.5 million, impacted by non-cash charges of approximately $30.4 million consisting of stock-based compensation of approximately $22.3 million, depreciation and amortization of approximately $9.2 million, remeasurement of private warrants of approximately $(0.5) million and an increase in working capital of approximately $(0.6) million.

 

Investing Activities

 

 

During the year ended December 31, 2023, cash provided by investing activities was approximately $1.1 million, which primarily resulted from the withdrawal of bank deposits of approximately $141.5 million, proceeds from sales and maturities of marketable securities of approximately $83.5 million, partially offset by investments in bank deposits of approximately $165.6 million, investment in marketable securities of approximately $51.7 million and purchases of property, plant, and equipment of approximately $6.6 million.

 

Financing Activities

 

During the year ended December 31, 2024, cash provided by financing activities was approximately $0.2 million resulting from the exercise of employee stock options.

 

During the year ended December 31, 2023, cash provided by financing activities was approximately $61.9 million resulting from $61.4 million in net proceeds from underwritten public offering and $0.5 million from the exercise of employee stock options.

 

Funding Requirements

 

We expect to continue to invest substantially in our research and development activities and incur commercialization expenses related to product sales, marketing, manufacturing and distribution. As we achieve further commercial success, we may need to obtain additional funding to support our continuing operations. In addition, our financial stability is reviewed by existing and potential customers from time to time and we believe that a stronger cash position provides us additional time to execute our growth strategy and is perceived positively by such customers and may also provide us with higher grading in such customers’ diligence processes. If we are unable to obtain capital when and if needed or on attractive terms, we could be forced to delay, reduce or eliminate some of our research and development programs or future commercialization efforts.

 

 

We also expect our losses to be similaror lower in future periods as we:

 

 

 

Off-Balance Sheet Arrangements

 

Our remaining performance obligations are comprised of application engineering services not yet rendered. As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $15.3 million, which we expect to recognize as revenues within the next 12 months.

 

Other than as set forth above, we have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

 

C. Research and Development, Patents and Licenses, etc.

 

Research and Development

 

We have invested a significant amount of time and expense into research and development of LiDAR-based technologies. Our research and development team is the largest department in the company and, as of December 31, 2024, was comprised of 340 employees. Our ability to maintain a leadership position in the industry depends to a great degree on our ongoing research and development activities. Our research and development team includes engineers and researchers with a diverse range of expertise and diverse levels of experience and academic backgrounds, including holders of B.Sc., M.Sc. and PhD degrees from leading academic institutions. Our research and development activities are largely conducted at our headquarters in Rosh HaAin, Israel.

 

Creating an automotive-grade, eye-safe and cost efficient ~905nm wavelength LiDAR solution and the accompanying software suite required the efforts of a multi-disciplinary team with expertise spanning optics, lasers, mechanical engineering, micro-electronics, chip design, MEMS design, complex IC packaging, algorithms, neural networks, systems engineering and software architecture and engineering.

 

Intellectual Property

 

Our success and competitive advantage depend in part upon our ability to develop and protect our core technology and intellectual property. We own a portfolio of intellectual property, including registered patents, registered trademarks, registered designs, confidential technical information, and expertise in the development of LiDAR technology and software for, among others, autonomous vehicles.

 

We have filed patent and trademark applications in order to further secure these rights and strengthen our ability to defend against third parties who may infringe on our rights. We also rely on design and manufacturing know-how, continuing technological innovations, and licensing and exclusivity opportunities to maintain and improve our competitive position. Additionally, we protect our proprietary rights through agreements with our commercial partners, supply-chain vendors, employees, and consultants, as well as close monitoring of developments and products in our industry.

 

D. Trend Information

 

Supply Chain

 

We currently have sufficient component inventory in order to meet the demands of our customers in the near-term. In addition, we are in the process of procuring additional component stock to keep in inventory on a go-forward basis to minimize the effect of supply chain strain on our business in the future.

 

E. Critical Accounting Policies and Use of Estimates

 

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

 

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates. Please see Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report for additional information.

 

Revenue Recognition

 

We follow the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which applies to all contracts with customers. Under ASC 606, revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products and services.

 

When we enter into a contract, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within the contract and determine those that are performance obligations and assess whether each promised good or service is distinct.

 

We evaluate each performance obligation to determine if it is satisfied at a point in time or over time.

 

Inventory Reserves

 

Our inventory are stated at the lower of cost or estimated net realizable value. Cost of inventory is determined as follows:

 

 

 

We charge cost of revenue for write-downs of inventory which are obsolete or in excess of anticipated demand based on a consideration of marketability and product life cycle stage, product development plans, component cost trends, demand forecasts, historical revenue, and assumptions about future demand and market conditions.

