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Table of Contents

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 October 1, 2022

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 001-41541

Mobileye Global Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

88-0666433

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

c/o Mobileye B.V.

Har Hotzvim, 13 Hartom Street

P.O. Box 45157 Jerusalem 9777513, Israel

+972-2-541-7333

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code)

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

Title of Each Class

    

Trading Symbol

    

Name of Each Exchange on Which Registered

Class A common stock, par value $0.01

MBLY

The Nasdaq Global Select Market

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, 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

There were 51,911,905 shares of Class A common stock, $0.01 par value, outstanding at November 1, 2022.

Table of Contents

MOBILEYE GLOBAL INC.

FORM 10-Q

For the quarterly period ended October 1, 2022

TABLE OF CONTENTS

Page 

Part I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

4

Condensed Combined Balance Sheets

4

Condensed Combined Statements of Operations and Comprehensive Income (Loss)

5

Condensed Combined Statements of Changes in Equity

6

Condensed Combined Statements of Cash Flows

7

Notes to Condensed Combined Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

43

Part II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

45

Item 6.

Exhibits

45

Signatures

46

2

Table of Contents

In this report, references to “we,” “us,” “our,” our “company,” “Mobileye,” the “Company,” and similar terms refer to Mobileye Global Inc. and, unless the context requires otherwise, its consolidated subsidiaries, except with respect to our historical business, operations, financial performance, and financial condition prior to our initial public offering, where such terms refer to Mobileye Group, which combines the operations of Cyclops Holdings Corporation, Mobileye B.V., GG Acquisition Ltd., Moovit App Global Ltd., and their respective subsidiaries, along with certain Intel employees mainly in research and development.

3

Table of Contents

Part 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOBILEYE GROUP

CONDENSED COMBINED BALANCE SHEETS

(UNAUDITED)

    

October 1,

    

December 25,

U.S. dollars in millions

 

2022

 

2021

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

871

$

616

Trade account receivables, net

 

222

 

155

Inventories

 

105

 

97

Related party loan

 

901

 

1,326

Other current assets

 

63

 

76

Total current assets

 

2,162

 

2,270

Non-current assets

 

  

 

  

Property and equipment, net

 

354

 

304

Intangible assets, net

 

2,658

 

3,071

Goodwill

 

10,895

 

10,895

Other long-term assets

 

95

 

115

Total non-current assets

 

14,002

 

14,385

TOTAL ASSETS

$

16,164

$

16,655

Liabilities and Equity

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable and accrued expenses

$

160

$

160

Employee related accrued expenses

 

75

 

102

Related party payable

 

966

 

163

Dividend Note with related party

 

3,520

 

Other current liabilities

 

59

 

49

Total current liabilities

 

4,780

 

474

Non-current liabilities

 

  

 

  

Long-term employee benefits

 

54

 

94

Deferred tax liabilities

 

162

 

181

Other long-term liabilities

 

8

 

17

Total non-current liabilities

 

224

 

292

TOTAL LIABILITIES

$

5,004

$

766

Equity

 

  

 

  

Parent net investment

 

11,178

 

15,884

Accumulated other comprehensive income (loss)

 

(18)

 

5

TOTAL EQUITY

 

11,160

 

15,889

TOTAL LIABILITIES AND EQUITY

$

16,164

$

16,655

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

4

Table of Contents

MOBILEYE GROUP

CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

Three months ended

 

Nine months ended

 

October 1,

 

September 25,

 

October 1,

 

September 25,

U.S. dollars in millions, except share and per share amounts

 

2022

 

2021

 

2022

 

2021

Revenue

    

$

450

    

$

326

    

$

1,304

    

$

1,030

Cost of revenue

 

233

 

173

 

682

 

529

Gross profit

 

217

 

153

 

622

 

501

Research and development, net

 

206

 

132

 

565

 

390

Sales and marketing

 

27

 

33

 

91

 

98

General and administrative

 

9

 

8

 

27

 

26

Total operating expenses

 

242

 

173

 

683

 

514

Operating income (loss)

 

(25)

 

(20)

 

(61)

 

(13)

Interest income with related party

 

5

 

 

9

 

2

Interest expense with related party

 

(11)

 

 

(20)

 

Other income (expense), net

 

1

 

 

6

 

Income (loss) before income taxes

 

(30)

 

(20)

 

(66)

 

(11)

Benefit (provision) for income taxes

 

(15)

 

(6)

 

(46)

 

(11)

Net income (loss)

$

(45)

$

(26)

$

(112)

 

(22)

Earnings (loss) per share:

 

  

 

  

 

  

 

  

Basic and diluted

$

(0.06)

$

(0.03)

$

(0.15)

$

(0.03)

Weighted-average number of shares used in computation of earnings (loss) per share (in millions):

 

  

 

  

 

  

 

  

Basic and diluted

 

750

 

750

 

750

 

750

Net income (loss)

 

(45)

 

(26)

 

(112)

 

(22)

Other comprehensive income (loss), net of tax

 

6

 

2

 

(23)

 

4

TOTAL COMPREHENSIVE INCOME (LOSS)

$

(39)

$

(24)

$

(135)

$

(18)

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

5

Table of Contents

MOBILEYE GROUP

CONDENSED COMBINED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

Accumulated other

Total

 

Parent Net

comprehensive

shareholders’

U.S. dollars in millions

 

