What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 363 added, 191 removed, 511 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except share and par value amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

CURRENT ASSETS:

22 unchanged sentences

EARNOUT LIABILITY 22,611 134,173

DEFERRED TAX LIABILITIES 12,995 —

OTHER LIABILITIES — 60

2 unchanged sentences

STOCKHOLDERS’ EQUITY:

Common stock, $ 0.0001 par value, 740,000,000 shares authorized as of June 30, 2022 and December 31, 2021, and 125,473,437 and 117,750,608 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.0001 par value, 740,000,000 shares authorized as of September 30, 2022 and December 31, 2021, and 152,015,458 and 117,750,608 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 525,311 294,190

1 unchanged sentence

Accumulated deficit ( 147,628 ) ( 228,667 )

Total stockholders’ equity of Navitas Semiconductor Corporation 377,693 65,536

Noncontrolling interest 4,417 —

Total stockholders’ equity 382,110 65,536

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Gain from change in fair value of warrants — — 51,763 —

Gain from change in fair value of earnout liabilities 54,854 — 118,260 —

Gain (loss) from change in fair value of earnout liabilities ( 6,098 ) — 112,162 —

Other expense ( 74 ) — ( 1,215 ) —

1 unchanged sentence

INCOME (LOSS) BEFORE INCOME TAXES ( 42,963 ) ( 6,830 ) 70,939 ( 32,801 )

PROVISION FOR INCOME TAXES 270 5 273 24

INCOME TAX (BENEFIT) PROVISION ( 10,135 ) 13 ( 9,862 ) 37

NET INCOME (LOSS) ( 32,828 ) ( 6,843 ) 80,801 ( 32,838 )

NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 238 ) — ( 238 ) —

NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTERESTS $ ( 32,590 ) $ ( 6,843 ) $ 81,039 $ ( 32,838 )

NET INCOME (LOSS) PER COMMON SHARE:

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(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Foreign currency translation adjustments, net of tax 54 2 ( 6 ) ( 1 )

Total other comprehensive loss — ( 3 ) ( 60 ) ( 4 )

TOTAL COMPREHENSIVE INCOME (LOSS) $ 33,837 $ ( 18,653 ) $ 113,569 $ ( 25,999 )

Total other comprehensive income (loss) 54 2 ( 6 ) ( 1 )

COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST $ ( 32,774 ) $ ( 6,841 ) $ 80,795 $ ( 32,839 )

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST ( 238 ) — ( 238 ) —

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST $ ( 32,536 ) $ ( 6,841 ) $ 81,033 $ ( 32,839 )

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

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Redeemable Convertible Preferred Stock Stockholder's equity (deficit)

THREE AND SIX MONTHS ENDED JUNE 30, 2022 Series A

preferred stock Series B

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comprehensive

income (loss) Total

income (loss) Noncontrolling interest Total

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

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BALANCE AT JUNE 30, 2022 — $ — — $ — — $ — — $ — 125,473 $ 16 $ 361,963 $ ( 115,038 ) $ — $ ( 62 ) $ — $ 246,879

Issuance of common stock under employee stock option and stock award plans — — — — — — — — 1,489 — 1,316 — — — — 1,316

Shares issued for business acquisition — — — — — — — — 24,883 2 146,310 — — — — 146,312

Shares issued for transaction fees — — — — — — — — 170 — 1,000 — — — — 1,000

Stock-based compensation expense related to employee and non-employee stock awards — — — — — — — — — — 14,722 — — — — 14,722

Change in noncontrolling interest — — — — — — — — — — — — — — 4,655 4,655

Foreign currency translation adjustment — — — — — — — — — — — — — 54 — 54

Net loss — — — — — — — — — — — ( 32,590 ) — — ( 238 ) ( 32,828 )

BALANCE AT SEPTEMBER 30, 2022 — $ — — $ — — $ — — $ — 152,015 $ 18 $ 525,311 $ ( 147,628 ) — $ ( 8 ) $ 4,417 $ 382,110

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

3 unchanged sentences

Redeemable Convertible Preferred Stock Stockholder's equity (deficit)

THREE AND SIX MONTHS ENDED JUNE 30, 2021 Series A

preferred stock Series B

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BALANCE AT JUNE 30, 2021 16,620 $ 14,970 14,213 $ 27,371 5,416 $ 14,786 18,199 $ 52,379 17,888 $ 3 18,295 $ ( 101,977 ) $ — $ ( 4 ) $ ( 83,683 )

Issuance of common stock under employee stock option and stock award plans — — — — — — — — 446 — 71 — — — 71

Stock-based compensation expense related to employee and non-employee stock awards — — — — — — — — — — 201 — — — 201

Foreign currency translation adjustment — — — — — — — — — — — — — 2 2

Net loss — — — — — — — — — — — ( 6,843 ) — — ( 6,843 )

BALANCE AT SEPTEMBER 30, 2021 16,620 $ 14,970 14,213 $ 27,371 5,416 $ 14,786 18,199 $ 52,379 18,334 $ 3 $ 18,567 $ ( 108,820 ) $ — $ ( 2 ) $ ( 90,252 )

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 80,801 $ ( 32,838 )

$ 113,629 $ ( 25,995 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

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Gain from change in fair value of earnout liability ( 112,162 ) —

Deferred income taxes ( 10,185 ) —

Change in operating assets and liabilities:

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Operating lease liability ( 466 ) —

Deferred revenue — 59

Net cash used in operating activities

1 unchanged sentence

CASH FLOWS FROM INVESTING ACTIVITIES:

Business acquisition, net of cash acquired ( 645 ) —

Business acquisitions, net of cash acquired ( 96,355 ) —

Asset acquisition — ( 680 )

Investment in joint venture ( 5,204 ) ( 634 )

( 5,204 ) ( 150 )

Investment in preferred stock ( 1,500 ) —

Purchases of property and equipment ( 3,485 ) ( 1,213 )

( 2,305 ) ( 641 )

Receipts on notes receivable 97 2

Net cash used in investing activities ( 106,447 ) ( 2,525 )

( 8,057 ) ( 1,469 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of deferred offering costs — ( 2,503 )

Redemption of warrants ( 38 ) —

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Principal payments on long-term debt ( 2,400 ) ( 267 )

Net cash provided by financing activities

Net cash used in financing activities

( 1,476 ) ( 476 )

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$ 124,792 $ 11,075

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Deferred offering costs in other current assets and accounts payable and accrued expenses $ — $ 977

Net assets acquired through change in control of joint venture $ 6,444 $ —

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

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The Company presently operates as a product design house that contracts the manufacturing of its chips and packaging to partner suppliers.

Navitas maintains its operations around the world, including the United States, Ireland, Germany, Italy, Belgium, China, Taiwan and the Philippines, with principal executive offices in El Segundo, California.

Navitas maintains its operations around the world, including the United States, Ireland, Germany, Italy, Belgium, China, Taiwan, Thailand and the Philippines, with principal executive offices in Torrance, California.

Reorganization

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initiated a restructuring to streamline its worldwide legal entity structure and more efficiently align its business operations (the “Restructuring”).

The Restructuring introduced wholly owned subsidiary in China as well as the addition of Legacy Navitas, an entity registered in Ireland and the U.S., as the parent of Navitas U.S.