 

Losses expected to arise from firm non-cancellable commitments for future purchases of inventory are charged to cost of revenues unless the losses are recoverable through firm sales contracts or other means.

 

Useful Lives of Property, Plant, and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation and impairment. The estimated useful lives of property and equipment are determined when those assets are initially recognized and are routinely reviewed for the remaining estimated useful lives. When useful life is reassessed for an asset, the remaining carrying amount of the asset is accounted for prospectively and depreciated over the revised estimated useful life.

 

 

A. Directors and Senior Management

 

The following table provides information about our directors and executive officers as of March 1, 2025. The address for each of the directors and executive officers is 5 Uri Ariav Street, Building C, Rosh HaAin, Israel 4809202.

 

 

Executive Officers

 

Omer David Keilaf, Chief Executive Officer, Co-Founder and Director

 

 

Eldar Cegla, Chief Financial Officer

 

 

Avishay Moscovici, Chief Research & Development Officer

 

 

Elad Hofstetter, Chief Business Officer

 

 

Udy Gal-On, Co-Chief Operating Officer

 

 

Ido Luski, Co-Chief Operating Officer

 

 

Directors

 

Amichai Steimberg, Chairperson of the Board of Directors

 

 

Aharon Aharon, Director

 

 

Dan Falk, Director

 

Dan Falk has served on our board of directors since April 2021. Mr. Falk currently serves as a member of the board of directors of the following companies: Nice Ltd. (Nasdaq: NICE) and Evogene (Nasdaq: EVGN). From 1999 to 2001, Mr. Falk was President and Chief Operating Officer of Sapiens International Corporation N.V. From 1985 to 1999, Mr. Falk served in various positions in Orbotech Ltd. (acquired by KLA Corporation (NYSE: KLAC)), the last of which were Chief Financial Officer and Executive Vice President. From 1973 to 1985, he served in several executive positions in the Israel Discount Bank. During the past five years, Mr. Falk served as a member of the board of directors of the following public companies, for which he no longer serves as a director: Attunity Ltd. (acquired by QlikTech International AB), Orbotech Ltd. (NYSE: KLAC) and Ormat Technologies Inc. (NYSE: ORA). Mr. Falk holds a B.A. degree in Economics and Political Science and an MBA, both from the Hebrew University.

 

Stefan Jacoby, Director

 

 

Ronit Maor, Director

 

 

James Sheridan, Director

 

 

Orit Stav, Director

 

 

Alexander Von Witzleben, Director

 

 

 

 

 

 

Directors

 

Under the Companies Law, the compensation of a public company’s directors requires the approval of its compensation committee, the subsequent approval of its board of directors and, unless exempted under regulations promulgated under the Companies Law, the approval of its shareholders at a general meeting. If the compensation of a public company’s directors is inconsistent with its stated compensation policy, then those provisions that must be included in the compensation policy according to the Companies Law must have been considered by the compensation committee and board of directors, and the shareholder approval will require a special majority under which:

 

 

 

We do not have any written agreement with any director providing for benefits upon the termination of such director’s relationship with our Company.

 

Executive Officers other than the Chief Executive Officer

 

The Companies Law requires the approval of the compensation of a public company’s executive officers (other than the chief executive officer) in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director compensation). However, if the shareholders of the company do not approve a compensation arrangement with an executive officer that is inconsistent with the company’s stated compensation policy, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons for their decision.

 

Chief Executive Officer

 

Under the Companies Law, the compensation of a public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee; (ii) the company’s board of directors, and (iii) the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director compensation). However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons for their decision. The approval of each of the compensation committee and the board of directors should be in accordance with the company’s stated compensation policy; however, in special circumstances, they may approve compensation terms of a chief executive officer that are inconsistent with such policy provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained (by a special majority vote as discussed above with respect to the approval of director compensation). In addition, the compensation committee may waive the shareholder approval requirement with regard to the approval of the engagement terms of a candidate for the chief executive officer position if they determine that the compensation arrangement is consistent with the company’s stated compensation policy, that the chief executive officer did not have a prior business relationship with the company or a controlling shareholder of the company and that subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to engage the chief executive officer candidate.

 

Aggregate Compensation of Office Holders

 

The aggregate compensation, including stock-based compensation, paid by our company to its executive officers and directors as a group for the year ended December 31, 2024, was approximately $6.4 million (including one executive officer who left the Company during 2024). Such amount includes approximately $0.3 million paid for pension, severance, retirement or similar benefits or expenses, but does not include business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other benefit costs commonly reimbursed or paid by companies in Israel.

 

As of December 31, 2024, options to purchase 3,453,214 of our ordinary shares granted to our executive officers and directors as a group were outstanding under our equity incentive plans at a weighted average exercise price of $8.01 per ordinary share.

 

In addition, 2,211,642 RSUs granted to our executive officers and directors, were outstanding under our equity incentive plans as of December 31, 2024.

 

We pay to each of our non-employee directors an annual cash retainer as follows: chairperson of the board of directors: $77,500; chairperson of the audit committee, compensation committee and nominating, environmental, social and governance committee: $50,000, $45,000 and $42,500, respectively; members of the audit committee, compensation committee and nominating, environmental, social and governance committee: $42,500, $40,000 and $38,750, respectively; and each other non-employee director: $35,000. Such compensation is not cumulative and the non-employee directors receive the highest level of compensation to which they are entitled. Additionally, we grant the chairperson of the board of directors an annual grant in a value of up to $300,000, and each of our non-employee directors annual grants in a value of up to $100,000 each. We also reimburse them for expenses arising from their board membership.

 

Share Option Plans

 

2016 Share Incentive Plan

 

Our 2016 Share Incentive Plan (the “2016 Plan”) was adopted by our board of directors on May 23, 2016. The Plan provides for the grant of options to employees, directors, office holders, service providers and consultants of our company and its subsidiaries.

 

We no longer grant any awards under the 2016 Plan as it was superseded by our 2021 Share Incentive Plan (the “2021 Plan”), although outstanding options previously granted under the 2016 Plan remain governed by the 2016 Plan. As of December 31, 2024, a total of 4,726,401 options to purchase ordinary shares were outstanding under the 2016 Plan, with a weighted average exercise price of $0.85 per ordinary share. Our board of directors, or a duly authorized committee of our board of directors, administers the 2016 Plan.

 

2021 Share Incentive Plan

 

In 2021, we adopted the 2021 Plan, under which we may grant equity-based incentive awards to attract, motivate and retain the talent for which we compete. Following the consummation of the Business Combination, we ceased to grant any awards under the 2016 Plan, though previously granted options under the 2016 Plan remain outstanding and governed by the 2016 Plan. As of December 31, 2024, options to purchase 6,130,886 of our ordinary shares and 16,859,323 RSUs were outstanding under the 2021 Plan.

 

The maximum number of our ordinary shares available for issuance under the 2021 Plan is equal to the sum of (i) 19,510,820 shares (together with any shares subject to awards under the 2016 Plan that expire or become un-exercisable without having been exercised), and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 5% of the outstanding shares on the last day of the immediately preceding calendar year and (B) such amount as determined by our board of directors if so determined prior to January 1 of a calendar year; provided, however, that no more than 14,000,000 shares in total may be issued upon the exercise of incentive stock options under the 2021 Plan. If permitted by us, ordinary shares tendered to pay the exercise price or withholding tax obligations with respect to an award granted under the 2021 Plan or the 2016 Plan may again be available for issuance under the 2021 Plan. Our board of directors may also reduce the number of ordinary shares reserved and available for issuance under the 2021 Plan in its discretion. On January 1, 2025, the number of ordinary shares reserved for the 2021 Plan increased by 7,187,592. The total number of ordinary shares reserved and available for future equity grants under the 2021 Plan, as of February 18, 2025 was 8,838,166.

 

Our board of directors, or a duly authorized committee of our board of directors, administers the 2021 Plan. Under the 2021 Plan, the administrator has the authority, subject to applicable law, to interpret the terms of the 2021 Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option award, the fair market value of an ordinary share, the time and vesting schedule applicable to an award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2021 Plan and take all other actions and make all other determinations necessary for the administration of the 2021 Plan.

 

The administrator also has the authority to amend and rescind rules and regulations relating to the 2021 Plan or terminate the 2021 Plan at any time before the date of expiration of its ten-year term.

 

The 2021 Plan provides for granting awards under various tax regimes, including, without limitation, for awards granted to our Israeli employees or service providers, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version), 1961 (the “Ordinance”) or Section 3(i) of the Ordinance and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A of the Code.

 

Section 102 of the Ordinance allows employees, directors and officers who are not “controlling shareholders” (as used under the Ordinance) and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options. Our non-employee service providers and controlling shareholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits.

 

The 2021 Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), ordinary shares, restricted shares, restricted share units, performance restricted share units and other stock-based awards. Options granted under the 2021 Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code or may be non-qualified stock options.

 

Clawback Policy

 

In 2023, we adopted a Clawback Policy in compliance with the SEC rules and Nasdaq listing standards to recover any excess incentive-based compensation from current and former executive officers after an accounting restatement. A copy of the Clawback Policy is filed as Exhibit 97 to this Annual Report.

 

C. Board Practices

 

Board of Directors

 

Under the Companies Law and our Articles, our business and affairs are managed under the direction of our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to executive management. Our Chief Executive Officer (referred to as a “general manager” under the Companies Law) is responsible for our day-to-day management. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors. All other executive officers are appointed by the Chief Executive Officer and are subject to the terms of any applicable employment or consulting agreements that we may enter into with them.

 

Under our Articles, our directors are divided into three classes with staggered three-year terms. Each class of directors consists, as nearly as possible, of one-third of the total number of directors constituting the entire board of directors. At each annual general meeting of our shareholders, the election or re-election of directors following the expiration of the term of office of the directors of that class of directors will be for a term of office that expires on the third annual general meeting following such election or re-election, such that each year the term of office of only one class of directors will expire.

 

Further, our Articles include a provision which provides that Perception has the right to appoint one director to our board of directors (the “Perception Director”) for so long as it beneficially owns at least 50% of the total number of ordinary shares it beneficially owned at the date of the closing of the Business Combination. Mr. Sheridan was appointed as the Perception Director.

 

Our directors, other than the Perception Director, are divided among the three classes as follows:

 

 

 

 

Director Independence

 

As an Israeli company, our company is subject to various corporate governance requirements under the Companies Law. However, pursuant to regulations promulgated under the Companies Law, companies with shares traded on certain U.S. stock exchanges, including Nasdaq, may, subject to certain conditions, opt out from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee, compensation committee and nominating, environmental, social and governance committee of the board of directors (other than the gender diversification rule under the Companies Law, which requires the appointment of a director from the other gender if at the time a director is appointed all members of the board of directors are of the same gender). In accordance with these regulations, we have elected to opt out of those requirements of the Companies Law. These exemptions will continue to be available to our company so long as: (i) we do not have a “controlling shareholder” as used under the Companies Law, (ii) our shares are traded on certain U.S. stock exchanges, including Nasdaq, and (iii) we comply with the director independence requirements and the audit committee, compensation committee and nominating, environmental, social and governance committee composition requirements under U.S. laws (including applicable Nasdaq rules) applicable to U.S. domestic issuers.

 

The term “controlling shareholder” as used in the Companies Law for purposes related to external directors and for the requirements related to appointment to the audit committee, compensation committee or nominating, environmental, social and governance committee, as described below, means a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. With respect to certain matters (including various related party transactions), a controlling shareholder is deemed to include a shareholder that holds 25% or more of the voting rights in a public company if no other shareholder holds more than 50% of the voting rights in the company, but excludes a shareholder whose power derives solely from his or her position as a director of the company or from any other position with the company.

 

Accordingly, we comply with Nasdaq rule 5605(b)(1), which requires that the board of directors be comprised of a majority of independent directors. A majority of our board of directors is composed of directors who are “independent” as defined by the rules of Nasdaq and all of the non-management directors qualify as “independent” under these standards. The board of directors has established categorical standards to assist it in making its determination of director independence. We use the definition of “independence” of Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of our company or any other individual having a relationship which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq rules provide that a director cannot be considered independent if:

 

 

 

 

 

 

 

Under the following three Nasdaq director independence rules a director is not considered independent: (a) Nasdaq Rule 5605(a)(2)(A), a director is not considered to be independent if he or she also is an executive officer or employee of our company, (b) Nasdaq Rule 5605(a)(2)(B), a director is not considered independent if he or she accepted any compensation from our company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, and (c) Nasdaq Rule 5605(a)(2)(D), a director is not considered to be independent if he or she is a partner in, or a controlling shareholder or an executive officer of, any organization to which our company made, or from which our company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000. Under such definitions, we have seven independent directors.

 

The board of directors assesses on a regular basis, and at least annually, the independence of directors and makes a determination as to which members are independent. References to “our company” above include any subsidiary in a consolidated group with our company. The terms “immediate family member” and “executive officer” above have the same meanings specified for such terms in the Nasdaq listing standards.

 

Corporate Governance

 

We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act) and our ordinary shares are listed on Nasdaq. We believe the following to be the significant differences between our corporate governance practices and those applicable to U.S. companies under the Nasdaq listing standards. Under the Nasdaq rules, listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the Nasdaq with limited exceptions. We rely on this “home country practice exemption” with respect to (a) the quorum requirement for shareholder meetings and (b) obtaining shareholder approval for certain corporation actions.

 

As permitted under the Companies Law, pursuant to our Articles, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting power of our shares (and in an adjourned meeting, with some exceptions, any number of shareholders), instead of 33 1/3% of the issued share capital required under the Nasdaq corporate governance rules.