Investment

income (loss)

equity

Three Months Ended

    

  

    

  

    

  

Balance as of July 2, 2022

$

11,223

$

(24)

$

11,199

Other comprehensive income (loss), net

 

 

6

 

6

Net income (loss)

 

(45)

 

 

(45)

Tax sharing agreement with Parent

 

(9)

 

 

(9)

Net transfer from (to) Parent

 

9

 

 

9

Balance as of October 1, 2022

$

11,178

$

(18)

$

11,160

Balance as of June 26, 2021

$

15,845

$

2

$

15,847

Other comprehensive income (loss), net

 

 

2

 

2

Net income (loss)

 

(26)

 

 

(26)

Net transfer from (to) Parent

 

38

 

 

38

Balance as of September 25, 2021

$

15,857

$

4

$

15,861

Nine Months Ended

Balance as of December 25, 2021

$

15,884

$

5

$

15,889

Other comprehensive income (loss), net

 

 

(23)

 

(23)

Net income (loss)

 

(112)

 

 

(112)

Equity transaction in connection with the legal purchase of Moovit entities

 

(900)

 

 

(900)

Dividend Note with related party

 

(3,500)

 

 

(3,500)

Dividend distribution

 

(336)

 

 

(336)

Tax sharing agreement with Parent

 

(16)

 

 

(16)

Net transfer from (to) Parent

 

158

 

 

158

Balance as of October 1, 2022

$

11,178

$

(18)

$

11,160

Balance as of December 26, 2020

$

15,842

$

$

15,842

Other comprehensive income (loss), net

 

 

4

 

4

Net income (loss)

 

(22)

 

 

(22)

Net transfer from (to) Parent

 

37

 

 

37

Balance as of September 25, 2021

$

15,857

$

4

$

15,861

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

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MOBILEYE GROUP

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(UNAUDITED)

    

Nine months ended

    

Nine months ended

 

October 1,

 

September 25,

U.S. dollars in millions

 

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

Net income (loss)

$

(112)

$

(22)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

  

 

  

Depreciation of property and equipment

 

17

 

12

Share-based compensation

 

112

 

73

Amortization of intangible assets

 

413

 

368

Exchange rate differences on cash and cash equivalents

 

6

 

Deferred income taxes

 

(8)

 

(24)

Interest on Dividend Note

 

20

 

Interest with related party, net

 

20

 

(2)

Other

 

(3)

 

(1)

Changes in operating assets and liabilities:

 

  

 

  

Decrease (increase) in trade accounts receivables

 

(67)

 

(57)

Decrease (increase) in other current assets

 

28

 

(4)

Decrease (increase) in inventories

 

(8)

 

30

Increase (decrease) in account payables and accrued expenses

 

22

 

31

Increase (decrease) in employee-related accrued expenses and long term benefits

 

(67)

 

20

Increase (decrease) in other current-liabilities

 

10

 

15

Decrease (increase) in other long term assets

 

15

 

(1)

Increase (decrease) in long-term liabilities

 

(3)

 

Net cash provided by operating activities

 

395

 

438

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchase of property and equipment

 

(79)

 

(98)

Repayments of loan due from related party

 

734

 

Issuance of loan to related party

 

(336)

 

(390)

Net cash provided by (used in) investing activities

 

319

 

(488)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Net transfers from Parent

 

99

 

69

Dividend paid

 

(336)

 

Share-based compensation recharge

 

(200)

 

Deferred offering costs

 

(14)

 

Changes in withholding tax related to employee stock plans

 

 

(2)

Net cash provided by (used in) financing activities

 

(451)

 

67

Effect of foreign exchange rate changes on cash and cash equivalents

 

(6)

 

Increase in cash, cash equivalents and restricted cash

 

257

 

17

Balance of cash, cash equivalents and restricted cash, at beginning of year

 

625

 

93

Balance of cash, cash equivalents and restricted cash, at end of period

$

882

$

110

Supplementary non-cash investing and financing activities:

 

  

 

  

Non cash purchase of property and equipment

 

9

 

28

Non-cash share based compensation recharge

 

9

 

105

Equity transaction in connection with the legal purchase of Moovit entities

 

900

 

Dividend Note with related party

 

3,500

 

Non cash deferred offering costs

 

1

 

Tax sharing agreement with Parent

 

16

 

Supplemental cash flow information:

 

  

 

  

Cash (paid) for income taxes, net of refunds

$

(40)

$

(35)

Interest received from related party

 

29

 

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

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - GENERAL

Background

Mobileye Group is a leader in the development and deployment of advanced driver assistance systems (“ADAS”) and autonomous driving technologies and solutions. Mobileye Group combines the operations of Cyclops Holdings LLC (“Cyclops”), Mobileye B.V. and its subsidiaries (“Mobileye”) GG Acquisition Ltd. and the Moovit App Global Ltd. and its subsidiaries (“Moovit”) and certain Intel employees mainly in research and development (the “Intel Aligned Groups”) (collectively, unless the context otherwise requires, the “Company”, “we”, and “our”).

Mobileye operates as a component of Intel, which acquired a majority stake in Mobileye in August 2017 (the “Mobileye Acquisition”). The remaining issued and outstanding shares of Mobileye were acquired by Intel during 2018. The Company is building a robust portfolio of end-to-end ADAS and autonomous driving solutions to provide the capabilities required for the future of autonomous driving, leveraging a comprehensive suite of purpose-built software and hardware technologies.

Moovit, a leading urban mobility app and mobility-as-a-service (“MaaS”) solutions provider also operates as a component of Intel upon acquisition of the issued and outstanding equity interests of Moovit in May 2020 (the “Moovit Acquisition”). On May 31, 2022, we legally purchased from Intel 100% of the issued and outstanding equity interests of the Moovit entities. For further detail see Note 6.

In December 2021, Intel announced plans to pursue an initial public offering (“IPO”) of Mobileye Group. In January 2022, Intel incorporated a new legal entity, Mobileye Global Inc., with the intent to contribute the Company to Mobileye Global Inc. and be able to offer newly issued shares of common stock of Mobileye Global Inc. in an IPO.

In October 2022, the initial public offering of Mobileye (the “Mobileye IPO”) was completed. The registration statement related to the Mobileye IPO was declared effective on October 25, 2022, and our Class A common stock began trading on the Nasdaq Global Select Market under the ticker symbol “MBLY” on October 26, 2022.

Prior to the completion of the Mobileye IPO, we were a wholly-owned business of Intel Corporation (“Intel” or the “Parent”). Upon the closing of the Mobileye IPO (after giving effect to the exercise of the underwriters’ over-allotment option), Intel continues to directly or indirectly hold all of the Class B common stock of Mobileye, which represents approximately 99.3% of the voting power of our common stock. Upon completion of the IPO, we completed the legal entity reorganization of our operations comprising the Mobileye Group business so that they are all under the single parent entity, Mobileye Global Inc., and the filing and effectiveness of our amended and restated certificate of incorporation.

Refer to Note 9, Subsequent Events, for details relating to the Company’s IPO and related transactions.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These condensed combined financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed combined financial statements have been prepared on the same basis as the Company’s annual audited combined financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

The results of operations for the three and nine months ended October 1, 2022 shown in this report are not necessarily indicative of the results to be expected for the full year ending 2022. The condensed combined financial statements should be read in conjunction with the audited combined financial statements for the fiscal year ended December 25, 2021.

The condensed combined financial statements and accompanying notes have been derived from the consolidated financial statements and accounting records of Intel and are presented as if the Company had been operating as a stand-alone company for all periods presented. The assets, liabilities, revenue, and expenses directly attributable to the Company’s operations, including the acquired goodwill and intangible assets, have been reflected in these condensed combined financial statements on a historical cost basis, as included in the consolidated financial statements of Intel.

The Company utilized the Intel Aligned Groups mainly in research and development activities. The associated costs of the Intel Aligned Groups are reflected on a specific attribution basis in the condensed combined statements of operations and comprehensive income (loss). Intel Aligned Groups also participated in various Intel compensation and benefit plans. Portions of those plans’ costs were based on actual headcount and included in these condensed combined financial statements. These costs are not necessarily indicative of costs that would have been incurred had the Company operated on a stand-alone basis.

The condensed combined statements of operations and comprehensive income (loss) also include allocations of general corporate expenses from Intel. These expenses have been allocated to the Company on the basis of direct usage when identifiable or allocated on the basis of headcount. Management of the Company and Parent considered the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of the services provided to or the benefit received by the Company during the periods presented.

Mobileye largely continued to operate as a standalone operation and had not been fully integrated into Intel, with limited use of corporate overhead functions. The allocated costs for the periods presented in the statement of operations and comprehensive income (loss) were not material. The allocations may not be reflective of the expenses that would have incurred had the Company operated as a stand-alone company for the periods presented. These costs also may not be indicative of the expenses that the Company will incur in the future or would have incurred if the Company had obtained these services from a third party. Actual costs that may have been incurred if the Company had operated as a stand-alone company would depend on a number of factors, including the chosen organizational structure, the outsourcing of certain functions, and other strategic decisions.

As Mobileye Group was not historically held by a single legal entity, total parent net investment is shown in lieu of equity in the condensed combined financial statements and represents Intel’s total interest in the recorded net assets of Mobileye Group. All intercompany transactions within the combined businesses of the Company have been eliminated. Transactions between the Company and Intel, arising from arrangements with Intel and other similar related-party transactions, were considered to be effectively settled in the condensed combined financial statements at the time the transactions were recorded, unless otherwise noted. The total net effect of the settlement of these transactions was reflected within parent net investment as a component of equity in the condensed combined balance sheets and within net transfers from Parent as a financing activity in the condensed combined statements of cash flows, unless otherwise noted.

There have been no material changes in our significant accounting policies as described in our combined financial statements for the fiscal year ended December 25, 2021, other than described below regarding deferred offering costs and income tax and regarding earnings per share as described in Note 4. For further detail, see Note 2 in the audited combined financial statements for the fiscal year ended December 25, 2021.

Deferred Offering Costs

Deferred offering costs consisting of legal, accounting and other fees and costs incurred that are directly related to the IPO, are capitalized and recorded on the condensed combined balance sheet. These deferred costs will be reclassified to shareholders’ equity upon the consummation of the IPO, which was completed in October 2022, and recorded against the proceeds received. If the IPO would have been aborted, all the deferred offering costs would have been expensed. The Company capitalized $15 million and $0 million of deferred offering costs within other long-term assets, in the condensed combined balance sheet as of October 1, 2022, and December 25, 2021, respectively. Transaction costs which are not directly related to the IPO, are expensed as incurred within general and administrative expenses. The Company recognized $1 million and $4 million of offering costs as an expense in the three and nine months ended October 1, 2022, respectively.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Cash, cash equivalents, and restricted cash

The following is a reconciliation of the cash, cash equivalents and restricted cash as of each period end:

U.S. dollars In millions

    

October 1, 2022

    

December 25, 2021

Cash and cash equivalents

 

$

871

 

$

616

Restricted cash (within other long-term assets)

 

11

 

9

Cash, cash equivalents and restricted cash

$

882

$

625

Fair value measurement

The carrying amounts of the related party loan, trade accounts receivable, Dividend Note with related party, accounts payable and investments in short term deposits classified as cash equivalents, approximate their respective fair value because of their generally short maturities.

Short term deposits included in cash and cash equivalents were $770 million and $209 million as of October 1, 2022 and December 25, 2021, respectively.

The Company also has goodwill and acquisition-related in-process research and development assets that are required to be recorded at fair value only if an impairment is recognized in the current period.

Research and development, net

Research and development expenses are expensed as incurred, and consist primarily of personnel, facilities, equipment, and supplies for research and development activities.

The Company occasionally enters into best-efforts nonrefundable, non-recurring engineering (“NRE”) arrangements pursuant to which the Company is reimbursed for a portion of the research and development expenses attributable to specific development programs. The Company does not receive any additional compensation or royalties upon completion of such projects and the potential customer does not commit to purchase the resulting product in the future. The participation reimbursement received by the Company does not depend on whether there are future benefits from the project. All intellectual property generated from these arrangements is exclusively owned by the Company.

Participation in expenses for research and development projects are recognized on the basis of the costs incurred and are netted against research and development expenses in the condensed combined statements of operations and comprehensive income (loss). Research and development reimbursements of $15 million, and $17 million were offset against research and development costs in the three months ended October 1, 2022 and September 25, 2021, respectively; and $40 million and $39 million were offset in the nine months ended October 1, 2022 and September 25, 2021, respectively.

Derivatives and hedging

Beginning in 2021, as part of Intel’s corporate hedging program, Intel is hedging forecast cash flows denominated in Israel Shekels (“ILS”) related to the Company. ILS is the largest operating expense currency of the Company. Intel combines all of its ILS exposures, and as part of Intel’s hedging program enters into hedging contracts to hedge Intel’s combined ILS exposure. Derivative gains and losses attributed to these condensed combined financial statements are recorded under accumulated other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

The notional amount and fair value of derivatives outstanding at Intel on behalf of Mobileye were:

 

October 1, 2022

 

December 25, 2021

 

U.S. dollars in millions

Notional amount of derivatives

    

$

192

    

$

230

Fair value of derivatives receivable from (payable to) Intel

 

$

(19)

 

$

5

The change in accumulated other comprehensive income (loss) relating to gains (losses) on derivatives used for hedging was as follows:

 

Three Months Ended 

 

Nine Months Ended 

October 1, 2022

October 1, 2022

 

U.S. dollars in millions

Other comprehensive income (loss) before reclassifications

    

$

1

    

$

(30)

Amounts reclassified out of accumulated other comprehensive income (loss)

 

6

 

6

Tax effects

 

(1)

 

1

Other comprehensive income (loss), net

 

$

6

 

$

(23)

Income Tax

The provision for income tax consists of income taxes in the various jurisdictions where the Company is subject to taxation, primarily the United States and Israel. For interim periods, the Company recognizes an income tax benefit (provision) based on the estimated annual effective tax rate, calculated on a worldwide consolidated basis, expected for the entire year. The Company applies this rate to the year-to-date pre-tax income. The overall effective tax rate is influenced by valuation allowances on tax assets for which no benefit can be recognized due to the Company’s recent history of pretax losses sustained. Tax jurisdictions with forecasted pretax losses for the year for which no benefit can be recognized are excluded from the calculation of the worldwide estimated annual effective tax rate, and any associated tax expense for those jurisdiction is recorded separately.

Certain legal entities of Mobileye file tax returns on a consolidated basis with our parent Intel Corporation. We have entered into a tax sharing agreement with Intel Corporation that establishes the amount of cash we will pay to our parent for our share of the tax liability owed on these consolidated filings. The income tax provision included in these combined financial statements has been calculated using the separate return method, as if the Company had filed its own tax returns. This method can limit our ability to benefit losses that may have been used by Intel in the consolidated tax returns. To the extent the tax sharing agreement and the separate return method differ, an adjustment to our net parent investment balance is recorded.

Use of estimates

The preparation of condensed combined financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts and events reported and disclosed in the combined financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions and factors, including the current economic environment, that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

On an on-going basis, management evaluates its estimates, judgments, and assumptions. The most significant estimates and assumptions relate to recognition and useful lives of intangible assets, impairment assessment of intangible assets and goodwill, and income taxes.

Loss contingencies

Management believes that there are no current matters that would have a material effect on the Company’s condensed combined balance sheets, statement of operations or cash flows. Legal fees are expensed as incurred.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, which include short-term deposits, and trade accounts receivable.

The majority of the Company’s cash and cash equivalents are invested in banks domiciled in the U.S., as well as in Israel. Generally, these cash equivalents may be redeemed upon demand. Short term bank deposits, included in cash and cash equivalents, are held in the aforementioned banks. Accordingly, management believes that these bank deposits have minimal credit risk.

The Company’s accounts receivables are derived primarily from sales to Tier 1 suppliers to the automotive manufacturing industry located mainly in the U.S., Europe, and China. Concentration of credit risk with respect to accounts receivables is mitigated by credit limits, ongoing credit evaluation, and account monitoring procedures. Credit is granted based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Trade accounts receivable are typically due from customers within 30 to 60 days. The Company performs ongoing credit evaluations of its customers and has not experienced any material losses in the periods presented. The Company establishes credit losses accounts receivable by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history from such customers, and the customers’ current ability to pay its obligation to the Company. As of October 1, 2022 and December 25, 2021, the credit losses in respect of accounts receivable, which are determined with respect to specific debts that are doubtful of collection and netted against accounts receivable, were not material. The Company writes off accounts receivable when they are deemed uncollectible. For the three and nine months ended October 1, 2022 and September 25, 2021, the charge-offs and recoveries in relation to the credit losses accounts were not material.

Customer concentration risk

The Company’s business, results of operations, and financial condition for the foreseeable future will likely continue to depend on sales to a relatively small number of customers. In the future, these customers may decide not to purchase the Company’s products, may purchase fewer products than in previous years, or may alter their purchasing patterns. Further, the amount of revenue attributable to any single customer or customer concentration generally may fluctuate in any given period. In addition, a decline in the production levels of one or more of the Company’s major customers, particularly with respect to vehicle models for which the Company is a significant supplier, could reduce revenue. The loss of one or more key customers, a reduction in sales to any key customer or the Company’s inability to attract new significant customers could negatively impact revenue and adversely affect the Company’s business, results of operations, and financial condition. See Note 8 related to customers that accounted for more than 10% of the Company’s total revenue and accounts receivable for each of the periods presented in these condensed combined financial statements.

Dependence on a single supplier risk

The Company purchases all its System on Chip (“EyeQ® SoC”) from a single supplier. Any issues that occur and persist in connection with the manufacture, delivery, quality, or cost of the assembly and testing of inventory could have a material adverse effect on the Company’s business, results of operations and financial condition. See below regarding a shortage in EyeQ® SoC that the Company has been experiencing during 2021 and through the nine months ended October 1, 2022.

COVID-19

The COVID-19 pandemic has adversely affected significant portions of the Company’s business and could have a continued adverse effect on the Company’s business, results of operations, and financial condition. There is a significant constraint in the global supply of semiconductors. The COVID-19 pandemic led to an increase in the demand for consumer electronics and global semiconductor manufacturers allocated significant capacity to meet such demand. As global automakers resumed production in 2020 following shutdowns resulting from the COVID-19 pandemic, semiconductor supply became further strained, and these factors, combined with the long lead times associated with the Company, have contributed to a shortage of semiconductors.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

During the fiscal year ended December 25, 2021, and through nine months ended October 1, 2022, the Company’s sole supplier was not able to meet demand of the Company for the EyeQ® SoC, causing a significant reduction in the Company’s inventory levels. We expect to continue to experience a shortfall of EyeQ® SoC which has already caused certain delays and may continue to cause further delays in our ability to fulfil customers’ orders. Since the EyeQ® SoC is the core of the ADAS and AV products, continued shortages in the supply of sufficient EyeQ® SoC to meet production needs may impair the Company’s ability to meet its customers’ requirements in a timely manner and may adversely affect the Company’s business, results of operations and financial condition. Moreover, to the extent that the global semiconductor shortage results in reduced production or production delays by automakers, those delays could result in reduced or delayed demand for the Company products. In addition, issues relating to the COVID-19 pandemic have led to port congestion and intermittent supplier shutdowns and delays in the delivery of critical components, resulting in additional expenses to expedite delivery of critical parts. Sustaining the Company’s production trajectory will require the readiness and solvency of its suppliers and vendors, a stable and motivated production workforce and ongoing government cooperation, including for travel and visa allowances, which many governments have restricted in connection with efforts to address the COVID-19 pandemic. Although we cannot fully predict the length and the severity of the impact these pressures will have on a long-term basis, we do not anticipate that our current supply chain constraints would materially adversely affect our results of operations, capital resources, sales, profits, and liquidity.

New Accounting pronouncements:

Recently Adopted Accounting Pronouncements

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s condensed combined financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard which can be applied prospectively or retrospectively, was adopted by the Company, and only impacts annual financial statement footnote disclosures. The impact of adoption of this standard is immaterial.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. ASU No. 2020-04 is effective and can be applied prospectively through December 31, 2022. The Company has completed its evaluation of significant contracts. The Company has adopted the ASU in these unaudited condensed combined financial statements. There was no material impact on these unaudited condensed combined financial statements. For further information, see Note 6 regarding related party transactions.

NOTE 3 - OTHER FINANCIAL STATEMENT DETAILS

Inventories:

 

October 1, 

 

December 25, 

2022

2021

 

U.S. dollars in millions

Raw materials

    

$

39

    

$

24

Work in process

 

1

 

Finished goods

 

65

 

73

 

$

105

 

$

97

Inventory write-downs and write-offs were not material for the periods presented in these condensed combined financial statements.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Property and equipment, net:

 

October 1,

 

December 25,

2022

2021

 

U.S. dollars in millions

Computers, electronic equipment and software

    

$

110

    

$

85

Vehicles

 

11

 

11

Office furniture and equipment

 

4

 

2

Leasehold improvements

 

20

 

15

Construction on process

 

284

 

249

Total property, plant and equipment, gross

 

429

 

362

Less: accumulated depreciation

 

(75)

 

(58)

Total property, plant and equipment, net

 

$

354

 

$

304

Depreciation expenses totaled $7 million and $5 million for the three months ended October 1, 2022 and September 25, 2021, respectively; and $17 million and $12 million for the nine months ended October 1, 2022 and September 25, 2021, respectively.

NOTE 4 - EQUITY

A.Stock-based compensation plans

The Company’s equity incentive plans are broad-based, long-term programs intended to attract and retain talented employees. The Company’s employees participate in Intel’s equity incentive plan. All references to share and per share data in the tables below refer to Intel’s common stock.

Options

Outstanding and exercisable options for Intel’s common stock under Intel’s plan as of October 1, 2022 were as follows:

 

Outstanding

 

Exercisable

Weighted average 

Number of

remaining 

Weighted average 

Number of

Weighted average 

Exercise price

 

options

 

contractual life

 

exercise price

 

 options

 

exercise price

(U.S. dollars)

 

In thousands

 

In years

 

 U.S. dollars

 

In thousands

 

 U.S. dollars

$ 4.01 - 21.59

    

69

    

3

    

7.8

    

32

    

6.5

$ 22.41 - 26.89

 

2,143

 

0.9

 

26.8

 

2,140

 

26.8

$55.17

 

68

 

6.5

 

55.2

 

45

 

55.2

Total

 

2,280

 

1.1

 

27.1

 

2,217

 

27.1

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

The option activity for the nine months ended October 1, 2022 for options granted to the Company’s employees for Intel’s common stock was as follows:

Weighted 

average

Weighted 

remaining 

average

contractual 

Aggregated 

Number 

 exercise price

Life

intrinsic value(1)

    

In thousands

    

 U.S. dollars

    

In Years

    

U.S. dollars in millions 

Options outstanding at December 25, 2021

 

3,578

$

29.2

 

1.5

$

79

Granted

 

 

  

 

  

Exercised

 

(1,298)

$

32.9

 

  

 

  

Forfeited

 

 

  

 

  

Options outstanding at October 1, 2022

 

2,280

$

27.1

 

1.1

$

1

Options exercisable as of October 1, 2022

 

2,217

$

27.1

 

1

$

1

The option activity for the three months ended October 1, 2022 for options granted to the Company’s employees for Intel’s common stock was as follows:

Weighted 

average

Weighted 

remaining 

average

contractual 

Aggregated 

Number 

 exercise price

Life

intrinsic value(1)

    

In thousands

    

 U.S. dollars

    

In Years

    

U.S. dollars in millions 

Options outstanding at July 2, 2022

 

2,290

$

27.1

 

1.4

$

21

Granted

 

$

 

  

 

  

Exercised

 

(10)

$

24.1

 

  

 

  

Forfeited

 

$

 

  

 

  

Options outstanding at October 1, 2022

 

2,280

$

27.1

 

1.1

$

1

Options exercisable at October 1, 2022

 

2,217

$

27.1

 

1

$

1

(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of the Intel’s ordinary share. On October 1, 2022 and December 25, 2021, Intel’s ordinary share prices were $25.77, and $51.31, respectively. This represents the potential pre-tax amount receivable by the option holders had all option holders exercised their options as of such date.
(2)The remaining options expected to vest as of October 1, 2022 are 63 thousand options with an average weighted exercise price of $26.49.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

RSUs

The RSU activity for the nine months ended October 1, 2022 for RSUs granted to Company’s employees for Intel’s common stock was as follows:

    

    

Weighted average

Number 

grant fair value

 

In thousands

 

 U.S. dollars 

Outstanding at December 25, 2021

 

5,278

 

46.49

Granted

 

3,752

 

43.65

Vested

 

(620)

 

49.58

Forfeited

 

(350)

 

48.53

Outstanding at October 1, 2022

 

8,060

 

44.84

The RSU activity for the three months ended October 1, 2022 for RSUs granted to Company’s employees for Intel’s common stock was as follows:

    

    

Weighted average

Number 

grant fair value

 

In thousands

 

 U.S. dollars 

Outstanding at July 2, 2022

 

7,967

 

45.34

Granted

 

294

 

33.33

Vested

 

(127)

 

49.22

Forfeited

 

(74)

 

45.02

Outstanding at October 1, 2022

 

8,060

 

44.84

Share-based compensation expense summary

Share-based compensation expenses included in the condensed combined statements of operations and comprehensive income (loss) was as follows:

 

Three Months Ended

 

Nine Months Ended

    

October 1, 2022

    

September 25, 2021

    

October 1, 2022

    

September 25, 2021

 

U.S. dollars in millions

Cost of revenue

    

$

    

$

    

$

    

$

Research and development, net

 

32

 

20

 

101

 

57

Sales and marketing

 

1

 

1

 

3

 

3

General and administrative

 

3

 

3

 

8

 

13

Total share-based compensation

$

36

$

24

$

112

$

73

A.Dividends

On May 12, 2022, Mobileye Group declared and paid a dividend in an aggregate amount of $336 million to Intel, net of $14 million of cash paid to tax authorities to settle related tax obligations.

B.Earnings Per Share

Before the Mobileye IPO, Intel held directly or indirectly the 100 shares of common stock of Mobileye Global Inc. with a par value of $0.01 per share, that were issued and outstanding. Immediately prior to the IPO, those 100 shares of common stock held by Intel were reclassified into 100 shares of Class B common stock with a par value of $0.01 per share. Concurrently, we issued to Intel an additional 749,999,900 shares of our Class B common stock pursuant to an agreement with Intel. Accordingly, as of the completion of the IPO, we have 750,000,000 Class B shares, all held by Intel. This share amount is being utilized for the calculation of basic and diluted earnings

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

per share for all periods presented. Basic and diluted net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period.

In connection with the IPO, we issued 41,000,000 shares of our Class A common stock to the public at a public offering price of $21.00 per share and an additional 4,761,905 Class A shares at a private placement. The IPO closed on October 28, 2022. On November 1, 2022, we closed the sale of an additional 6,150,000 shares pursuant to the exercise of the underwriters’ option. In accordance with ASC 260, the Class A shares issued in connection with the IPO will be included in earnings per share calculations for periods subsequent to the closing of the IPO and are not included in the earning per share calculations for periods prior to the closing of the IPO.

In October 2022, our board of directors approved the issuance of restricted stock units in connection with the IPO. These restricted stock units were not included in the computation of diluted earnings per share for the three and nine months ended October 1, 2022.

The following table summarizes the calculation of basic net income (loss) per share for the periods presented:

Three Months Ended

Nine Months Ended

October 1

September 25,

October 1

September 25,

    

2022

    

2021

    

2022

    

2021

in millions, except per share amounts

Numerator:

 

 

  

 

  

 

  

Net income (loss)

 

(45)

 

(26)

 

(112)

 

(22)

Denominator:

 

  

 

  

 

  

 

  

Weighted average common shares - basic and diluted

 

750

 

750

 

750

 

750

Net income (loss) per share:

 

  

 

  

 

  

 

  

Basic and diluted

$

(0.06)

$

(0.03)

$

(0.15)

 

$

(0.03)

NOTE 5 - INCOME TAXES

The Company’s quarterly benefit (provision) for income taxes and the estimates of its annual effective tax rate, are subject to fluctuation due to several factors, principally including variability in overall pre-tax income and the mix of paying for certain components to which such income relates.

The income tax provision included in these condensed combined financial statements has been calculated using the separate return method, as if the Company had filed its own tax returns. This method can limit the Company’s ability to benefit from losses that may have been used by Intel in its consolidated tax returns. The Company has entered into a tax sharing agreement with Intel, which establishes the amount of cash payable to Intel for our share of the tax liability owed on a consolidated tax filing basis with Intel. To the extent the tax sharing agreement and the separate return method differ, and the liability to Intel is higher or lower than the amount that would have been payable if the Company had filed its own tax returns, an adjustment to the net parent investment balance is recorded within equity. The adjustment to the net parent investment for the nine months ended October 1, 2022 was an aggregate decrease in net parent investment of $16 million because amounts payable under the tax sharing agreement in respect of the nine-month period exceeded amounts calculated under the separate return method.

The tax expense for the nine months ended October 1, 2022, was unfavorably impacted by an accrued withholding tax expense and valuation allowances for certain jurisdictions. A withholding tax expense of $14 million related to a dividend distribution between entities within the Mobileye Group (see Note 4 regarding a dividend distribution to Intel) was recorded in the nine months ended October 1, 2022. As the Company has jurisdictions that have sustained recent losses based on the separate return method, a valuation allowance is required for deferred tax assets for which no benefit can be currently realized. The Company also estimates cash taxes for these jurisdictions this year due to unfavorable timing adjustments based upon tax law.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 - RELATED PARTIES TRANSACTIONS

The Company has entered into a series of related party arrangements with Intel. The arrangements were as follows:

Loan arrangements

The Company entered into a series of bilateral lending/borrowing arrangements with Intel. The purposes of the facilities are to enable bilateral cash movements between the parties. The arrangements are denominated in U.S dollars.

In 2017, Intel along with the Company, entered into a bilateral lending/borrowing arrangement (“Arrangement 1”) to make available to either party up to an aggregate principal amount of $1.5 billion. Arrangement 1 has a mechanism of automatic renewal for additional periods of one year. In 2021, Arrangement 1 was amended to increase the capacity from $1.5 billion to $1.8 billion, and was automatically renewed to December 2022.

In 2017, Intel along with the Company, entered into a bilateral lending/borrowing arrangement (“Arrangement 2”) to make cash available to either party up to an aggregate principal amount of $750 million. Arrangement 2 has a mechanism for automatic renewal for additional periods of one year each. In March 2022, Arrangement 2 was amended to increase the aggregate principal amount from $750 million to $1.0 billion and the maturity date was extended to March 2023.

In 2021, the Company and Intel entered into a bilateral lending/borrowing arrangement (“Arrangement 3” and together with Arrangement 1 and Arrangement 2, the “Bilateral Loan Arrangements”) to make cash available to either party up to an aggregate principal amount of $100 million. Arrangement 3 has a maturity date of July 2022 with a mechanism of automatic renewal for additional periods of one year. In March 2022, Arrangement 3 was amended to increase the aggregate principal amount available to draw from $100 million to $500 million. The interest rate is based on an applicable margin of 0.0% with an option for Intel to elect to increase or decrease the applicable margin on or after the first day of the 2022 fiscal year. If the election to increase the applicable margin is applied, the spread adjustment would be reflective of the difference between three-month LIBOR and the term Secured Overnight Financing Rate (“SOFR”).

In March 2022, due to reference rate reform, Arrangement 1 and Arrangement 2 were amended to change the interest rate from LIBOR based to SOFR based. The modification was accounted for as if it is not substantial in accordance with the expedient for ASC 470 and an updated effective interest rate was calculated to reflect the change in terms. There was no gain or loss recognized for the nine months ended October 1, 2022.

The total outstanding balance under the Bilateral Loan Arrangements was approximately $901 million and $1.3 billion as of October 1, 2022 and December 25, 2021 respectively, and is reflected in current assets as a related party loan based on the maturity date as of each balance sheet period (accumulated interest is presented within other current assets). Interest income recognized by the Company totaled $5 million, and $0.6 million for the three months ended October 1, 2022 and September 25, 2021, respectively; and $9 million and $2 million for the nine months ended October 1, 2022 and September 25, 2021, respectively.

Stock Compensation Recharge Agreement

The Company entered into a stock compensation recharge agreement with Intel, which requires the Company to reimburse Intel for certain amounts relating to the value of share-based compensation provided to the Company’s employees for RSUs or stock options exercisable in Intel stock. The liability associated with the stock compensation recharge agreement that is reflected on the condensed combined balance sheets, under related party payable was approximately $14 million and $162 million as of October 1, 2022 and December 25, 2021, respectively. As for the inclusion of the Company’s employees in Intel’s equity incentive plan, see Note 4.

Hedging services

Intel centrally hedges its exposure to changes in foreign exchange rates. At the beginning of 2021, the Company entered into a hedging services agreement with Intel, pursuant to which the Company is entitled to a certain allocation of the gains and obligated to a

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

certain allocation of the losses arising from the execution of the hedging contracts. For further information, see Note 2, Derivatives and hedging.

Development Services and Lease

Intel entered into agreements with the Company to provide certain development services, including research, technical work on technology, products and solutions, construction and ancillary administrative services and use of space in Intel’s building in Israel. The Company paid for these services on a quarterly basis. These costs are included in the condensed combined statements of operations and comprehensive income (loss) primarily on a specific and direct attribution basis.

Other services to a related party

The Company reimbursed its Chief Executive Officer for reasonable travel related expenses incurred while conducting business on behalf of the Company. Travel expenses totaled $0.8 million and $0.6 million for nine months ended October 1, 2022 and September 25, 2021, respectively.

Dividend Note

On April 21, 2022, Intel and Mobileye Group signed a loan agreement whereby Mobileye Group agreed to issue a promissory note to Intel in an aggregate principal amount of $3.5 billion (the “Dividend Note”). The Dividend Note is scheduled to mature on April 21, 2025 and accrues interest at a rate equal to 1.26% per annum, such interest to accrue quarterly. Prior to June 30, 2024, such interest will be paid by being automatically added to the outstanding principal amount of the loan and will thereafter be payable quarterly in cash in arrears and shall also be payable upon any prepayment, whether in whole or in part, to the extent accrued on the amount being prepaid and upon maturity. Under the Dividend Note, Mobileye Group has the right, at its option, on any business day, to prepay the loan, including principal and any accrued interest thereon, in whole or in part without premium or penalty. As of October 1, 2022, accrued interest expense was $20 million. The aggregate principal amount plus related accrued interest is presented as Dividend Note with related party. Refer to Note 9 for the settlement of the Dividend Note.

Equity transaction in connection with the legal purchase of Moovit entities

On May 31, 2022, we entered into an agreement with Intel pursuant to which we legally purchased from Intel 100% of the issued and outstanding equity interests of the Moovit entities for an aggregate amount of $900 million that is payable in cash to Intel and presented within related party payable. Moovit’s operations are already reflected as part of the Mobileye Group in these condensed combined financial statements as further detailed in Note 1 and therefore the transaction is treated within equity.

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS

October 1, 2022

December 25, 2021

    

U.S. dollars in millions

    

    

Accumulated 

    

    

    

Accumulated 

    

Gross Assets

Amortization

Net

Gross Assets

Amortization

Net

Developed technology

    

$

3,973

    

$

1,756

    

$

2,217

    

$

3,991

    

$

1,419

    

$

2,572

Customer relationships & brands

786

345

441

831

332

499

Total

$

4,759

$

2,101

$

2,658

$

4,822

$

1,751

$

3,071

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the amortization expenses recorded for these identified intangible assets and their weighted average useful lives:

Three Months Ended

Nine Months Ended

    

    

    

    

Weighted 

    

October 1, 

    

September 25, 

    

October 1, 

    

September 25,

    

Average

2022

2021

2022

 2021

Useful Life

    

U.S. Dollars in millions

Developed technology

 

$

115

 

$

100

 

$

355

 

$

300

 

10

Customer relationships & brands

 

16

 

23

 

58

 

68

 

12

Total amortization expenses

 

$

131

 

$

123

 

$

413

 

$

368

 

The Company expects future amortization expenses for the next five years and thereafter to be as follows: