SEC Filing | Kaltura

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KALTURA INC - 1432133 - 2021

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-40644

Kaltura, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	20-8128326
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
250 Park Avenue South 10th Floor New York, New York	10003
(Address of principal executive offices)	(Zip Code)

(646) 290-5445

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	KLTR	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 11, 2021, there were 126,489,472 shares of the registrant’s common stock, par value $0.0001, outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)	F-1
	Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020 (audited)	F-1 - F-2
	Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	F-3
	Consolidated Statement of Changes in Convertible and Redeemable Convertible Preferred Stock and Stockholders’ Deficit for three and six months ended June 30, 2021 and 2020 (unaudited)	F-4 - F-6
	Consolidated Statement of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	F-7 - F-8
	Notes to Unaudited Consolidated Interim Financial Statements (unaudited)	F-9 - F-34
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
Signatures		78

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition, business strategy, plans and market growth.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Kaltura,” the “Company,” “we,” “us,” and “our,” refer to Kaltura, Inc. and its subsidiaries on a consolidated basis.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

•	Our business and operations have experienced rapid growth, and if we do not appropriately manage this growth and any future growth, or if we are unable to improve our systems, processes and controls, our business, financial condition, results of operations and prospects will be adversely affected;

•	Our recent growth may not be indicative of our future growth, and we may not be able to sustain our revenue growth rate in the future. Our growth also makes it difficult to evaluate our current business and future prospects and may increase the risk that we will not be successful;

•	We have a history of losses and may not be able to achieve or maintain profitability;

•	The ongoing COVID-19 outbreak, and its variants, could adversely affect our business, financial condition and results of operations;

•	The markets for our offerings are new and evolving and may develop more slowly or differently than we expect. Our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving market conditions;

•	The loss of one or more of our significant customers, or any other reduction in the amount of revenue we derive from any such customer, would adversely affect our business, financial condition, results of operations and growth prospects;

•

If we are not able to keep pace with technological and competitive developments and develop or otherwise introduce new products and solutions and enhancements to our existing offerings, our offerings may become less marketable, less competitive or obsolete, and our business, financial condition and results of operations may be adversely affected;

•

If we do not maintain the interoperability of our offerings across devices, operating systems and third-party applications that we do not control, and if we are not able to maintain and expand our relationships with third-party technology partners to integrate our offerings with their products and solutions, our business, financial condition and results of operations may be adversely affected;

•	A version of our Media Services is licensed to the public under an open source license, which could negatively affect our ability to monetize our offerings and protect our intellectual property rights;

•

The markets in which we compete are nascent and highly fragmented, and we may not be able to compete successfully against current and future competitors, some of whom have greater financial, technical, and other resources than we do. If we do not compete successfully, our business, financial condition and results of operations could be harmed;

•	If we are unable to increase sales of our subscriptions to new customers, expand the offerings to which our existing customers subscribe, or expand the value of our existing customers’ subscriptions, our future revenue and results of operations will be adversely affected;

•	If our existing customers do not renew their subscriptions, or if they renew on terms that are less economically beneficial to us, it could have an adverse effect on our business, financial condition and results of operations;

•	We recognize a significant portion of revenue from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not immediately reflected in full in our results of operations;

•

We typically provide service-level commitments under our customer agreements. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, face contract termination with refunds of prepaid amounts or could experience a decrease in customer renewals in future periods, any of which would lower our revenue and adversely affect our business, financial condition and results of operations;

•	We rely on third parties, including third parties outside the United States, for some of our software development, quality assurance, operations, and customer support;

•	We depend on our management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect our business;

•	If we are not able to maintain and enhance awareness of our brand, especially among developers and IT operators, our business, financial condition and results of operations may be adversely affected;

•	Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and entrepreneurial spirit we have worked to foster, which could adversely affect our business;

•	Our failure to offer high quality customer support would have an adverse effect on our business, reputation and results of operations;

•	The failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our offerings;

•	The sales prices of our offerings may change, which may reduce our revenue and gross profit and adversely affect our financial results;

•	We expect our revenue mix to vary over time, which could negatively impact our gross margin and results of operations;

•	The length of our sales cycle can be unpredictable, particularly with respect to sales to large customers, and our sales efforts may require considerable time and expense;

•	Our international operations and expansion expose us to risk;

•	If we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be adversely affected;

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

•	A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks;

•

If we are unable to consummate acquisitions at our historical rate and at acceptable prices, and to enter into other strategic transactions and relationships that support our long-term strategy, our growth rate and the trading price of our common stock could be negatively affected. These transactions and relationships also subject us to certain risks;

•	A real or perceived bug, defect, security vulnerability, error, or other performance failure involving our platform, products or solutions could cause us to lose revenue, damage our reputation, and expose us to liability;

•

If we or our third-party service providers experience a security breach, data loss or other compromise, including if unauthorized parties obtain access to our customers’ data, our reputation may be harmed, demand for our platform, products and solutions may be reduced, and we may incur significant liabilities;

•	Failure to protect our proprietary technology, or to obtain, maintain, protect and enforce sufficiently broad intellectual property rights therein, could substantially harm our business, financial condition and results of operations;

•	Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new offerings could reduce our ability to compete and could adversely affect our business;

•	Changes in laws and regulations related to the internet, changes in the internet infrastructure itself, or increases in the cost of internet connectivity and network access may diminish the demand for our offerings and could harm our business; and

•	Political, economic, and military conditions in Israel could materially and adversely affect our business.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	June 30, 2021		December 31, 2020 (as restated)
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	29,772	$	27,711
Trade receivables		23,747		17,134
Prepaid expenses and other current assets		4,714		2,769
Deferred contract acquisition and fulfillment costs, current		7,549		5,848

Total current assets		65,782		53,462

NON-CURRENT ASSETS
Property and equipment, net		7,259		4,147
Other assets, noncurrent		4,949		3,564
Deferred contract acquisition and fulfillment costs, noncurrent		20,729		15,876
Intangible assets, net		2,347		2,835
Goodwill		11,070		11,070

Total non-current assets		46,354		37,492

TOTAL ASSETS	$	112,136	$	90,954

LIABILITIES, CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Current portion of long-term loans	$	1,743	$	1,000
Current portion of long-term lease liabilities		894		1,738
Trade payables		5,196		5,045
Employees and payroll accruals		20,360		16,275
Accrued expenses and other current liabilities		14,521		11,251
Deferred revenue		59,070		47,685

Total current liabilities		101,784		82,994

NON-CURRENT LIABILITIES
Deferred revenue, noncurrent		1,752		1,858
Long-term loans, net of current portion		59,749		47,160
Long-term lease liabilities, net of current portion		3		142
Other liabilities, noncurrent		2,331		2,564
Warrants to purchase preferred and common stock		53,855		56,780

Total non-current liabilities		117,690		108,504

TOTAL LIABILITIES	$	219,474	$	191,498

The accompanying notes are an integral part of these condensed consolidated financial statements.

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except for share data)

	June 30, 2021			December 31, 2020 (as restated)
	(Unaudited)
COMMITMENTS AND CONTINGENCIES

Convertible preferred stock, $ 0.0001 par value per share, 1,043,778 shares authorized, issued and outstanding as of June 30, 2021 and December 31, 2020; aggregate liquidation preference of $ 1,921 as of June 30, 2021;		1,921			1,921
Redeemable convertible preferred stock, $ 0.0001 par value per share, 15,968,831 shares authorized as of June 30, 2021 and December 31, 2020, 15,806,333 and 15,779,322 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $ 192,201 as of June 30, 2021;		159,340			158,191

Total mezzanine equity		161,261			160,112

STOCKHLDERS’ DEFICIT
Common stock of$ 0.0001 par value per share, 157,500,000 shares authorized as of June 30, 2021 and December 31, 2020; 33,479,452 and 33,153,112 shares issued as of June 30, 2021 and December 31, 2020, respectively; 25,794,262 and 25,467,922 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		2			2
Treasury stock – 7,685,190 shares of common stock, $0.0001 par value per share, as of June 30,2021 and December 31, 2020		(4,881	)		(4,881	)
Additional paid-in capital		17,838			8,388
Receivables on account of stock		-			(882	)
Accumulated deficit		(281,558	)		(263,283	)

Total stockholders’ deficit		(268,599	)		(260,656	)

TOTAL LIABILITIES, CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS’ DEFICIT	$	112,136		$	90,954

The accompanying notes are an integral part of these condensed consolidated financial statements.

F - 2

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands)

	Three months ended June 30					Six months ended June 30
	2021			2020		2021			2020
	(Unaudited)

Revenue:

Subscription	$	36,467		$	24,969	$	68,808		$	48,173
Professional services		5,136			3,780		10,508			6,482

Total revenue		41,603			28,749		79,316			54,655

Cost of revenue:

Subscription		10,018			6,352		19,894			12,036
Professional services		5,604			4,436		11,309			9,168

Total cost of revenue		15,622			10,788		31,203			21,204

Gross profit		25,981			17,961		48,113			33,451

Operating expenses:

Research and development		11,787			6,489		22,687			13,268
Sales and marketing		10,524			6,521		20,685			14,800
General and administrative		9,440			3,828		17,387			8,183
Other operating expenses		-			-		1,724			-

Total operating expenses		31,751			16,838		62,483			36,251

Operating income (loss)		(5,770	)		1,123		(14,370	)		(2,800	)

Financial expenses (income), net		(4,497	)		11,575		653			11,284

Loss before provision for income taxes		1,273			10,452		15,023			14,084
Provision for income taxes		1,446			554		3,252			1,906

Net loss	$	2,719		$	11,006	$	18,275		$	15,990

Net loss per share attributable to common stockholders, basic	$	0.24		$	0.56	$	0.98		$	0.88
Net loss per share attributable to common stockholders, diluted	$	0.37		$	0.56	$	0.98		$	0.88

Weighted average number of shares used in computing basic net loss per share attributable to common stockholders		25,768,411			25,174,126		25,538,010			24,575,196
Weighted average number of shares used in computing diluted net loss per share attributable to common stockholders		32,836,110			25,174,126		25,538,010			24,575,196

The accompanying notes are an integral part of these condensed consolidated financial statements.

F - 3

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

(U.S. dollars in thousands, except share and per share data)

	Convertible Preferred stock				Redeemable Convertible Preferred stock				Common stock					Treasury stock					Receivables on account		Additional paid-in		Accumulated			Total stockholders'
	Number		Amount		Number		Amount		Number		Amount			Number		Amount			of stock		capital		deficit			deficit

Balance at April 1, 2021		1,043,778	$	1,921		15,806,333	$	159,340		25,755,951	$	2			7,685,190	$	(4,881	)	$	-	$	13,560	$	(278,839	)	$	(270,158	)

Stock-based compensation expenses		-		-		-		-		-		-			-		-			-		4,213		-			4,213
Issuance of common shares upon exercise of stock options		-		-		-		-		38,311		*	)		-		-			-		65		-			65
Net loss		-		-		-		-		-		-			-		-			-		-		(2,719	)		(2,719	)

Balance at June 30, 2021 (unaudited)		1,043,778	$	1,921		15,806,333	$	159,340		25,794,262	$	2			7,685,190	$	(4,881	)	$	-	$	17,838	$	(281,558	)	$	(268,599	)

	Convertible Preferred stock				Redeemable Convertible Preferred stock				Common stock					Treasury stock					Receivables on account			Additional paid-in		Accumulated			Total stockholders'
	Number		Amount		Number		Amount		Number		Amount			Number		Amount			of stock			capital		deficit			deficit

Balance at April 1, 2020		1,043,778	$	1,921		15,779,322	$	158,191		25,138,454	$	2			7,685,190	$	(4,881	)	$	(882	)	$	612	$	(209,504	)	$	(214,653	)

Stock-based compensation expenses		-		-		-		-		-		-			-		-			-			1,134		-			1,134
Issuance of common shares upon exercise of stock options		-		-		-		-		55,799		*	)		-		-			-			13		-			13
Net loss		-		-		-		-		-		-			-		-			-			-		(11,006	)		(11,006	)

Balance at June 30, 2020 (unaudited)		1,043,778	$	1,921		15,779,322	$	158,191		25,194,253	$	2			7,685,190	$	(4,881	)		(882	)		1,759		(220,510	)		(224,512	)

*) Represents an amount lower than $ 1

F - 4

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

(U.S. dollars in thousands, except share and per share data)

	Convertible Preferred stock				Redeemable Convertible Preferred stock				Common stock					Treasury stock					Receivables on account			Additional paid-in		Accumulated			Total stockholders'
	Number		Amount		Number		Amount		Number		Amount			Number		Amount			of stock			capital		deficit			deficit

Balance at January 1, 2021		1,043,778	$	1,921		15,779,322	$	158,191		25,467,922	$	2			7,685,190	$	(4,881	)	$	(882	)	$	8,388	$	(263,283	)	$	(260,656	)

Stock-based compensation expenses		-		-		-		-		-		-			-		-			-			9,173		-			9,173
Loan forgiveness		-		-		-		-		-		-			-		-			882			-		-			882
Issuance of common shares upon exercise of stock options		-		-		-		-		326,340		*	)		-		-			-			277		-			277
Issuance of preferred stock upon exercise of warrants		-		-		27,011		1,149		-		-			-		-			-			-		-			-
Net loss		-		-		-		-		-		-			-		-			-			-		(18,275	)		(18,275	)

Balance at June 30, 2021 (unaudited)		1,043,778	$	1,921		15,806,333	$	159,340		25,794,262	$	2			7,685,190	$	(4,881	)	$	-			17,838		(281,558	)		(268,599	)

*) Represents an amount lower than $ 1

The accompanying notes are an integral part of these condensed consolidated financial statements.

F - 5

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

(U.S. dollars in thousands, except share and per share data)

	Convertible Preferred stock				Redeemable Convertible Preferred stock				Common stock					Treasury stock					Receivables on account			Additional paid-in			Accumulated			Total stockholders'
	Number		Amount		Number		Amount		Number		Amount			Number		Amount			of stock			capital			deficit			deficit

Balance at January 1, 2020		1,043,778	$	1,921		15,779,322	$	155,550		22,959,969	$	2			7,685,190	$	(4,881	)	$	(882	)	$	-		$	(204,520	)	$	(210,281	)

Stock-based compensation expenses		-		-		-		-		-		-			-		-			-			1,796			-			1,796
Issuance of common shares upon exercise of stock options		-		-		-		-		1,007,769		*	)		-		-			-			26			-			26
Issuance of common shares upon business combination		-		-		-		-		1,226,515		*	)		-		-			-			2,578			-			2,578
Accretion of redeemable convertible preferred stock		-		-		-		2,641		-		-			-		-			-			(2,641	)		-			(2,641	)
Net loss		-		-		-		-		-		-			-		-			-			-			(15,990	)		(15,990	)

Balance at June 30, 2020 (unaudited)		1,043,778	$	1,921		15,779,322	$	158,191		25,194,253	$	2			7,685,190	$	(4,881	)	$	(882	)	$	1,759		$	(220,510	)	$	(224,512	)

*) Represent an amount lower than $ 1

The accompanying notes are an integral part of these condensed consolidated financial statements.

F - 6

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

	Six months ended June 30,
	2021			2020
	(Unaudited)
Cash flows from operating activities:

Net loss	$	(18,275	)	$	(15,990	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,200			2,093
Stock-based compensation expenses		9,173			1,796
Increase in deferred contract acquisition and fulfillment costs		(6,554	)		(1,769	)
Change in valuation of warrants to purchase preferred and common stock		(1,776	)		10,034
Non-cash interest expenses		222			43
Non-cash expenses with respect to stockholders’ loans.		882			-
Changes in operating assets and liabilities:
Increase in trade receivables		(6,612	)		(692	)
Increase in prepaid expenses and other current assets and other assets, noncurrent		(1,945	)		(215	)
Decrease in trade payables		(177	)		(415	)
Increase in accrued expenses and other current liabilities		3,112			2,801
Increase in employees and payroll accruals		4,085			989
Increase (decrease) in other liabilities, noncurrent		(309	)		219
Increase (decrease) in deferred revenue		11,279			(2,082	)

Net cash used in operating activities		(5,695	)		(3,188	)

Cash flows from investing activities:

Net cash acquired in business combination		-			383
Purchases of property and equipment		(956	)		(566	)
Capitalized internal-use software		(1,255	)		(382	)
Purchase of intangible assets		(79	)		(89	)

Net cash used in investing activities		(2,290	)		(654	)

Cash flows from financing activities:

Proceeds from long term loans, net of debt issuance cost		41,915			2,000
Repayment of long-term loans		(28,833	)		-
Principal payments on finance leases		(956	)		(1,267	)
Proceeds from exercise of options by employees		277			26
Payment of deferred offering costs		(2,594	)		-

Net cash provided by financing activities		9,809			759

Increase (decrease) in cash, cash equivalents and restricted cash		1,824			(3,083	)
Cash, cash equivalents and restricted cash at the beginning of the period		28,355			27,144

Cash, cash equivalents and restricted cash at the end of the period	$	30,179		$	24,061

Non-cash transactions:

Purchase of property and equipment, internal-use software and intangible asset in credit		1,534			75

Issuance of common shares and warrant with respect to business combination		-			3,799

The accompanying notes are an integral part of these condensed consolidated financial statements.

F - 7

KALTURA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

	Six months ended June 30,
	2021			2020
	Unaudited
Supplemental disclosure of cash flow information:

Cash paid for income taxes, net	$	(946	)	$	(543	)

Cash paid for interest	$	(1,215	)	$	(1,939	)

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:

Cash and cash equivalents	$	29,772		$	23,456
Restricted cash included in other assets, non-current		407			605

Total cash, cash equivalents, and restricted cash	$	30,179		$	24,061

The accompanying notes are an integral part of these condensed consolidated financial statements.

F - 8

KALTURA INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars unless specified otherwise)

NOTE 1:

BUSINESS

Description of Business

Kaltura, Inc. (together with its subsidiaries, the “Company”) was incorporated in October 2006 and commenced operations in January 2007. The Company’s business operations are allocated between two main segments, Enterprise, Education, and Technology (“EE&T”) and Media and Telecom (“M&T”). The Company has developed a platform for video creation, management, and collaboration. The Company's platform enables companies, educational institutions, and other organizations to cost-effectively launch advanced online video experiences, including for Over-the-top (“OTT”) Television, Cloud TV, web video publishing, video-based teaching, learning, and training, video-based marketing, and video-based collaboration. The Company’s core offerings consist of various Software-as-a-Service (“SaaS”) products and solutions and a Platform-as-a-Service (“PaaS”).

Initial Public Offering

On July 23, 2021, after the balance sheet date, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 15,000,000 shares of its common stock at an offering price of $10.00 per share. On August 6, 2021, the underwriters of the IPO exercised in full their option to purchase 2,250,000 additional shares of common stock at the offering price of $10.00 per share. The Company received net proceeds of $155.4 million after deducting underwriting discounts and commissions of $10.5 million, and other issuance costs of $5.0 million.

See Note 15 Subsequent Events for additional information related to the IPO.

NOTE 2:

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

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

The condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by U.S. GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included in the Company’s final prospectus dated July 22, 2021 (the “Prospectus”) filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended.

F - 9

KALTURA INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars unless specified otherwise)

NOTE 2:

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements with normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2021, and the Company’s consolidated results of operations, change of convertible and redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the three and six months ended June 30, 2021 and 2020. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021, or any other future interim or annual period.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, income tax uncertainties, stock-based compensation cost, fair value measurement of warrants, accretion of redeemable stocks, fair value and useful life of intangible assets, as well as in estimates used in applying the revenue recognition policy. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.

Due to the Coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require a material update to its estimates or judgments or an adjustment of the carrying value of its assets or liabilities as of June 30, 2021. While there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2021, these estimates may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 and its variants that could result in material impacts to the Company’s condensed consolidated financial statements in future reporting periods.

Restatement of previously consolidated financial statements

The Company has restated its previously issued consolidated financial statements as of the year ended December 31, 2020, to amend the underlying assumptions used in its common stock valuation work. See Note 20 to the consolidated financial statements included in the Company’s Prospectus for further information.

F - 10

KALTURA INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars unless specified otherwise)

NOTE 2:

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Concentration of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash and trade receivables.

The majority of the Company’s and its subsidiaries’ cash, and cash equivalents and restricted cash are invested with major banks in the United States, Israel, and the United Kingdom. Such investments in the United States may be in excess of insured limits and they are not insured in other jurisdictions. In general, these investments may be redeemed upon demand and therefore bear minimal risk.

The Company’s trade receivables are geographically dispersed and derived from sales to customers mainly in the United States, Europe, and Asia. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation, and account monitoring procedures.

Major customer data as a percentage of total revenues:

The following table sets forth a customer that represented 10% or more of the Company’s total revenue in each of the periods set forth below:

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	(unaudited)
Customer A (M&T)		*	%		12.03	%		*	%		12.90	%
Customer B (EE&T)		*	%		*	%	$	10.01	%		*	%

*) Represents an amount that is lower than 10% of the Company’s total revenue.

Significant Accounting Policies and Estimates

There were no material changes to the significant accounting policies and estimates during the six months ended June 30, 2021.

Recently Adopted Accounting Pronouncements

As an “emerging growth company”, the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.

F - 11

KALTURA INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars unless specified otherwise)

NOTE 2:

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements. The Company adopted this guidance prospectively on January 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.