 

We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law, rather than seeking approval for corporate actions in accordance with Nasdaq Listing Rule 5635. In particular, under the Nasdaq Listing Rule, shareholder approval is generally required for: (i) an acquisition of shares/assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest (or such persons collectively have a 10% or greater interest) in the target company or the assets to be acquired or the consideration to be received and the present or potential issuance of ordinary shares, or securities convertible into or exercisable for ordinary shares, could result in an increase in outstanding common shares or voting power of 5% or more; (ii) the issuance of shares leading to a change of control; (iii) adoption/amendment of a stock option or purchase plan or other equity compensation arrangements, pursuant to which stock may be acquired by officers, directors, employees or consultants (with certain limited exception); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (and/or via sales by directors/officers/5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares. We will seek shareholder approval for all actions requiring such under the Companies Law. Under the Companies Law, the adoption of, and material changes to, equity-based compensation plans generally require the approval of the board of directors.

 

We otherwise comply with and intend to continue to comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may in the future, however, decide to use other foreign private issuer exemptions with respect to some or all the other Nasdaq listing rules. Following our home country governance practices may provide less protection than is accorded to investors under the Nasdaq listing rules applicable to domestic issuers.

 

Chairperson of the Board

 

Our Articles provide that the chairperson of the board of directors is appointed by the members of the board of directors and serves as chairperson of the board of directors throughout his or her term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the chief executive officer (or any relative of the chief executive officer) may not serve as the chairperson of the board of directors, and the chairperson (or any relative of the chairperson) may not be vested with authorities of the chief executive officer without shareholder approval, for periods of up to three years each, consisting of a majority vote of the shares present and voting at a shareholders meeting, provided that either:

 

 

 

In addition, a person subordinated, directly or indirectly, to the chief executive officer may not serve as the chairperson of the board of directors; the chairperson of the board of directors may not be vested with authorities that are granted to those subordinated to the chief executive officer; and the chairperson of the board of directors may not serve in any other position in the Company or a controlled company, but he may serve as a director or chairperson of a subsidiary.

 

External Directors

 

Under the Companies Law, companies incorporated under the laws of the State of Israel that are public companies, including companies with shares listed on Nasdaq, are required to appoint at least two external directors who must meet heightened independence requirements. Pursuant to regulations promulgated under the Companies Law, companies with shares traded on certain U.S. stock exchanges, including Nasdaq, may, subject to certain conditions, opt out from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee, compensation committee and nominating, environmental, social and governance committee of the board of directors. In accordance with these regulations, we elected to opt out from these Companies Law requirements. Instead, we must comply with the director independence requirements, the audit committee, the compensation committee and the nominating, environmental, social and governance committee composition requirements under U.S. laws (including applicable Nasdaq rules) applicable to U.S. domestic issuers.

 

Committees of the Board of Directors

 

Our board of directors has the following standing committees: an audit committee, a compensation committee and a nominating, environmental, social and governance committee.

 

Audit Committee

 

The audit committee is responsible, among its other duties and responsibilities, for overseeing our accounting and financial reporting processes, audits of financial statements, qualifications and independence of the independent registered public accounting firm, the effectiveness of internal control over financial reporting and the performance of the internal audit function and independent registered public accounting firm. The audit committee reviews and assesses the qualitative aspects of our financial reporting, processes to manage business and financial risks, and compliance with significant applicable legal, ethical and regulatory requirements. The audit committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm. In addition, the audit committee is responsible for the following additional matters pursuant to the Companies Law:

 

 

 

 

 

 

 

The members of the audit committee are Dan Falk, Ronit Maor and Orit Stav. Dan Falk serves as the chairperson of the audit committee. The board of directors has designated Dan Falk as an “audit committee financial expert” and determined that each member is “financially literate” under the Nasdaq rules. The board of directors has also determined that each member of the audit committee is “independent” as defined under the Nasdaq rules and Exchange Act rules and regulations.

 

Compensation Committee

 

The compensation committee is responsible, among its other duties and responsibilities, for reviewing and approving all forms of compensation to be provided to, and employment agreements with, our executive officers and directors, establishing the general compensation policies of our company and its subsidiaries and reviewing, approving and overseeing the administration of the employee benefits plans of our company and its subsidiaries. The compensation committee is also responsible for:

 

 

 

 

 

 

The members of the compensation committee are Ronit Maor and Dan Falk. Ronit Maor serves as the chairperson of the compensation committee. The board of directors has determined that each member of the compensation committee is “independent” as defined under the Nasdaq listing standards. The compensation committee has the authority to retain compensation consultants, outside counsel and other advisers.

 

Compensation Policy under the Companies Law

 

In general, under the Companies Law, a public company must have a compensation policy approved by the board of directors after receiving and considering the recommendations of the compensation committee. In addition, a compensation policy must be approved at least once every three years, first, by the public company’s board of directors, upon recommendation of its compensation committee, and second, by a simple majority of the ordinary shares present, in person or by proxy, and voting at a shareholders meeting, provided that either:

 

 

 

In the event that the shareholders fail to approve the compensation policy in a duly convened meeting, the board of directors may nevertheless override that decision, provided that the compensation committee and then the board of directors decide, on the basis of detailed reasons and after further review of the compensation policy, that approval of the compensation policy is for the benefit of the company despite the failure of the shareholders to approve the policy.

 

If a company that adopts a compensation policy in advance of its initial public offering (or in our case, prior to the closing of the Business Combination) describes the policy in its prospectus for such offering, then that compensation policy shall be deemed validly adopted in accordance with the Companies Law and will remain in effect for term of five years from the date such company becomes a public company.

 

The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, business plan and long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:

 

 

 

 

 

 

The compensation policy must also include, among other things:

 

 

•

with the exception of office holders who report directly to the chief executive officer, provisions determining the variable components on the basis of long-term performance and on measurable criteria; however, the company may determine that an immaterial part of the variable components of the compensation package of an office holder shall be awarded based on non-measurable criteria, if such amount is not higher than three monthly salaries per annum, while taking into account such office holder’s contribution to the company; and

 

 

 

 

Our compensation policy, which became effective immediately following the consummation of the Business Combination, is designed to promote retention and motivation of directors and executive officers, incentivize superior individual excellence, align the interests of our directors and executive officers with our long-term performance and provide a risk management tool. To that end, a portion of an executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand, our compensation policy includes measures designed to reduce an executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.

 

The compensation policy also addresses our executive officers’ individual characteristics (such as their respective positions, education, scope of responsibilities and contribution to the attainment of its goals) as the basis for compensation variation among our executive officers and considers the internal ratios between compensation of our executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special bonuses with respect to any special achievements, such as outstanding personal achievement, outstanding personal effort or outstanding company performance), equity-based compensation, benefits and retirement and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary. In addition, the total variable compensation components (cash bonuses and equity-based compensation) may not exceed 95% of each executive officer’s total compensation package with respect to any given calendar year.

 

An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive officers other than our Chief Executive Officer will be based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by the Chief Executive Officer and subject to minimum thresholds. The annual cash bonus that may be granted to executive officers other than our Chief Executive Officer may be based entirely on a discretionary evaluation. Furthermore, our Chief Executive Officer is entitled to recommend performance objectives, and such performance objectives will be approved by the compensation committee (and, if required by law, by our board of directors).

 

The measurable performance objectives of our Chief Executive Officer may be determined annually by our compensation committee and board of directors and include the weight to be assigned to each achievement in the overall evaluation. A less significant portion of the Chief Executive Officer’s annual cash bonus may be based on a discretionary evaluation of the Chief Executive Officer’s overall performance by the compensation committee and the board of directors based on quantitative and qualitative criteria.

 

The equity-based compensation under the compensation policy for our executive officers is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus. Primary objectives include enhancing the alignment between the executive officers’ interests and our long-term interests and those of our shareholders and strengthening the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares, restricted share units and performance share units, in accordance with our share incentive plan then in place. All equity-based incentives granted to executive officers are subject to vesting periods and/or performance milestones in order to promote long-term retention of the awarded executive officers. Equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.

 

In addition, the compensation policy contains compensation recovery provisions which allows us under certain conditions to recover bonuses paid in excess, enables our Chief Executive Officer to approve immaterial changes in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our compensation policy) and allows us to exculpate, indemnify and insure our executive officers and directors subject to certain limitations as set forth therein.

 

The compensation policy also provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in the compensation policy.

 

Our compensation policy, which was approved by our board of directors and shareholders on January 20, 2021 and January 29, 2021, respectively, became effective in April 2021.

 

Nominating, Environmental, Social and Governance Committee

 

The members of the nominating, environmental, social and governance committee are Orit Stav and Aharon Aharon. Orit Stav serves as the chairperson of the nominating, environmental, social and governance committee. The nominating, environmental, social and governance committee is responsible, among other things, for:

 

 

 

 

 

 

Exculpation, Insurance and Indemnification of Office Holders

 

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability, in whole or in part, for damages caused as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our Articles include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.

 

An Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:

 

 

•

reasonable litigation expenses, including legal fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction;

 

 

An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:

 

 

 

 

 

 

An Israeli company may not indemnify or insure an office holder against any of the following:

 

 

 

 

 

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors (and, with respect to directors and the chief executive officer, by the shareholders). However, under regulations promulgated under the Companies Law, the insurance of office holders does not require shareholder approval and may be approved by only the compensation committee, if the engagement terms are determined in accordance with the company’s compensation policy, which was approved by the shareholders by the same special majority required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially impact the company’s profitability, assets or obligations.

 

Our Articles allow us to exculpate, indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including any omission) which was performed by virtue of being an office holder to the fullest extent permitted under applicable law. Our office holders are currently covered by a directors and officers’ liability insurance policy.

 

The maximum indemnification amount set forth in such agreements is limited to an amount equal to the higher of $40,000,000 and 25% of our total shareholders’ equity on a consolidated basis as reflected in our most recent consolidated financial statements prior to the date on which the indemnity payment is made (other than indemnification for an offering of securities to the public, including by a shareholder in a secondary offering, in which case the maximum indemnification amount is limited to the gross proceeds raised by us and/or any selling shareholder in such public offering). The maximum amount set forth in such agreements is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.

 

In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.

 

There is no pending litigation or proceeding against any of our office holders as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any office holder. Notwithstanding the foregoing, in connection with the consummation of the Business Combination, we agreed to indemnify certain former directors and officers of Collective Growth. On March 28, 2024, Sheadrick Richards, a purported stockholder of Collective Growth, filed the Lawsuit. The Lawsuit alleges that Collective Growth’s disclosures in connection with the Business Combination (completed in April 2021) were materially incomplete and misleading, and that the directors breached their fiduciary duties. Although we maintain insurance and run-off coverages in amounts and with deductibles that we believe are appropriate for our operations, our insurance and run-off coverages may not cover all claims that have been or may be brought against us, and insurance coverage may not continue to be available to us at a reasonable cost.

Internal Auditor

 

Under the Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under the Companies Law, the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office holder, nor may the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in the Companies Law as: (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as a director or as a chief executive officer of the company.

 

Ms. Sharon Cohen, CPA from Deloitte IL & Co, a firm in the Deloitte Global Network served as our internal auditor for the year ended December 31, 2024.

 

D. Employees

 

We believe that our corporate culture and our relationship with our employees contribute to our success. Our employees are continuously innovating, and our structure rewards productivity. As of December 31, 2024, we had 415 employees.

 

On January 31, 2024, we announced a strategic realignment of our operations to expand our cash runway and optimize our path towards profitability and free cash flow generation, which included a reduction in the company’s headcount by approximately 13% during the first quarter of 2024.

 

In addition, on February 4, 2025, we announced an optimization of our operations to extend our cash runway and accelerate progress towards profitability and free cash flow generation, which includes a reduction in our employee headcount by approximately 9% during the first quarter of 2025.

 

In regard to our Israeli employees, Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-discrimination laws and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Our employees have pension plans that comply with applicable Israeli legal requirements, and we make monthly contributions to severance pay funds for all employees, which cover potential severance pay obligations.

 

None of our employees work under any collective bargaining agreements. Extension orders issued by the Israeli government apply to us and affect matters such as cost of living adjustments to salaries, length of working hours and week, recuperation pay, travel expenses and pension rights.

 

We have never experienced labor-related work stoppages or strikes and believe that our relations with our employees are satisfactory.

 

A. Major Shareholders

 

The following table sets forth information with respect to the beneficial ownership of our shares as of March 1, 2025, by:

 

 

 

 

The beneficial ownership of ordinary shares is determined in accordance with the SEC rules and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power. For purposes of the table below, we deem shares subject to options that are currently exercisable or exercisable within 60 days as of March 1, 2025, and restricted share units that shall vest within 60 days of March 1, 2025, to be outstanding and to be beneficially owned by the person holding the options or restricted share units for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of shares beneficially owned is based on 198,961,957 ordinary shares outstanding as of March 1, 2025.

 

All of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares. Unless otherwise noted below, each shareholder’s address is 5 Uri Ariav Street, Building C, Rosh HaAin 4809202, Israel.

 

A description of any material relationship that our principal shareholders have had with us or any of our affiliates since January 1, 2024, is included under Item 7.B. “Major Shareholders and Related Party Transactions—Related Party Transactions.”

 

 

To our knowledge, other than as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage ownership held by any major shareholder since January 1, 2022. The major shareholders listed above do not have voting rights with respect to their ordinary shares that are different from the voting rights of other holders of our ordinary shares.

 

As substantially all our shares are held in book-entry form, we are not aware of the identity of all of our shareholders. As of March 1, 2025, we had 75,504 ordinary shares held by 4 U.S. resident shareholders of record.

 

B. Related Party Transactions

 

The following is a description of our related party transactions since January 1, 2024.

 

Registration Rights Agreement

 

In December 2020, Innoviz, certain equityholders of Innoviz, certain equityholders of Collective Growth, Perception and Antara entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Innoviz agreed to file a shelf registration statement with respect to the registrable securities defined therein within 60 days of the closing of the Business Combination. Certain holders of registrable securities under the Registration Rights Agreement may request to sell all or any portion of their registrable securities in an underwritten offering up to twice in any 12-month period so long as the total offering price is reasonably expected to exceed $75.0 million. Innoviz also agreed to provide customary “piggyback” registration rights. The Registration Rights Agreement also provides that Innoviz will pay certain expenses relating to such registrations and indemnify the shareholders against certain liabilities. The Registration Rights Agreement does not contemplate the payment of penalties or liquidated damages to the equityholders party thereto as a result of a failure to register, or delays with respect to the registration of, the registrable securities.

 

Put Option Agreement

 

In December 2020, Innoviz and Antara entered into the Put Option Agreement (the “Put Option Agreement”), pursuant to which Innoviz caused Antara to subscribe for a number of Innoviz ordinary shares in the PIPE with an aggregate equity value equal to $70,000,000. In consideration for entering into the Put Option Agreement, at the Effective Time (as defined in the Put Option Agreement), Innoviz issued to an affiliate of Antara 3,784,753 warrants and 3,002,674 ordinary shares. In addition, Innoviz agreed to issue to an affiliate of Antara 312,296 ordinary shares in the event that earnout shares are issued to Perception Capital Partners, LLC (“Perception”).

 

Agreements with Directors and Officers

 

 

 

 

Related Party Transaction Policy

 

Our board of directors has adopted a written related party transaction policy to set forth the policies and procedures for identifying related party transactions.

 

C. Interests of Experts and Counsel

 

Not applicable.

 

 

A. Consolidated Statements and Other Financial Information

 

Consolidated Financial Statements

 

See Item 18. “Financial Statements.”

 

Legal and Arbitration Proceedings

 

From time to time, we may become involved in actions, claims suits, and other legal proceedings arising in the ordinary course of our business, including assertions by third parties relating to intellectual property infringement, breaches of contract or warranties or employment-related matters. We are not currently a party to any material actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to it, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations. See Note 9 of our consolidated financial statements included elsewhere in this Annual Report, which is incorporated by reference in this Item 8.A, for additional information regarding the Lawsuit.

 

Dividend Policy

 

We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business. Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant.

 

The Companies Law imposes restrictions on our ability to declare and pay dividends. See Item 5. “Operating and Financial Review and Prospects.”

 

Payment of dividends may be subject to Israeli withholding taxes. See Item 10.E. “Taxation—Taxation and Government Programs—Israeli Tax Considerations and Government Programs” for additional information.

 

B. Significant Changes

 

None.

 

 

A. Offer and Listing Details

 

Our ordinary shares and warrants commenced trading on Nasdaq on April 6, 2021, under the trading symbols “INVZ” and “INVZW,” respectively. Prior to this, no public market existed for our ordinary shares or warrants.

 

B. Plan of Distribution

 

Not applicable.

 

C. Markets

 

Our ordinary shares and warrants commenced trading on Nasdaq on April 6, 2021, under the trading symbols “INVZ” and “INVZW,” respectively. Prior to this, no public market existed for our ordinary shares or warrants.

 

D. Selling Shareholders

 

Not applicable.

 

E. Dilution

 

Not applicable.

 

F. Expenses of the Issue

 

Not applicable.

 

 

A. Share Capital

 

Not applicable.

 

B. Memorandum and Articles of Association

 

A copy of our Articles is incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-3 (File No. 333‑265170) filed with the SEC on May 24, 2022. Other than as set forth below, the information called for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference herein.

 

 

As of December 31, 2024, we had 169,397,030 ordinary shares and 16,231,141 warrants outstanding.

 

 

There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.

 

 

Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in our Articles as “special general meetings”. Our board of directors may call special general meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene a special general meeting upon the written request of (i) any two or more of our directors or one-quarter or more of the serving members of our board of directors or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding issued shares and 1% or more of our outstanding voting power or (b) 5% or more of our outstanding voting power.

 

Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which, as a company listed on an exchange outside Israel, may be between four and 40 days prior to the date of the meeting. Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of our shareholders:

 

 

 

 

 

 

 

 

The Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties or the approval of a merger, notice must be provided at least 35 days prior to the meeting. Under the Companies Law, shareholders are not permitted to take action by way of written consent in lieu of a meeting.

 

C. Material Contracts

 

The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date of this Annual Report:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D. Exchange Controls

 

There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.

 

E. Taxation

 

 

The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares and warrants. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

 

Material Israeli Tax Considerations

 

The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that benefit us. This section also contains a discussion of material Israeli tax consequences concerning the purchase, ownership and disposition of our ordinary shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.

 

 

 

The Industry Encouragement Law and the regulations promulgated thereunder provide that an “Industrial Company” is an Israeli resident-company, of which 90% or more of its income in any tax year, other than income from certain government loans, capital gains, dividends and interest and linkage differentials, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition under section 3A of the Ordinance. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.

 

Following are the main tax benefits available to Industrial Companies: