May 24, 2022

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ION ACQUISITION CORP 1 LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

References in this report (the “Quarterly Report”) to “we,” “us” or the
“Company” refer to ION Acquisition Corp 1 Ltd. References to our “management” or
our “management team” refer to our officers and directors. The following
discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning
of 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”) that are not historical facts, and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Form 10-Q including, without limitation, statements in this
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” regarding the Company’s financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as “expect,” “believe,” “anticipate,”
“intend,” “estimate,” “seek” and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management’s current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company’s annual report on Form 10-K, as amended, as filed with the U.S.
Securities and Exchange Commission
(the “SEC”). The Company’s securities filings
can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.

Overview

We are a blank check company incorporated in the Cayman Islands on August 6,
2020
formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Company’s initial public
offering (the “Initial Public Offering”) and the sale of the Private Placement
Warrants, our shares, debt or a combination of cash, shares and debt.

We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.

Recent Developments

On January 25, 2021, we entered into a Merger Agreement with Taboola, and Merger
Sub, relating to a proposed business combination transaction between us and
Taboola.

Pursuant to the Merger Agreement, Merger Sub will merge with and into the
Company (the “Merger”), with the Company continuing as the Surviving Company. As
a result of the Merger and the other transactions contemplated by the Merger
Agreement (the “Transactions” or the “Business Combination”), the Company will
become a direct, wholly-owned subsidiary of Taboola.

Immediately prior to the Effective Time, (i) each preferred share, with no par
value, of Taboola (each, a “Taboola Preferred Share”) will be converted into
ordinary shares, with no par value, of Taboola (each, a “Taboola Ordinary
Share”) and (ii) immediately following such conversion but prior to the
Effective Time, Taboola will effect a stock split of each Taboola Ordinary Share
into such number of Taboola Ordinary Shares calculated in accordance with the
terms of the Merger Agreement such that each Taboola Ordinary Share will have a
value of $10.00 per share after giving effect to such stock split (the “Stock
Split” and, together with the conversion of Taboola Preferred Shares, the
“Capital Restructuring”).

Pursuant to the Merger Agreement, immediately prior to the Effective Time, each
(i) Class B Ordinary Share of the Company will be automatically converted into
one (1) Class A Ordinary Share of the Company in accordance with the terms of
the Company’s organizational documents and, after giving effect to such
automatic conversion, at the Effective Time and as a result of the Business
Combination, each issued and outstanding Class A Ordinary Share will no longer
be outstanding and will automatically be converted into the right of the holder
thereof to receive one Taboola Ordinary Share after giving effect to the Capital
Restructuring and (ii) issued and outstanding ION Warrant will automatically and
irrevocably be assumed by Taboola and converted into a corresponding Taboola
Warrant exercisable for Taboola Ordinary Shares.

Immediately prior to the Effective Time, the Class A Ordinary Shares and the
Public Warrants comprising each issued and outstanding ION Unit, consisting of
one Class A Ordinary Share and one-fifth of one Public Warrant, will be
automatically separated and the holder thereof will be deemed to hold one Class
A Ordinary Share and one-fifth of one Public Warrant. No fractional Public
Warrants will be issued in connection with such separation such that if a holder
of such Public Units would be entitled to receive a fractional Public Warrant
upon such separation, the number of Public Warrants to be issued to such holder
upon such separation will be rounded down to the nearest whole number of Public
Warrants and no cash will be paid in lieu of such fractional Public Warrants.

The Business Combination will be consummated subject to the deliverables and
provisions as further described in the Merger Agreement.

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Results of Operations

We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through March 31, 2021 were
organizational activities and those necessary to prepare for the Initial Public
Offering, identifying a target for our Business Combination and activities in
connection with the proposed acquisition of Taboola. We do not expect to
generate any operating revenues until after the consummation of our initial
Business Combination. We expect to generate non-operating income in the form of
interest income on marketable securities held after the Initial Public Offering.
We expect that we will incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses in connection with searching for, and
completing, a Business Combination. Additionally, we recognize non-cash gains
and losses within other income (expense) related to changes in recurring fair
value measurement of our warrant liabilities at each reporting period.

For the period from August 6, 2020 (inception) through December 31, 2020, we had
a net loss of $20,943,194, which consists of changes in fair value of warrant
liabilities of $20,054,190, issuance costs of $177,233 and operating and
formation costs of $756,593 offset by interest income on marketable securities
held in the Trust Account of $42,308 and an unrealized gain on marketable
securities held in the Trust Account of $2,514.

For the period from January 1, 2021 through March 31, 2021, we had a net income
of $11,792,022, which consists of changes in fair value of warrant liabilities
of $14,417,471, and operating and formation costs of $2,647,699 offset by
interest income on marketable securities held in the Trust Account of $22,250

Liquidity and Capital Resources

On October 6, 2020, we consummated the Initial Public Offering of 25,875,000
Units, which includes the full exercise by the underwriters of their
over-allotment option in the amount of 3,375,000 Units, at a price of $10.00 per
Unit, generating gross proceeds of $258,750,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 7,175,000 Private
Placement Warrants to the Sponsor at a price of $1.00 per Private Placement
Warrant generating gross proceeds of $7,175,000.

Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of $258,750,000 was placed in the Trust Account, and we had no
cash held outside of the Trust Account, after payment of costs related to the
Initial Public Offering, and available for working capital purposes. We incurred
$5,806,964 in transaction costs, including $5,175,000 of underwriting fees and
$631,964 of other costs.

For the period from January 1, 2021 through March 31, 2021, net cash used in
operating activities was $289,632.

As of March 31, 2021, we had cash and marketable securities held in the Trust
Account of $258,817,072. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account, which interest shall be net of taxes payable and excluding
Business Combination Marketing Agreement fee, to complete our Business
Combination. We may withdraw interest from the Trust Account to pay taxes, if
any. To the extent that our share capital or debt is used, in whole or in part,
as consideration to complete a Business Combination, the remaining proceeds held
in the Trust Account will be used as working capital to finance the operations
of the target business or businesses, make other acquisitions and pursue our
growth strategies.

As of March 31, 2021, we had cash of $787,240. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, structure, negotiate and complete a
Business Combination.

In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.

We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our initial Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2020. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any offbalance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, utilities, administrative services
and remote support services provided to the Company. We began incurring these
fees on October 2, 2020 and will continue to incur these fees monthly until the
earlier of the completion of a Business Combination and the Company’s
liquidation.

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We entered into forward purchase agreements on September 15, 2020, pursuant to
which the forward purchase investors agreed to purchase an aggregate of up to
5,000,000 Class A ordinary shares, at a purchase price of $10.00 per share, or
up to $50,000,000 in the aggregate, in private placements that will close
substantially concurrently with the closing of a Business Combination. Any
reduction in the number of forward purchase shares will be made in our sole
discretion. The forward purchase shares are identical to the Public Shares,
except that the holders thereof will have certain registration rights. The
forward purchase agreements and the registration rights agreement also provide
that the forward purchase investors are entitled to registration rights with
respect to the forward purchase shares. The proceeds from the sale of the
forward purchase shares may be used as part of the consideration to the sellers
in a Business Combination, expenses in connection with a Business Combination or
for working capital in the post-business combination company. The forward
purchases are required to be made regardless of whether any Class A ordinary
shares are redeemed by the Public Shareholders and are intended to provide us
with a minimum funding level for a Business Combination. No forward purchase
investor will have the ability to approve the Business Combination prior to the
signing of a material definitive agreement. The forward purchase shares will be
issued only in connection with the closing of a Business Combination.

We engaged Cowen and Company, LLC as an advisor in connection with the Business
Combination to assist us in holding meetings with its shareholders to discuss
the potential Business Combination and the target business’s attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with the potential Business Combination, assist us in
obtaining shareholder approval for the Business Combination and assist us with
its press releases and public filings in connection with the Business
Combination. Pursuant to the terms of the agreement, we will pay Cowen and
Company, LLC
a marketing fee for such services upon the consummation of a
Business Combination in an amount equal to, in the aggregate, 3.5{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the gross
proceeds of Initial Public Offering, or $9,056,250 (including proceeds from the
full or partial exercise of the over-allotment option). No fee will be due to
Cowen and Company, LLC if the Company does not complete a Business Combination.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:

Class A Ordinary Shares Subject to Redemption

We account for our Class A ordinary shares subject to possible conversion in
accordance with the guidance in Accounting Standards Codification (“ASC”) Topic
480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to
mandatory redemption are classified as a liability instrument and are measured
at fair value. Conditionally redeemable ordinary shares (including ordinary
shares that feature redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) are classified as temporary equity. At all other
times, ordinary shares are classified as shareholders’ equity. Our Class A
ordinary shares feature certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events.
Accordingly, Class A ordinary shares subject to possible redemption are
presented at redemption value as temporary equity, outside of the shareholders’
equity section of our balance sheet.

Warrants liability

We evaluated the Public Warrants and Private Placement Warrants (collectively,
“Warrants”) in accordance with ASC 815-40, “Derivatives and Hedging – Contracts
in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement
related to certain tender or exchange offers as well as provisions that provided
for potential changes to the settlement amounts dependent upon the
characteristics of the holder of the warrant, precludes the Warrants from being
accounted for as components of equity. As the Warrants meet the definition of a
derivative as contemplated in ASC 815 and are not eligible for an exception from
derivative accounting, the Warrants are recorded as derivative liabilities on
the Balance Sheet and measured at fair value at inception (on the date of the
IPO) and at each reporting date in accordance with ASC 820, “Fair Value
Measurement”, with changes in fair value recognized in the Statement of
Operations in the period of change.

Net Income (Loss) Per Ordinary Share

We apply the two-class method in calculating earnings per share. Ordinary shares
subject to possible redemption, which are not currently redeemable and are not
redeemable at fair value, have been excluded from the calculation of basic net
loss per ordinary share since such shares, if redeemed, only participate in
their pro rata share of the Trust Account earnings. Our net income (loss) is
adjusted for the portion of income that is attributable to ordinary shares
subject to redemption, as these shares only participate in the earnings of the
Trust Account and not our income or losses.

Recent Accounting Standards

Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.

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