The Restructuring introduced wholly owned subsidiaries in Hong Kong and China as well as the addition of Legacy Navitas, an entity registered in Ireland and the U.S., as the parent of Navitas U.S.

and the other Navitas subsidiaries.

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federal income tax purposes and is a tax resident in both Ireland and the United States.

See Note 14, Provision for Income Taxes, for more information.

Business combination

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

quantities for Legacy Navitas convertible preferred stock related to balances or activity before the Closing reflect the historical quantities and are not adjusted for the Exchange Ratio.

Acquisition of VDDTech

On June 10, 2022, the Company’s wholly owned subsidiary, Navitas Semiconductor Limited, acquired all of the stock of VDDTECH srl, a private Belgian company (“VDDTech”) for approximately $ 1,859 in cash and stock.

Based in Mont-saint-Guibert, Belgium, VDDTech creates advanced digital-isolators for next-generation power conversion.

VDDTech’s net assets and operating results since the acquisition date are inc luded in the Company’s Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022, and were not material.

The Company issued 113 restricted shares that are subject to time based vesting and issued another 151 restricted shares that are subject to time and performance based vesting over the next four and three years , respectively.

These restricted shares are subject to certain individuals maintaining employment with the Company and, therefore, are accounted for under ASC 718.

The Company has recorded a preliminary allocation of the purchase price to tangible assets acquired and liabilities assumed based on their fair values as of the acquisition date.

The excess of the purchase price over the fair value of tangible assets and liabilities of $ 1,177 was recorded as goodwill.

Upon a final determination of the purchase price and the final valuation of the intangible assets acquired, primarily including developed technology, the Company will allocate the purchase price to tangible and intangible assets acquired and liabilities assumed, and adjust the excess purchase price allocated to goodwill as needed.

In June 2022, the Company acquired VDDTech for $ 1.9 million in cash and stock , and in August 2022 the Company acquired GeneSiC for $ 246.2 million in cash and stock.

S ee Note 17, Business Combinations, for more information.

Basis of presentation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The results of operations for the three and six months ended June 30, 2022 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2022.

The results of operations for the three and nine months ended September 30, 2022 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2022.

In the opinion of the Company’s management, the information contained herein reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and stockholders’ equity (deficit).

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Except as further described below, there have been no significant changes in the Company’s accounting policies from those disclosed in its annual report on Form 10-K filed with the SEC on March 31, 2022.

The consolidated financial statements include the accounts of a Former Joint Venture, an entity in which the Company has a controlling interest (see Note 18, Noncontrolling Interest).

The Company reports noncontrolling interests of the consolidated entities as a component of equity separate from the Company’s equity.

All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in the consolidation.

The Company’s net income (loss) excludes income (loss) attributable to the noncontrolling interests.

Basis of consolidation

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All intercompany transactions and balances have been eliminated in consolidation.

SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) (“ASU 2016-02”), and also issued subsequent amendments under ASU 2019-10 and ASU 2020-05 (collectively ASC 842).

On January 1, 2022, the Company adopted

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

ASC 842 and the related amendments.

SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

Business Combinations

We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations .

The acquisition method requires identifiable assets acquired and liabilities assumed be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business.

The amount by which the fair value of consideration transferred exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill.

The determination of estimated fair value requires us to make significant estimates and assumptions.

These fair value determinations require judgment and involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and asset lives, among other items.

As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

Transaction costs associated with business combinations are expensed as they are incurred.

Valuation of Contingent Consideration Resulting from a Business Combination

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified milestone events.

We record contingent consideration resulting from a business combination at its fair value on the acquisition date.

Each quarter thereafter, we revalue these obligations and record increases or decreases in their fair value within our Statement of Operations and Comprehensive Income (Loss) until such time as the specified milestone achievement period is complete.

Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones.

Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period.

Updates to assumptions could have a significant impact on our results of operations in any given period.

Actual results may differ from estimates.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) (“ASU 2016-02”), and also issued subsequent amendments under ASU 2019-10 and ASU 2020-05 (collectively ASC 842).

On January 1, 2022, the Company adopted ASC 842 and the related amendments.

ASC 842 requires lessees to (i) recognize a right of use asset and a lease liability that is measured at the present value of the remaining lease payments, on the consolidated balance sheets, (ii) recognize a single lease cost, calculated over the lease term on a straight-line basis and (iii) classify lease related cash payments within operating and financing activities.

The Company recognized approximately $ 1,634 of operating lease right-of-use assets and $ 1,685 operating lease liabilities on the consolidated balance sheets upon adoption on January 1, 2022.

The Company recognized approximately $ 1.6 million of operating lease right-of-use assets and $ 1.7 million operating lease liabilities on the consolidated balance sheets upon adoption on January 1, 2022.

Credit Losses

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The Company is currently evaluating the impact of the new standard on the Company’s condensed consolidated financial statements and related disclosures.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

June 30, 2022 December 31, 2021

Property and equipment, net consist of the following (in thousands):

September 30, 2022 December 31, 2021

Furniture and fixtures

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$ 5,721 $ 2,302

For the three and six months ended June 30, 2022, depreciation expense was $ 186 and $ 352 , respectively.

For the three and six months ended June 30, 2021, depreciation expense was $ 86 and $ 166 .

For the three and nine months ended September 30, 2022, depreciation expense was $ 280 and $ 632 , respectively.

For the three and nine months ended September 30, 2021, depreciation expense was $ 112 and $ 278 .

The depreciation method was determined using the straight-line method over the following estimated useful lives:

2 unchanged sentences

Leasehold improvements

Inventory consists of the following:

June 30, 2022 December 31, 2021

Inventory consists of the following (in thousands):

September 30, 2022 December 31, 2021

Raw materials

2 unchanged sentences

$ 17,044 $ 11,978

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

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The short-term nature of the Company’s cash and cash equivalents, accounts receivable, debt and current liabilities causes each of their carrying values to approximate fair value for all periods presented.

Cash equivalents classified as Level 1 instruments were $ 131.5 million and $ 159.6 million as of June 30, 2022 and December 31, 2021, respectively.

The following table presents the Company’s fair value hierarchy for financial liabilities as of June 30, 2022 :

Cash equivalents classified as Level 1 instruments were $ 12.6 million and $ 159.6 million as of September 30, 2022 and December 31, 2021, respectively.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

The following table presents the Company’s fair value hierarchy for financial liabilities as of September 30, 2022 (in thousands) :

Level 1 Level 2 Level 3 Total

1 unchanged sentence

Total $ — $ — $ 22,611 $ 22,611

The following table presents the Company’s fair value hierarchy for financial liabilities as of December 31, 2021:

The following table presents the Company’s fair value hierarchy for financial liabilities as of December 31, 2021 (in thousands):

Level 1 Level 2 Level 3 Total

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The liability for the Private Warrants is a level 2 valuation because there is no active market.

GOODWILL AND INTANGIBLES

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.

Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date.

Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

The following table presents the changes in the Company’s goodwill balance (in thousands):

VDDTech GeneSiC Former Joint Venture Total

Balance at June 30, 2022 $ 1,177 $ — $ — $ 1,177

Additions to goodwill — 157,429 2,867 160,296

Impairment of goodwill — — — —

Purchase accounting adjustment ( 1,177 ) — — ( 1,177 )

Balance at September 30, 2022 $ — $ 157,429 $ 2,867 $ 160,296

Refer to Note 17, Business Combinations, for further details.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

The following table presents the Company’s intangible asset balance (in thousands):

Intangible Asset Cost Accumulated Amortization Net Book Value Amortization Method Useful Life

Trade Names $ 900 $ ( 56 ) $ 844 Straight line 2 years

Developed Technology 49,100 ( 1,534 ) 47,566 Straight line 4 years

In-process R&D 1,177 — 1,177 Indefinite N/A

Patents 34,900 ( 299 ) 34,601 Straight line 5 - 15 years

Customer Relationships 24,300 ( 304 ) 23,996 Straight line 10 years

Non-Competition Agreements 1,900 ( 47 ) 1,853 Straight line 5 years

Other 683 ( 259 ) 424 Straight line 5 years

Total $ 112,960 $ ( 2,499 ) $ 110,461

The amortization expense was $ 2.2 million and $ 2.4 million for the three months and nine months ended September 30, 2022, respectively.

There were no impairment charges as of September 30, 2022.

DEBT OBLIGATIONS

On April 29, 2020, the Company entered into a loan and security agreement with a new bank (the “Term Loan”), which provides for term advances up to $ 8,000 .

On April 29, 2020, the Company entered into a loan and security agreement with a new bank (the “Term Loan”), which provides for term advances up to $ 8.0 million .

The loan is divided into three term advances, First Term Advance, Second Term Advance and Third Term Advance.

The First Term Advance has a maximum available amount of $ 6,000 .

The Second Term Advance has a maximum available amount of $ 1,000 and is subject to the Company receiving aggregate net proceeds from Series B-2 Preferred Stock of $ 29,800 by no later than September 30, 2020.

The Third Term Advance has a maximum available amount of $ 1,000 and is subject to the Company receiving aggregate net proceeds from Series B-2 Preferred Stock of $ 39,900 by no later than September 30, 2020.

The First Term Advance has a maximum available amount of $ 6.0 million .

The Second Term Advance has a maximum available amount of $ 1.0 million and is subject to the Company receiving aggregate net proceeds from Series B-2 Preferred Stock of $ 29.8 million by no later than September 30, 2020.

The Third Term Advance has a maximum available amount of $ 1.0 million and is subject to the Company receiving aggregate net proceeds from Series B-2 Preferred Stock of $ 39.9 million by no later than September 30, 2020.

The Term Loan bears interest at a rate equal to the greater of (i) US Prime Rate plus 0.75 % or (ii) 5.5 % and is collateralized by all assets of the Company.

As of June 30, 2022, the interest rate was 5.5 %.

The loan is payable in monthly installments beginning September 1, 2021 with a final maturity date of January 1, 2024.

As of September 30, 2022, the interest rate wa s 6.3 %.

T he loan is payable in monthly installments beginning September 1, 2021 with a final maturity date of January 1, 2024.

Concurrent with the execution of the Term Loan, the Company paid off the outstanding principal balance and accrued interest on its then-existing long-term debt (which bore interest at 5 % at December 31, 2019) with a different bank, fully satisfying its obligations.

On August 1, 2021, the Company drew down $ 2,000 , the maximum available amount under the Second Term Advance and Third Term Advance.

On August 1, 2021, the Company drew down $ 2.0 million , the maximum available amount under the Second Term Advance and Third Term Advance.

In connection with execution of the Term Loan, the Company issued warrants to the bank (see Note 10, Warrant Liability).

The fair value of the warrants at the date of issuance was $ 16 and was recorded as debt discount, subject to amortization using the effective interest rate method over the term of the loan.

Amortization of debt discount and issuance costs for the three and nine months ended September 30, 2022 was $ 3 and $ 7 , respectively.

Amortization of debt discount and issuance costs for the three and nine months ended September 30, 2021 was $ 3 and $ 9 , respectively.

Amortization of debt discount and issuance costs includes the write-off of unamortized costs as of the date that the prior term loan was extinguished in 2020.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

In connection with execution of the Term Loan, the Company issued warrants to the bank (see Note 9).

The fair value of the warrants at the date of issuance was $ 16 and was recorded as debt discount, subject to amortization using the effective interest rate method over the term of the loan.

Amortization of debt discount and issuance costs for the three and six months ended June 30, 2022 was $ 2 and $ 6 , respectively.

Amortization of debt discount and issuance costs for the three and six months ended June 30, 2021 was $ 3 and $ 6 , respectively.

Amortization of debt discount and issuance costs includes the write-off of unamortized costs as of the date that the prior term loan was extinguished in 2020.

The following is a summary of the carrying value of long-term debt as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

The following is a summary of the carrying value of long-term debt as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

$ 4,533 $ 6,933

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$ 1,323 $ 3,716

As of June 30, 2022, future scheduled principal payments of debt obligations were as follows:

As of September 30, 2022, future scheduled principal payments of debt obligations were as follows (in thousands):

2022 (remaining) $ 800

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The operating leases do not contain material residual value guarantees or material restrictive covenants.

Rent expense, including short-term lease cost, was $ 364 and $ 716 for the three and six months ended June 30, 2022, respectively.

Rent expense, including short-term lease cost, was $ 285 and $ 552 for the three and six months ended June 30, 2021, respectively.

Information related to the Company right-of-use assets and related operating lease liabilities were as follows:

Six Months Ended June 30, 2022

Rent expense, including short-term lease cost, was $ 657 and $ 1.4 million for the three and nine months ended September 30, 2022, respectively.

Rent expense, including short-term lease cost, was $ 372 and $ 923 for the three and nine months ended September 30, 2021, respectively.

In addition to rent payments, the Company’s leases include real estate taxes, common area maintenance, utilities, and management fees, which are not fixed.

The Company accounts for these cost as variable payment and does not include such costs as a lease component.

Total variable expense was $ 50 and $ 129 f or the three and nine months ended September 30, 2022, respectively.

Information related to the Company right-of-use assets and related operating lease liabilities were as follows (in thousands):

Nine Months Ended September 30, 2022

Cash paid for operating lease liabilities $ 425

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

Maturities of lease liabilities due in 12-month period ending June 30,

Maturities of lease liabilities (in thousands) due in 12-month period ending September 30,

Thereafter 1,370

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Supplemental information for comparative periods

As of December 31, 2021 prior to the adoption of ASC 842, minimum payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year were as follows:

As of December 31, 2021 prior to the adoption of ASC 842, minimum payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year were as follows (in thousands):

Operating Leases

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

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The Company uses the straight-line method to amortize stock awards granted over the requisite service period of the award, which may be explicit or derived, unless market or performance conditions result in a graded attribution.

The following table summarizes the stock-based compensation expense recognized for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes the stock-based compensation expense recognized for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net revenues $ — $ 50 $ — $ 163

Cost of revenues $ — $ — $ — $ 163

Research and development 5,227 68 15,758 1,698

6 unchanged sentences

The fair value of incentive stock options and non-statutory stock options issued was estimated using the Black-Scholes model.

The Company did not grant any awards during the six months ended June 30, 2022.

A summary of stock options outstanding, excluding LTIP options as of June 30, 2022, and activity during the three months then ended, is presented below:

The Company did not grant any awards during the nine months ended September 30, 2022.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

Stock Options Shares

A summary of stock options outstanding, excluding LTIP options as of September 30, 2022, and activity during the nine months then ended, is presented below:

(In thousands) Exercise Price Per Share Weighted-

Price Remaining Weighted-

Price Weighted-

(In years) Per Share Average Intrinsic Value

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Cancelled ( 1 ) $ 1.06 1.06 — 2.80

Outstanding at June 30, 2022 8,053 $ .08 - $ 1.06

Outstanding at September 30, 2022 7,074 $ .08 - $ 1.06

$ 0.60 6.60 $ 4.25

Vested and Exercisable at June 30, 2022 5,945 $ .08 - $ 1.06

Vested and Exercisable at September 30, 2022 5,301 $ .08 - $ 1.06

$ 0.46 6.11 $ 4.39

During the three and six months ended June 30, 2022, the Company recognized $ 120 and $ 245 respectively, of stock-based compensation expense for the vesting of outstanding stock options, excluding $ 1.4 million related to the LTIP Options described below.

During the three and six months ended June 30, 2021, the Company recognized $ 208 and $ 347 , respectively, of stock-based compensation expense for the vesting of outstanding stock options.

At June 30, 2022, unrecognized compensation cost related to unvested awards totaled $ 0.9 million.

During the three and nine months ended September 30, 2022, the Company recognized $ 117 and $ 363 respectively, of stock-based compensation expense for the vesting of outstanding stock options, excluding $ 1.4 million related to the LTIP Options described below.

During the three and nine months ended September 30, 2021, the Company recognized $ 145 and $ 492 , respectively, of stock-based compensation expense for the vesting of outstanding stock options.

At September 30, 2022, unrecognized compensation cost related to unvested awards totaled $ 736 .

The weighted-average period over which this remaining compensation cost will be recognized is 1.6 years.

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The weighted average contractual period remaining is 9.9 years .

T he Black-Scholes model and a Monte Carlo simulation incorporating 100,000 scenarios.

T he Black-Scholes model and a Monte Carlo simulation incorporated 100,000 scenarios.

The valuation model utilized the following assumptions:

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Weighted-average grant date fair value of options $ 8.13

The Company recognized $ 1.4 million and $ 2.8 million of stock-based compensation expense for the three month and six months ended June 30, 2022, respectively.

The unrecognized compensations expense related to the LTIP Options is $ 50.1 million.

The Company recognized $ 1.4 million and $ 4.2 million of stock-based compensation expense for the three month and nine months ended September 30, 2022, respectively.

The unrecognized compensation expense related to the LTIP Options is $ 48.6 million as of September 30, 2022, a compensation expense will be recognized over 3.7 years.

The Company awarded a total of 3,250,000 performance stock options (“LTIP Options”) to a member of senior management on August 15, 2022 pursuant to the 2021 Plan.

The options vest in increments subject to achieving certain performance conditions, including ten share price hurdles ranging from $ 15 to $ 60 per share, coupled with revenue and EBITDA targets, measured over a seven year performance period and expire on the tenth anniversary of the grant date.

The options have an exercise price of $ 15.51 per share and the average fair value on the grant date was $ 2.51 .

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

weighted average contractual period remaini ng is 9.9 years.

T he Black-Scholes model and a Monte Carlo simulation incorporated 100,000 scenarios.

The valuation model utilized the following assumptions:

Risk-free interest rates 2.82 %

Expected volatility rates 63 %

Expected dividend yield —

Cost of equity (for derived service period) 14.64 %

Weighted-average grant date fair value of options $ 2.51

The Company recognized $ 119 and $ 119 of stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

The unrecognized compensation expense related to the LTIP Options is $ 8.0 million as of September 30, 2022, and compensation expense will be recognized over 4.3 years.

Restricted Stock Units

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Each RSU represents the right to receive one share of common stock of the Company, subject to the vesting and other terms and conditions set forth in the RSU Agreements and the 2020 Plan.

3,830,400 of these RSU awards are subject to vesting in

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

three equal installments over a three-year period, subject to the occurrence of an IPO (which includes the Business Combination) and certain valuation targets, and subject to accelerated vesting based on the satisfaction of certain stock price targets.

3,830,400 of these RSU awards are subject to vesting in three equal installments over a three-year period, subject to the occurrence of an IPO (which includes the Business Combination) and certain valuation targets, and subject to accelerated vesting based on the satisfaction of certain stock price targets.

547,200 of these RSUs were subject to vesting on the six-month anniversary of the grant date, subject to the occurrence of an IPO (which included the Business Combination) and certain valuation targets.

1 unchanged sentence

As of October 19, 2021, the IPO performance condition had been met as a result of the completion of the Business Combination.

A summary of RSUs outstanding as of June 30, 2022, and activity during the six months then ended, is presented below:

Restricted Common Stock Awards Shares

A summary of RSUs outstanding as of September 30, 2022 , and activity during the nine months then ended, is presented below:

(In thousands) Weighted-Average Grant Date Fair Value Per Share

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Forfeited ( 183 ) 10.60

Outstanding at June 30, 2022 7,198 $ 9.91

During the three and six months ended June 30, 2022, the Company recognized $ 7.4 million and $ 23.3 million of stock-based compensation expense for the vesting of RSAs and RSUs.

During the three and six months ended June 30, 2021, the Company recognized $ 12,330 and $ 13,772 of stock-based compensation expense for the vesting of RSAs and RSUs.

As of June 30, 2022, unrecognized compensation cost related to unvested RSU awards totaled $ 31.3 million.

Outstanding at September 30, 2022 11,255 $ 5.54

During the three and nine months ended September 30, 2022 , the Company recognized $ 8.7 million and $ 32.4 million of stock-based compensation expense for the vesting of RSUs, respectively.

During the three and nine months ended September 30, 2021 , the Company recogniz ed $ 501 and $ 14.3 million of stock-based compensation expense for the vesting of RSUs, respectively.

As of September 30, 2022, unrecognized compensation cost related to unvested RSU awards totale d $ 58.4 million.

The weighted-average period over which this remaining compensation cost is expected be recognized is 2.6 years.

The Company accrued $ 3.5 million and $ 2.0 million as of June 30, 2022 and December 31, 2021, respectively, related to a stock-based bonus plan that the Company plans to settle by issuing a variable number of fully-vested restricted stock units to employees.

Based on the closing share price of the Company’s Class A Common Stock of $ 3.86 on June 30, 2022, approximately 907,954 shares would have been issued, however, the actual number of shares will be based on the share price at the date of settlement .

The Company accrued $ 3.8 million an d $ 2.0 million as of September 30, 2022 and December 31, 2021, respectively, related to a stock-based bonus plan that the Company plans to settle by issuing a variable number of fully-vested restricted stock units to employees.

The $ 3.8 million accrued as of September 30, 2022 is for the eligible employee’s included the Company’s 2022 annual bonus plan and is expected to be settled during the first quarter of 2023.

The $ 2.0 million accrued as of December 31, 2021 was for the Company’s 2021 annual bonus plan and no balance is

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

accrued as of September 30, 2022.

Based on the closing share price of the Company’s Class A Common Stock of $ 4.85 on September 30, 2022, approximately 783,505 shares would have been issued, however, the actual number of shares will be based on the share price at the date of settlement .

Unvested Earnout Shares

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As a result, these unvested earn-out shares are equity-classified awards and have an aggregated grant date fair value of $ 19.1 million or $ 11.52 per share.

During the six months ended June 30, 2022, the Company recognized $ 0.8 million of stock-based compensation expense for the vesting of earnout shares.

At June 30, 2022, unrecognized compensation cost related to unvested earnout shares totaled $ 6.1 million.

The weighted-average period over which this remaining compensation cost is expected be recognized is 0.4 years.

Refer to Note 10.

During the three and nine months ended September 30, 2022, the Company recog nized $ 4.3 million and $ 11.5 million of s tock-based compensation expense for the vesting of earnout shares, respectively.

At September 30, 2022, unrecognized compensation cost related to unvested earnout shares total ed $ 1.8 million.

The weighted-average period over which this remaining compensation cost is expected be recognize d is 0.5 years.

Ref er to Note 11, Earnout Liability.

WARRANT LIABILITY

2 unchanged sentences

On February 4, 2022, the Company gave notice that it would redeem all of the Warrants, as further described below.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

The Warrants were exercisable only during the period commencing December 7, 2021 ( 12 months after the consummation of Live Oak’s initial public offering) and ending on the earlier of October 19, 2026 ( five years after the Closing of the Business Combination) or, in the event of redemption, the corresponding redemption date.

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The Warrants were exercisable by their holders until immediately before 5:00 p.m.

New York City time on the Redemption Date, either (i) on a cash basis, at an exercise price of $ 11.50 per share of Common Stock, or (ii) on a “cashless” basis in which the exercising holder would receive 0.261 shares of Common Stock per Warrant exercised.

New York City time on the Redemption Date, either (i) on a cash basis, at an exercise price of $ 11.50 per share of Common Stock, or (ii) on a

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

“cashless” basis in which the exercising holder would receive 0.261 shares of Common Stock per Warrant exercised.

Between December 7, 2021 (the date the Warrants became exercisable) and the Redemption Date, an aggregate of 12,722,773 Warrants were exercised (including 17,785 on a cash basis and 12,704,988 on a “cashless” basis);

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A total of 377,187 Warrants remained outstanding and unexercised at the Redemption Date and were redeemed for an aggregate Redemption Price of $ 38 .

Prior to the redemption date, the warrants had an aggregate fair value of $ 81,388 which resulted in a gain of $ 0 and $ 51,763 due to the decrease in the fair value of the warrant liability in the three and six months ended June 30, 2022.

There were no outstanding warrants as of June 30, 2022.

Prior to the redemption date, the warrants had an aggregate fair value of $ 81.4 million which resulted in a gain of $ 0 and $ 51.8 million due to the decrease in the fair value of the warrant liability in the three and nine months ended September 30, 2022.

There were no outstanding warrants as of September 30, 2022.

EARNOUT LIABILITY

8 unchanged sentences

These earnout shares have been categorized into two components:

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

of the Business Combination that will be earned over the remaining service period with the Company on their unvested equity shares and upon achievement of the Earnout Milestones.

(i) the “Vested Shares” - those associated with stockholders with vested equity at the closing of the Business Combination that will be earned upon achievement of the Earnout Milestones and (ii) the “Unvested Shares” - those associated with stockholders with unvested equity at the closing of the Business Combination that will be earned over the remaining service period with the Company on their unvested equity shares and upon achievement of the Earnout Milestones.

The Vested Shares are classified as liabilities in the consolidated balance sheet and the Unvested Shares are equity-classified share-based compensation to be recognized over time (see Note 9, Share-based Compensation).

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The valuation model utilized the following assumptions:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Risk-free interest rate

3 unchanged sentences

At the closing of the Business Combination on October 19, 2021, the earnout liability had an initial fair value of $ 96,069 , which was recorded as a long-term liability and a reduction to additional paid in capital in the consolidated balance sheet.

As of June 30, 2022 and December 31, 2021, the earnout liability had a fair value of $ 15,913 and $ 134,173 , respectively which resulted in a gain due to the decrease in the fair value of the earnout liability of $ 54,854 and $ 118,260 for the three and six month ended June 30, 2022, respectively.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

As of September 30, 2022 and December 31, 2021, the earnout liability had a fair va lue of $ 22.6 million a nd $ 134.2 million , respectively which resulted in a loss in the fair value of the earnout liability of $ 6.1 million for the three months ended September 30, 2022 due to the increase in the fair value of the earnout liability during the third quarter of 2022 and a gain due to the decrease in the fair value of the earnout liability of $ 112.2 million for the nine months ended September 30, 2022.

GeneSiC Earnout Liability

In connection with the merger agreement of GeneSiC Semiconductor as discussed in Note 17, the Company will pay additional contingent consideration of up to $ 25.0 million , in the form of cash earnout payments to the Sellers and certain employees of GeneSiC, conditioned on the achievement of substantial revenue and gross profit margin targets for the

GeneSiC business over the four fiscal quarters beginning on October 1, 2022 and ending on September 30, 2023.

The estimated fair value of the earnout liability was determined using a Monte Carlo analysis of 20,000 simulations assuming that GeneSiC’s revenue and gross profit margins follow a geometric Browian motion over the earnout period.

The valuation model utilized an assumption on the risk-free interest rate of 3.1 % and equity volatility rate of 99.9 %.

As of September 30, 2022, the GeneSiC Earnout liability was $ 0.6 million and is recorded in Earnout Liability on the Company’s Condensed Consolidated Balance Sheets.

SIGNIFICANT CUSTOMERS AND CREDIT CONCENTRATIONS

2 unchanged sentences

These distributors sell the Company’s products to a range of end users, including OEMs and merchant power supply manufacturers.

The following customers represented 10% or more of the Company’s net revenues for the respective three and six months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30, Six Months Ended June 30,

The following customers represented 10% or more of the Company’s net revenues for the respective three and nine months ended September 30, 2022 and 2021, respectively:

Three Months Ended September 30, Nine Months Ended September 30,

Customer 2022 2021 2022 2021

3 unchanged sentences

Distributor D * 21 % 15 % 20 %

Distributor E * 42 % * 38 %

Distributor F * * * 20 %

*Total customer net revenues was less than 10% of total net revenues.

1 unchanged sentence

The Company considers the domicile of its end customers, rather than the distributors it sells to directly, to be the basis for attributing revenues from external customers to individual countries.

Revenues for the three and six months ended June 30, 2022 and 2021, were attributable to end customers in the following countries:

Three Months Ended June 30, Six Months Ended June 30,

Revenues for the three and nine months ended September 30, 2022 and 2021, were attributable to end customers in the following countries:

Three Months Ended September 30, Nine Months Ended September 30,

Country 2022 2021 2022 2021

2 unchanged sentences

Rest of Asia 3 10 7 7

Other 2 — 2 1 —

100 % 100 % 100 % 100 %

2 unchanged sentences

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

6 unchanged sentences

The following customers represented 10% or more of the Company’s accounts receivable.

Customer June 30, 2022 December 31, 2021

Customer September 30, 2022 December 31, 2021

Distributor A 25 % 44 %

1 unchanged sentence

Distributor C 16 % 14 %

Distributor D 13 % *

Distributor E 30 % *

*Total customer accounts receivable was less than 10% of net account receivables.

Concentration of Supplier Risk

The Company currently relies on a single foundry to produce wafers for GaN ICs.

Loss of the relationship with this supplier could have a substantial negative effect on the Company.

The Company currently relies on a single foundry to produce wafers for GaN ICs and a separate single foundry to produce SiC MOSFETs.

Loss of the relationship with either of these suppliers could have a substantial negative effect on the Company.

Additionally, the Company relies on a limited number of third-party subcontractors and suppliers for testing, packaging and certain other tasks.

1 unchanged sentence

Although there are generally alternate sources for these materials and services, qualification of the alternate sources could cause delays sufficient to have a material adverse effect on the Company.

A significant amount of the Company’s third-party subcontractors and suppliers, including third-party foundries that supply wafers for GaN ICs, are located in Taiwan.

A significant amount of the Company’s assembly and test operations are conducted by third-party contractors in Taiwan and the Philippines.

A significant amount of the Company’s third-party subcontractors and suppliers, including third-party foundry that supply wafers for GaN ICs, are located in Taiwan.

A significant amount of the Company’s assembly and test operations are conducted by third-party contractors in Taiwan, Thailand and the Philippines.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

7 unchanged sentences

The Company has no plans to declare dividends.

A summary of the net income (loss) per share calculation is as follows for the three and six months ended June 30:

Three Months Ended June 30, Six Months Ended June 30,

A summary of the net income (loss) per share calculation is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Numerator - basic and diluted:

2022 2021 2022 2021

Net income (loss) $ 33,837 $ ( 18,650 ) $ 113,629 $ ( 25,995 )

Net income (loss) attributable to controlling interests $ ( 32,590 ) $ ( 6,843 ) $ 81,039 $ ( 32,838 )

Weighted-average common shares - basic common stock 138,455 18,305 127,390 19,643

13 unchanged sentences

Shares excluded from diluted weighted average shares 30,745 67,485 19,975 67,485

(1) The Company’s potentially dilutive securities, which include unexercised stock options, unvested shares, preferred shares, earnout shares, and warrants for common and preferred shares, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share for the three and six months ended June 30, 2021.

For the three and six months ended June 30, 2022, potentially dilutive securities have been excluded as these securities contain performance metric(s) which have not be satisfied as of June 30, 2022.

Therefore, the

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.

(2) Balances as of June 30, 2022 r etroactively restated to give effect to the October 19, 2021 reverse recapitalization.

F or the nine months ended September 30, 2022, potentially dilutive securities have been excluded as these securities contain performance metric(s) which have not be satisfied as of September 30, 2022.

(2) Balances as of September 30, 2022 r etroactively restated to give effect to the October 19, 2021 reverse recapitalization.

PROVISION FOR INCOME TAXES:

The Company determined the income tax provision for interim periods using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter.

The Company determined the income tax provision for interim periods using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising during the quarter.

The Company’s effective tax rate for the three months ended September 30, 2022 and 2021 was ( 98.9 )% and 0.2 %, respectively.

The Company’s effective tax rate for the nine months ended September 30, 2022 and 2021 was ( 38.5 )% and 0.2 %, respectively.

The effective tax rates for 2022 differ from the prior year primarily as a result of the valuation allowance release described below.

In each quarter, the Company updates its estimated annual effective tax rate, and if the estimated annual effective tax rate changes, a cumulative adjustment is recorded in that quarter.

The Company’s quarterly income tax provision and quarterly estimate of the annual effective tax rate are subject to volatility due to several factors, including our ability to accurately predict the proportion of our income (loss) before provision for income taxes in multiple jurisdictions, the tax effects of our stock-based compensation, and the effects of its foreign entity

At December 31, 2021, the Company has approximately $ 100,147 of federal net operating loss (“NOL”) carryforwards and approximately $ 82,583 of State NOL carryforwards expiring in varying amounts through 2037, with the exception of Federal NOLs arising from the years ended after December 31, 2017 that may be carried forward indefinitely.

At December 31, 2021, the Company had approximately $ 100.1 million of federal net operating loss (“NOL”) carryforwards and approximately $ 82,583 of State NOL carryforwards expiring in varying amounts through 2037, with the exception of Federal NOLs arising from the years ended after December 31, 2017 that may be carried forward indefinitely.

Realization of the NOL carryforwards is dependent on the Company generating sufficient taxable income prior to expiration of the NOL carryforwards and is also potentially subject to usage limitations due to changes in the Company’s ownership.

As of June 30, 2022, the Company continues to maintain a valuation allowance as the Company believes that it is not more likely than not that the deferred tax assets will be fully realized.

The Company had no unrecognized tax benefits for the three and six months ended June 30,2022 and 2021.

As of December 31, 2021 and through the second quarter of 2022, the Company had a full valuation allowance on its net deferred tax assets.

As a result of the GeneSiC Semiconductor Inc.

acquisition, (see Note 17, Business Combinations), the Company released $ 9.9 million of U.S.

valuation allowance during the three months ended September 30, 2022.

The release was attributable to a preliminary estimate of $ 23.2 million of net deferred tax liabilities recorded on GeneSiC’s opening balance sheets that offset certain U.S.

net deferred tax assets of Navitas.

As of September 30, 2022, the Company continues to maintain a valuation allowance on the remaining deferreds as the Company believes that it is not more likely than not that the deferred tax assets will be fully realized.

The Company had no unrecognized tax benefits for the three and nine months ended September 30, 2022 and 2021.

The Company recognizes interest and penalties related to unrecognized tax benefits in operating expenses.

No such interest and penalties were recognized during the three and six months ended June 30, 2022 and 2021.

No such interest and penalties were recognized during the three and nine months ended September 30, 2022 and 2021.

COMMITMENTS and CONTINGENCIES

Purchase Obligations

At June 30, 2022, the Company had no non-cancelable purchase obligations that were due beyond one year.

At September 30, 2022, the Company had no non-cancelable purchase obligations that were due beyond one year.

Employment agreements

The Company has entered into agreements with certain employees to provide severance payments to the employees for termination for reasons other than cause, death or disability.

Aggregate payments that would be required to be made in the event of termination under the agreements are approximately $ 1,443 .

At June 30, 2022, no terminations have occurred or are expected to occur pursuant to these arrangements and, accordingly, no termination benefits have been accrued.

Aggregate payments that would be required to be made in the event of termination under the agreements are approximat ely $ 2.1 million.

At September 30, 2022, no terminations have occurred or are expected to occur pursuant to these arrangements and, accordingly, no termination benefits have been accrued.

Indemnifications

The Company sells products to its distributors under contracts, collectively referred to as Distributor Sales Agreements (DSA).

Each DSA contains the relevant terms of the contractual arrangement with the distributor, and generally includes certain provisions for indemnifying the distributor against losses, expenses, and liabilities from damages that may be awarded against the distributor in the event the Company’s products are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party (Customer Indemnification).

The DSA generally limits the scope of and remedies for the Customer Indemnification obligations in a variety of industry-standard respects, including, but not limited to, limitations based on time and geography, and a right to replace an infringing product.

The Company also, from time to time, has granted a specific indemnification right to individual customers.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

that may be awarded against the distributor in the event the Company’s products are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party (Customer Indemnification).

The Company also, from time to time, has granted a specific indemnification right to individual customers.

The Company believes its internal development processes and other policies and practices limit its exposure related to such indemnifications.

In addition, the Company requires its employees to sign a proprietary information and inventions agreement, which assigns the rights to its employees’ development work to the Company.

To date, the Company has not had to reimburse any of its distributors or end customers for any losses related to these indemnifications and no material claims were outstanding as of June 30, 2022.

To date, the Company has not had to reimburse any of its distributors or end customers for any losses related to these indemnifications and no material claims were outstanding as of September 30, 2022.

For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnifications.

7 unchanged sentences

The notes have various maturity dates through May 1, 2023 and bear interest at rates ranging from 1 % to 2.76 %.

As of June 30, 2022, Note 1 was forgiven for a loss of $ 109 and Note 2 was paid off in the amount of $ 88 .

The Company recognized $ 0.3 and $ 0.9 of interest income from the notes for the three and six months ended June 30, 2022, respectively.

The Company recognized $ 0.8 and $ 1.7 of interest income from the notes for the three and six months ended June 30, 2021.

June 30, 2022 December 31, 2021

As of September 30, 2022, Note 1 was forgiven for a loss of $ 109 and Note 2 was paid off in the amount of $ 88 .

The Company recognized $ 0 and $ 0.9 of interest income from the notes for the three and nine months ended September 30, 2022, respectively.

The Company recognized $ 0 and $ 2 of interest income from the notes for the three and nine months ended September 30, 2021.

September 30, 2022 December 31, 2021

Notes receivable

1 unchanged sentence

In 2021, Navitas entered into a partnership with a manufacturer of power management ICs to develop products and technology relating to AC/DC converters.

Structured as a joint venture, Navitas’ initial contribution was the commitment to sell its GaN integrated circuit die at prices representing cost plus insignificant handling fees, in exchange for a minority interest, with the right to acquire the balance of the joint venture based on the future results of the venture (among other rights and obli gations).

The Company accounts for the investment in the joint venture as an equity-method investment.

Total related party revenues recognized by the Company as a result of arrangements with its joint venture were $ 45 and $ 658 for the three and six months ended June 30, 2022, respectively, and are included in Net Revenues in the Condensed Consolidated Statements of Operations.

As of June 30, 2022, the investment balance of $ 4.7 million was included in other assets on the consolidated balance sheet.

For its unconsolidated joint venture investments, the Company measures and records impairment losses, and reduces the carrying value of the equity investment when indicators of impairment are present and the expected discounted cash flows related to the investment is less than the carrying value.

For the six months ended June 30, 2022, the Company did not record any impairment charges.

The Company accounted for the investment in the joint venture as an equity-method investment.

Total related party revenues recognized by the Company as a result of arrangements with its joint venture were $ 21 and $ 678 for the three and nine months ended September 30, 2022 , respectively, and are included in Net Revenues in the Condensed Consolidated Statements of Operations.

See Note 18, Noncontrolling Interest, for more information.

Related Party License Revenue

As of June 30, 2022, Navitas entered into a Patent License Agreement with an entity under common control with the Company’s partner in the joint venture described above.

In consideration of the license rights granted, the Company recorded license fee revenue of $ 850 during the three months ended June 30, 2022.

During the second quarter of 2022, Navitas entered into a Patent License Agreement with an entity under common control with the Company’s partner in the joint venture described above.

In consideration of the license rights granted, the Company recorded license fee revenue of $ 0 and $ 850 during the three and nine months ended September 30, 2022, respectively.

Such amounts are included in Net Revenues in the Condensed Consolidated Statement of Operations.

1 unchanged sentence

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

($ in thousands, except per share amounts and where noted)

Related Party Investment

During the third quarter of 2022, Navitas ma de a $ 1.5 million inv estment in preferred interests of an entity under common control with the Company’s partner in the joint venture described above.

Such investment is included in Other Assets in the condensed consolidated balance sheet as of September 30, 2022 and will be accounted for as an equity investment under ASC 321 Investments - Equity Securities .

The Company also entered into a Patent License Agreement with this entity as described above under related party license revenue.

Related Party Advance

During the third quarter of 2022, Navitas made a $ 1.0 million to its p artner in the joint venture described above in order to facilitate orders of raw materials.

Such amounts are included in Prepaid Expenses and Other Current Assets as of September 30, 2022.

BUSINESS COMBINATIONS

Acquisition of VDDTech srl

Based in Mont-saint-Guibert, Belgium, VDDTech creates advanced digital-isolators for next-generation power conversion.

VDDTech’s net assets and operating results since the acquisition date are inc luded in the Company’s Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022, and were not material.

Among shares issued in the transaction, the Company issued approximately 113,000 restricted shares that are subject to time based vesting and issued approximately 151,000 restricted shares that are subject to time and performance based vesting over the next four and three years , respectively.

These restricted shares are subject to certain individuals maintaining employment with the Company and, therefore, are accounted for under ASC 718.

The Company recorded a preliminary allocation of the purchase price to tangible assets acquired and liabilities assumed based on their fair values as of the acquisition date.

The excess of the purchase price over the fair value of tangible assets and liabilities of $ 1.2 million was recorded as goodwill as of June 30, 2022.

Subsequent to June 30, 2022, a preliminary valuation of the intangible assets acquired was calculated at $ 1.2 million .

During the three months ended September 30, 2022, the Company reclassed the goodwill to an intangible asset.

Upon a final determination of the purchase price and the final valuation of the intangible assets acquired, primarily including in-process R&D, the Company will allocate the purchase price to tangible and intangible assets acquired and liabilities assumed, and adjust the excess purchase price allocated to goodwill as needed.

The fair value of the in-process R&D was estimated using the multi-period excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows.

To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired technology, which were discounted at a rate of 18 % to determine the fair value.

Acquisition of GeneSiC Semiconductor Inc.

On August 15, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire 100 % of the outstanding shares of GeneSiC Semiconductor Inc.

for approximately $ 146.3 million of equity, $ 99.3 million of cash consideration, and potential future cash earn-out payments of up to an aggregate of $ 25.0 million.

GeneSiC is a silicon carbide (“SiC”) pioneer with deep expertise in SiC power device design and process, based in Dulles, Virginia.

The future earn-out payments were fair valued at $ 0.6 million, for a total merger consideration of $ 246.2 million.

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).

The Company has determined preliminary fair values of the assets acquired and liabilities assumed.

These values are subject to change as the Company performs additional reviews of the assumptions used.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities acquired, certain legal matters, amounts for income taxes including deferred tax accounts, amounts for uncertain tax positions, and net operating loss carryforwards inclusive of associated limitations and valuation allowances, the determination of identifiable intangible assets and the final allocation of purchase price to goodwill.

Additionally, finalized fair values associated with deferred tax accounts could have a material effect on the Company's estimated reversal of its consolidated U.S.

valuation allowances recognized during the three month period ended December 31, 2022.

See Note 14, Provision for Income Taxes, for further information.

The Company expects to continue to obtain information to assist it in determining the fair values of the net assets acquired at the acquisition date during the measurement period.

The following tables summarize the preliminary purchase consideration and the preliminary purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed (in thousands):

Merger Consideration Fair Value

Cash consideration at closing $ 99,291

Equity consideration at closing 146,314

Contingent earn-out 600

Total $ 246,205

Preliminary estimate of purchase price allocation

Cash and cash equivalents $ 951

Accounts receivable 823

Inventory 1,538

Fixed assets 226

Other assets 7

Intangible assets 110,100

Goodwill 157,429

Total assets acquired $ 271,074

Liabilities assumed:

Interest bearing debt 16

Other current liabilities 1,673

Deferred tax liabilities 23,180

Total liabilities acquired 24,869

Estimated fair value of net assets acquired $ 246,205

Goodwill represents the excess of the merger price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed, the final amount of the goodwill recorded could differ materially from the amount presented.

Goodwill is primarily attributable to assembled workforce, market and expansion capabilities, expected synergies from integration and streamlining operational activities and other factors.

Goodwill is not expected to be deductible for income tax purposes.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

The preliminary fair values of the identifiable intangible assets acquired at the date of Acquisition are as follows (in thousands):

Intangible Asset Fair Value Amortization Method Useful Life

Trade Names $ 900 Straight line 2 years

Developed Technology 49,100 Straight line 4 years

Patents 33,900 Straight line 15 years

Customer Relationships 24,300 Straight line 10 years

Non-Competition Agreements 1,900 Straight line 5 years

Total Intangibles $ 110,100

The valuations of intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows.

The Company recognized approximately $ 5.4 million of transaction costs in the three and nine months ended September 30, 2022.

These costs are recorded in “Selling, general and administrative expense” in the consolidated statements of operations.

The financial results of GeneSiC have been included in the Company's consolidated financial statements since the date of the acquisition.

The fair value of developed technology was estimated using the multi-period excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows.

The fair value of customer relationships was estimated using the distributor method, an income level approach (Level 3), which estimates the value of an asset based upon costs avoided through ownership of the asset.

Estimated costs on projected revenues, excluding acquired contract backlog, were made using historical data pertaining to sales to new and existing customers.

The cash flow impact of projected cost savings, primarily avoidance of legal costs pertaining to new customers and lower commission rates applicable to existing customers than new customers, were discounted at a rate of 16 % to determine the fair value.

The fair value of the trade name and trademarks was estimated using the relief from royalty method, an income approach (Level 3), because of the licensing appeal of these assets, the Company estimated the benefit of the ownership as the relief form the royalty expense that would be incurred in the absence of ownership A royalty rate was applied to the projected revenues associated with the intangible asset to determine the amount of savings, which was at a rate of 16 % to determine the fair value.

The fair value of the patents was estimated using the relief from royalty method, an income approach (Level 3), because of the licensing appeal of these assets, the Company estimated the benefit of the ownership as the relief form the royalty expense that would be incurred in the absence of ownership.

A royalty rate was applied to the projected revenues associated with the intangible asset to determine the amount of savings, which was at a rate of 16 % to determine the fair value.

The value of the non-competition agreement was estimated using the lost income method (Level 3), because the non-competition agreement prohibits the covenantor from competing with the Company, the fair value of the non-competition agreement can be determined by estimating cash flows that would be lost if the covenantors were to compete, we estimated a discount rate of 16 % to determine the fair value.

Discount rates for each respective intangible asset were determined by accounting for the risk associated with each asset, including required technology development and customer acquisition required to support respective projections, the uncertainty of market success and the risk inherent with projected financial results.

The estimated useful lives were determined by evaluating the expected economic and useful lives of the assets and of similar intangible assets from previous business combinations and adjusting accordingly after taking into account circumstances that may be unique to GeneSiC.

Net tangible assets and intangibles assets assumed as well as goodwill recognized are presented as continuing operations in the consolidated balance sheets.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts and where noted)

The following unaudited pro forma financial information presented in the table below is provided for illustrative purposes only and is based on the historical financial statements of the Company and presents the Company’s results as if the business combination had occurred as of January 1, 2021 (in thousands):

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

Revenue $ 38,145

Net loss $ ( 162,744 )

Basic net loss per share $ ( 2.54 )

Diluted net loss per share $ ( 2.54 )

The unaudited pro forma financial information may not be indicative of the results of operations that the Company would have attained had the business combination occurred as of January 1, 2021, nor is the pro forma financial information indicative of the results of operations that may occur in the fut ure.

NONCONTROLLING INTEREST

In July 2021, the Company formed a joint venture for the purpose of conducting research and development on technology in the area of AC/DC converters for chargers and adapters.

On August 19, 2022, the Company obtained control of the joint venture, no consideration was paid pursuant to the Change of Control Agreement.

The Company consolidated the fair value of the net assets of the joint venture as of August 19, 2022, and the Company reports noncontrolling interests of the joint venture as a component of equity separate from the Company’s equity.

The fair value of the net assets is based on preliminary estimates.

The Company’s net income (loss) excludes income (loss) attributable to the noncontrollling interests.

The fair value of the joint venture was determined based on a multiple of future annual revenues with a discount rate of 30 %.

In connection with the consolidation, the Company reacquired a patent license, which was fair valued at $ 1.0 million based on comparable transactions during the year, and will be amortized over a five year term.

The carrying value of the non-controlling interest as of September 30, 2022 (in thousands):

Entity Carrying Value of Non-Controlling Interest as of August 19, 2022 Net loss Attributable to the Non-Controlling Interest Carrying Value of Non-Controlling Interest as of September 30, 2022

Former Joint Venture $ 4,655 $ ( 238 ) $ 4,417

SUBSEQUENT EVENTS

The Company evaluated material subsequent events from the consolidated balance sheet date of June 30, 2022, through August 15, 2022, the date the condensed consolidated financial statements were issued.

There were no material subsequent events as of August 15, 2022, except as noted below.

Acquisition of GeneSiC Semiconductor

On August 15, 2022, the Company acquired GeneSiC Semiconductor Inc., a private Delaware corporation (“GeneSiC”), in exchange for consideration consisting of $ 100,000 in cash and 24,883,161 shares of Navitas common stock.

The acquisition was consummated pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Gemini Acquisition LLC, a Delaware limited liability company and a wholly owned direct subsidiary of the Company (“Merger Sub”), GeneSiC, and the stockholders of GeneSiC.

Pursuant to the Merger Agreement and immediately after its execution and delivery, GeneSiC merged with and into Merger Sub (the “Merger”), with Merger Sub as the surviving entity and continuing to operate the GeneSiC business after the Merger as a wholly owned subsidiary of the Company.

The Merger Agreement also includes possible earn-out payments of up to $ 25,000 , conditioned on revenue targets for the GeneSiC business over the four fiscal quarters ending September 30, 2023.

Due to the limited time since the acquisition date, and the size and complexity of the GeneSiC acquisition, the accounting for the business combination is not yet complete.

The Company evaluated material subsequent events from the consolidated balance sheet date of September 30, 2022, through November 14, 2022, the date the condensed consolidated financial statements were issued.

There were no material subsequent events as of November 14, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements