KALTURA INC - 1432133 - 2021
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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
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________________ to ___________________
 
Commission File Number: 001-40644

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
 
F-1
 
F-1 - F-2
 
F-3
 
F-4 - F-6
 
F-7 - F-8
 
F-9 - F-34
1
26
27
   
PART II
OTHER INFORMATION
 
28
28
76
76
76
76
77
 
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.
 
i

 
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;
 
ii

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.
 
Recently Issued Accounting Pronouncements
 
In February 2016, the FASB issued ASU No. 2016-02, Leases, which would require lessees to put all leases on their balance sheets, whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term.
 
In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which defers the effective date of ASU 2016-02 for non-public entities to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The guidance will be effective for the Company beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023. The Company is currently evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.
 
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company beginning January 1, 2023, and interim periods therein. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.
 
In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2021; early adoption is permitted. The Company does not expect that ASU 2017-04 will have an impact on its consolidated financial statements and related disclosures.
 
F - 12

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 December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing a variety of exceptions within the framework of ASC 740.
 
These exceptions include the exception to the incremental approach for intra-period tax allocation in the event of a loss from continuing operations and income or a gain from other items (such as other comprehensive income), and the exception to using general methodology for the interim period tax accounting for year-to-date losses that exceed anticipated losses.
 
The guidance will be effective for the Company beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements and related disclosures.
 
 
 
 
NOTE 3:
REVENUES FROM CONTRACTS WITH CUSTOMERS
 
  a.
The following table presents disaggregated revenue by category:
 
   
Enterprise, Education
and Technology
   
Media and Telecom
 
   
Amount
   
Percentage of revenue
   
Amount
   
Percentage of revenue
 
Three months ended June 30, 2021 (unaudited)
                       
                         
Subscription
 
$
27,197