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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 176 added, 139 removed, 654 unchanged (33% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares and par value) March 31, 2023 December 31, 2022

(In thousands, except shares and par value) June 30, 2023 December 31, 2022

CURRENT ASSETS:

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STOCKHOLDERS’ EQUITY:

Common stock, $ 0.0001 par value, 750,000,000 shares authorized as of both March 31, 2023 and December 31, 2022, and 160,943,107 and 153,628,838 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.0001 par value, 750,000,000 shares authorized as of both June 30, 2023 and December 31, 2022, and 173,649,862 and 153,628,838 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 658,530 535,875

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Three Months Ended

June 30, Six Months Ended

(In thousands, except per share amounts) 2023 2022 2023 2022

NET REVENUES (including $ 0 and $ 613 of related party revenues)

$ 13,358 $ 6,740

NET REVENUES $ 18,062 $ 8,611 $ 31,420 $ 15,351

COST OF REVENUES (exclusive of amortization of intangible assets included below) 10,572 5,026 18,445 8,803

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OTHER INCOME (EXPENSE), net:

Interest income (expense), net 903 ( 24 )

Interest income, net 806 52 1,709 28

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

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INCOME (LOSS) BEFORE INCOME TAXES ( 58,623 ) 34,107 ( 120,928 ) 113,902

INCOME TAX PROVISION 61 3

INCOME TAX (BENEFIT) PROVISION ( 96 ) 270 ( 35 ) 273

NET INCOME (LOSS) ( 58,527 ) 33,837 ( 120,893 ) 113,629

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31,

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

(In thousands) 2023 2022 2023 2022

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COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST ( 58,527 ) 33,837 ( 120,893 ) 113,569

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST ( 518 ) —

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST — — ( 518 ) —

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ ( 58,527 ) $ 33,837 $ ( 120,375 ) $ 113,569

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Stockholder's equity

THREE MONTHS ENDED MARCH 31, 2023 Common stock Additional

Stockholder's Equity (Deficit)

SIX MONTHS ENDED JUNE 30, 2023 Common stock Additional

capital Accumulated

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BALANCE AT MARCH 31, 2023 160,943 $ 18 $ 561,193 $ ( 216,601 ) $ ( 7 ) $ — $ 344,603

Stockholder's equity

THREE MONTHS ENDED MARCH 31, 2022 Common stock Additional

Issuance of common stock under employee stock option and stock award plans 1,207 — 633 — — — 633

Shares issued in May 2023 public offering, including underwriter's exercise of option to purchase shares, net of issuance costs 11,500 1 86,458 — — — 86,459

Stock-based compensation expense related to employee and non-employee stock awards — — 10,246 — — — 10,246

Net loss — — — ( 58,527 ) — — ( 58,527 )

BALANCE AT JUNE 30, 2023 173,650 $ 19 $ 658,530 $ ( 275,128 ) $ ( 7 ) $ — $ 383,414

Stockholder's Equity (Deficit)

SIX MONTHS ENDED JUNE 30, 2022 Common stock Additional

capital Accumulated

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BALANCE AT MARCH 31, 2022 123,461 $ 15 $ 348,658 $ ( 148,875 ) $ ( 62 ) $ — $ 199,736

Issuance of common stock under employee stock option and stock award plans 1,862 1 2,514 — — — 2,515

Shares issued for business acquisition 150 — 1,068 — — — 1,068

Stock-based compensation expense related to employee and non-employee stock awards — — 9,723 — — — 9,723

Net income — — — 33,837 — — 33,837

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

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2023 2022

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Proceeds from issuance of common stock in connection stock option exercises 854 880

Proceeds from issuance of common stock in May 2023 public offering 86,941 —

Payment of May 2023 public offering costs ( 482 ) —

Principal payments on long-term debt — ( 1,600 )

Net cash provided by (used in) financing activities 87,313 ( 1,308 )

NET DECREASE IN CASH AND CASH EQUIVALENTS ( 9,514 ) ( 14,455 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 67,411 ( 27,748 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 110,337 268,252

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Shares issued in connection with buyout agreement (see Note 18) $ 22,400 $ —

Shares issued for business acquisition $ — $ 1,068

Capital expenditures in accounts payable $ 180 $ 873

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At the closing of the Business Combination, Live Oak changed its name to Navitas Semiconductor Corporation (“Navitas”).

References to the “Company” in these financial statements refer to Legacy Navitas and its predecessors before the consummation of the Business Combination, or to Navitas Semiconductor Corporation after the Business Combination, as the context suggests.

References to the “Company” in these financial statements refer to Legacy Navitas and its predecessors before the consummation of the Business Combination, or to Navitas Semiconductor Corporation and its consolidated subsidiaries after the Business Combination, as the context suggests.

The Company designs, develops and markets next-generation power semiconductors including gallium nitride (“GaN”) power integrated circuits (“ICs”), silicon carbide (“SiC”) and associated high-speed silicon system controllers, and digital isolators used in power conversion and charging.

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

May 2023 Public Offering

On May 26, 2023, the Company completed an underwritten public offering (the “May 2023 Public Offering”) of 10,000.000 shares of its Class A Common Stock at a public offering price of $ 8.00 per share, before deducting underwriting discounts and commissions.

In connection with the May 2023 Public Offering, the Company granted the underwriters of the offering a 30-day option to purchase up to an additional 1,500,000 shares of the Company’s Class A Common Stock (the “Option Shares”) from the Company at the same public offering price.

On June 1, 2023, the underwriters exercised in full their option to purchase the Option Shares.

The sale of the Option Shares closed on June 5, 2023.

After deducting underwriting discounts and commissions and before deducting offering expenses payable by the Company, the Company received net proceeds of $ 75.6 million and $ 11.3 million from the May 2023 Public Offering and sale of the Option Shares, respectively.

The total net proceeds received by the Company after deducting offering expenses was $ 86.5 million.

The Company intends to use the net proceeds for working capital and other general corporate purposes, including potential acquisitions or strategic manufacturing investments.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In June 2022, the Company acquired VDDTECH srl, a Belgian private company, for approximately $ 1.9 million in cash and stock , and in August 2022 the Company acquired GeneSiC for approximately $ 246.2 million in cash and stock.

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See Note 18, Noncontrolling Interest, for more information.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Consolidation

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 months ended March 31, 2023 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2023.

The results of operations for the three and six months ended June 30, 2023 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2023.

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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The Company engages third-party valuation specialists to assist with estimates related to the valuation of intangible assets, stock options, restricted common stock awards, earnout shares and warrants.

Such estimates often require the selection of appropriate valuation methodologies and models, and significant judgment in evaluating ranges of assumptions and financial inputs.

Actual results could differ from those estimates.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimates often require the selection of appropriate valuation methodologies and models, and significant judgment in evaluating ranges of assumptions and financial inputs.

Actual results could differ from those estimates.

SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

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Additions to the allowance are charged to general and administrative expenses in the consolidated statements of operations.

Accounts receivable are written off against the allowance when the probability of collection of an account balance is deemed remote.

Accounts receivables are written off against the allowance when the probability of collection of an account balance is deemed remote.

NAVITAS SEMICONDUCTOR CORPORATION

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Inventory consists of the following (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Raw materials

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Furniture and fixtures $ 230 $ 215

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Total $ 7,255 $ 6,532

For the three months ended March 31, 2023 and 2022, depreciation expense w as $ 0.5 million and $ 0.1 million, respectively, and was determined using the straight-line method over the following estimated useful lives:

For the three and six months ended June 30, 2023, depreciation expense was $ 0.5 million and $ 1.0 million, respectively.

For the three and six months ended June 30, 2022, depreciation expense w as $ 0.2 million and $ 0.4 million, respectively, and was determined using the straight-line method over the following estimated useful lives:

Furniture and fixtures

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This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

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 no t material as of March 31, 2023 and December 31, 2022.

Cash equivalents classified as Level 1 instruments were $ 159.3 million and not material as of June 30, 2023 and December 31, 2022, respectively.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s fair value hierarchy for financial liabilities as of March 31, 2023 (in thousands) :

The following table presents the Company’s fair value hierarchy for financial liabilities as of June 30, 2023 (in thousands) :

Level 1 Level 2 Level 3 Total

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Fair value adjustment 59,976

Balance at March 31, 2023 $ 40,816

The Company did not transfer any investments between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2023.

Balance at June 30, 2023 $ 73,040

The Company did not transfer any investments between Level 1 and Level 2 of the fair value hierarchy during the three and six months ended June 30, 2023.

GOODWILL AND INTANGIBLES

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Purchase price adjustment 1,688

Balance at March 31, 2023 $ 161,442

Balance at June 30, 2023 $ 163,215

NAVITAS SEMICONDUCTOR CORPORATION

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

The following table presents the Company’s intangible asset balance by asset class as of March 31, 2023 (in thousands):

The following table presents the Company’s intangible asset balance by asset class as of June 30, 2023 (in thousands):

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

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Amortization expense ( 9,272 )

Balance at March 31, 2023 $ 105,569

The amortization expen se was $ 4.5 million and $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively.

There were no impairment charges during the three months ended March 31, 2023 and 2022.

Balance at June 30, 2023 $ 100,847

The amortization expen se was $ 4.8 million and $ 9.3 million for the three and six months ended June 30, 2023, respectively.

The amortization expense was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2022, respectively.

There were no impairment charges during the three months ended June 30, 2023 and 2022.

DEBT OBLIGATIONS

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

As of March 31, 2023, this loan had been paid in full.

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

Warrant Liability).

As of June 30, 2023, this loan had been paid in full.

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 not material and was recorded as debt discount, subject to amortization using the effective interest rate method over the term of the loan.

All warrants were redeemed by December 31, 2022, and amortization of debt discount and issuance costs was not significant either of the three months ended March 31, 2023 or 2022.

All warrants were no longer outstanding by December 31, 2022, and amortization of debt discount and issuance costs was not significant any of the three or six months ended June 30, 2023 or 2022.

NAVITAS SEMICONDUCTOR CORPORATION

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These leases have terms which range from 0.2 to 5.4 years.

As of March 31, 2023 no operating lease agreements contain economic penalties for the Company to extend the lease, and it is not reasonably certain the Company will exercise these extension options.

As of June 30, 2023 no operating lease agreements contain economic penalties for the Company to extend th e lease, and it is not reasonably certain the Company will exercise these extension options.

Additionally, these operating lease agreements do not contain material residual value guarantees or material restrictive covenants.

As of March 31, 2023 all leases recorded on the Company’s consolidated balance sheets were operating leases.

As of June 30, 2023 all leases recorded on the Company’s consolidated balance sheets were operating leases.

Upon adoption of ASC 842 on January 1, 2022, the Company recorded operating lease assets of $ 1.6 million and lease liabilities of $ 1.7 million in the Company’s consolidated balance sheets.

The adoption of this standard did not have a material impact on retained earnings, the co nsolidated statements of operations, or cash flows.

The Company obtained $ 0.6 million in additional right-of-use assets in exchange for lease obligations during the three months ended March 31, 2023.

The adoption of this standard did not have a material impac t on retained earnings, the consolidated statements of operations, or cash flows.

The Company has made the accounting policy election to use certain ongoing practical expedients made available by ASC 842 to:

(i) not separate lease components from nonlea se components for real estate;

(i) not separate lease components from non-lea se components for real estate;

and (ii) exclude leases with an initial term of 12 months or less (“short-term” leases) from the consolidated balance sheets and will recognize related lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

For leases that do not have a readily determinable implicit rate, the Company uses its estimated secured incremental borrowing rate based on the information available at the lease commencement date to determine the present value of lease payments.

Rent expense, including short-term lease cost, was $ 0.5 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, respectively.

Rent expense, including short-term lease cost, was $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2023, respectively.

Rent expense, including short term lease cost, was $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2022, 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 costs as variable payments and does not include such costs as a lease component.

Total variable expense was not material for the three months ended March 31, 2023 and 2022.

There were no leases that had not yet commenced as of March 31, 2023, that will create significant additional rights and obligations for the Company.

Total variable expense was not material for the three and six months ended June 30, 2023 and 2022.

There were no leases that had not yet commenced as of June 30, 2023, that will create significant additional rights and obligations for the Company.

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

Three Months Ended March 31,

Six Months Ended June 30,

Cash paid for operating lease liabilities $ 933 $ 527

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Weight-average discount rate 4.25 % - 8.25 %

Right-of-use assets and lease liabilities consisted of the following (in thousands):

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 December 31, 2022

Operating lease right-of-use assets $ 6,537 $ 6,381

Operating lease liabilities - current 1,477 1,305

Operating lease liabilities - noncurrent 5,248 5,263

Total lease liabilities $ 6,725 $ 6,568

4.25 % - 5.50 %

Maturities of lease liabilities are as follows (in thousands):

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Total lease liabilities $ 6,322

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SHARE BASED COMPENSATION:

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plus (b) up to 15,802,050 shares of Common Stock subject to awards under the 2020 Plan that are forfeited, expire or lapse after October 19, 2021;

plus (c) an annual increase, effective as of the first day of each fiscal year up to and including January 1, 2031, equal to the lesser of (i) 4 % of the

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

number of shares of Common Stock outstanding as of the conclusion of the Company’s immediately preceding fiscal year, or (ii) such amount, if any, as the board of directors may determine.

As of March 31, 2023 the Company has issued 9,750,000 non-statutory stock options under the 2021 Plan.

plus (c) an annual increase, effective as of the first day of each fiscal year up to and including January 1, 2031, equal to the lesser of (i) 4 % of the number of shares of Common Stock outstanding as of the conclusion of the Company’s immediately preceding fiscal year, or (ii) su ch amount, if any, as the board of directors may determine.

As of June 30, 2023 the Company has issued 9,750,000 non- statutory stock options under the 2021 Plan.

Stock-Based Compensation

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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 months ended March 31, 2023 and 2022:

Three Months Ended March 31,

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the stock-based compensation expense recognized for the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

Research and development $ 6,947 $ 3,037 $ 14,124 $ 10,531

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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 stock option awards during either the three months ended March 31, 2023 or 2022.

A summary of stock options outstanding, excluding LTIP Options as of March 31, 2023, and activity during the three months then ended, is presented below:

The Company did not grant any stock option awards during the three or six months ended June 30, 2023 or 2022.

A summary of stock options outstanding, excluding LTIP Options as of June 30, 2023, and activity during the three months then ended, is presented below:

Stock Options Shares

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Cancelled — — —

Outstanding at March 31, 2023 6,127 $ 0.61 6.20

Vested and Exercisable at March 31, 2023 5,015 $ 0.51 5.90

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During both the three months ended March 31, 2023 and 2022, the Company recognized $ 0.1 million of stock-based compensation expense for the vesting of outstanding stock options, excluding $ 2.5 million and $ 1.4 million related to the LTIP Options d escribed below.

At March 31, 2023, unrecognized compensation cost related to unvested awards totaled $ 0.5 million.

Outstanding at June 30, 2023 5,389 $ 0.57 5.81

Vested and Exercisable at June 30, 2023 5,389 $ 0.57 5.81

During both the three and six months ended June 30, 2023, the Company recogni zed $ 0.1 million and $ 0.2 million o f stock-based compensation expense for the vesting of outstanding stock optio ns, excluding $ 1.9 million and $ 4.3 million related to the LTIP Options described below.

During the three and six months ended June 30, 2022, the Company recognized $ 0.1 million and $ 0.2 million of stock-based compensation expense for the vesting of outstanding stock options, excluding $ 1.4 million related to LTIP options described below.

At June 30, 2023, unrecognized compensation cost related to unvested awards totaled $ 0.4 million.

The weighted-average period over which this remaining compensation cost will be recognized is 5.8 years.

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The Company awarded a total of 6,500,000 LTIP Options to certain members of senior management on December 29, 2021 pursuant to the 2021 Plan.

These non-statutory options are intended to be the only equity awards for the recipients over the duration of the performance period.

These non-statutory options are intended to be the only equity incentive awards for the recipients over the duration of the performance period.

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 $ 8.13 based on the Black-Scholes model and a Monte Carlo simulation incorporating 500,000 scenarios.

The weighted average contractual period remaining is 8.8 years.

The weighted average contractual

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

period remaining is 8.8 years.

The Company utilized the services of a professional valuation firm to finalize these assumptions during the fiscal year ended December 31, 2022.

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Weighted-average grant date fair value of options $ 8.13

In connection with LTIP Options granted in 2021, the Company recognized $ 2.2 million and $ 1.4 million of stock-based compensation expense for the three months ended March 31, 2023 and 2022, respectively.

The unrecognized compensation expense related to these LTIP Options is $ 51.6 million as of M arch 31, 2023, and compensation expense will be recogn ized over 3.2 years.

In connection with LTIP Options granted in 2021, the Company recognized $ 1.6 million and $ 3.7 million of stock-based compensation expense for the three and six months ended June 30, 2023, respectively.

The Company recognized $ 1.4 million and $ 2.8 million related to these LTIP Options during the three and six months ended June 30, 2022, respectively.

The unrecognized compensation expense related to these LTIP Options is $ 50.1 million as of June 30, 2023, and compensation expense will be recognized over 2.9 years.

The Company awarded a total of 3,250,000 LTIP Options to a member of senior management on August 15, 2022 pursuant to the 2021 Plan.

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Weighted-average grant date fair value of options $ 2.51

In connection with LTIP Options granted in 2022, the Company recognized $ 0.3 million of stock-based compensation expense for the three months ended March 31, 2023.

The unrecognized compensation expense related to the LTIP Options is $ 8.7 million as of March 31, 2023, and compensation expense will be recognized over 3.8 years.

In connection with LTIP Options granted in 2022, the Company recognized 0.3 million and $ 0.6 million of stock-based compensation expense for the three and six months ended June 30, 2023, respectively.

The unrecognized compensation expense related to the LTIP Options is $ 8.5 million as of June 30, 2023, and compensation expense will be recognized over 3.5 years.

Restricted Stock Units

On August 25, 2021, the Company granted an aggregate of 4,525,344 Legacy Navitas RSUs under the 2020 Plan to certain members of senior management pursuant to restricted stock unit agreements (collectively, the “RSU Agreements”).

Each RSU represents the right to receive one share of common stock of the Company, subject to the vesting and other

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

terms and conditions set forth in the RSU Agreements and the Plan.

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 Plan.

3,830,400 of these RSU awards vest 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, subject to an accelerated vesting schedule based on the satisfaction of certain stock price targets.

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Additionally, the Company regularly grants RSUs to employees as a component of their compensation.

A summary of RSUs outstanding as of March 31, 2023 , and activity during the three months then ended, is presented below:

A summary of RSUs outstanding as of June 30, 2023 , and activity during the six months then ended, is presented below:

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Forfeited ( 8 ) 7.22

Outstanding at March 31, 2023 15,224 $ 6.30

During the three months ended March 31, 2023 and 2022 , the Company recognized $ 7.1 million and $ 16.2 million of stock-based compensation expense for the vesting of RSUs, respectively.

As of March 31, 2023, unrecognized compensation cost related to unvested RSU awards totaled $ 90.2 million.

Outstanding at June 30, 2023 14,944 $ 6.29

During the three and six months ended June 30, 2023 , the Company recognized $ 8.1 million and $ 15.4 million of stock-based compensation expense for the vesting of RSUs, respectively.

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 RSUs, respectively.

As of June 30, 2023, unrecognized compensation cost related to unvested RSU awards totaled $ 83.2 million.

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

The Company implemented a yearly a stock-based bonus plan in 2021 which settles by issuing a variable number of fully-vested restricted stock units to employees in the first quarter of the following fiscal year.

The $ 2.3 million accrued as of March 31, 2023 reflects eligible employees included the Company’s 2023 annual bonus plan and amounts expected to be settled during the first quarter of 2024.

The $ 2.8 million accrued as of December 31, 2022 was for the Company’s 2022 annual bonus plan and a balance of $ 0.1 million is accrued as of March 31, 2023.

The Company implemented a yearly stock-based bonus plan in 2021 which settles by issuing a variable number of fully-vested restricted stock units to employees in the first quarter of the following fiscal year.

The $ 4.1 million accrued as of June 30, 2023 reflects eligible employees included the Company’s 2023 annual bonus plan and amounts expected to be settled during the first quarter of 2024.

The $ 2.8 million accrued as of December 31, 2022 was for the Company’s 2022 annual bonus plan and a balance of $ 0.1 million is accrued as of June 30, 2023.

Other Share Awards

In connection with the acquisition of the remaining minority interest of a silicon control IC joint venture, as described in Note 18, the Company issued 841,729 fully vested shares to certain former employees of the joint venture with a grant date fair value totaling $ 4.5 million.

Such amount has been recognized as stock-based compensation expense during the three months ended March 31, 2023.

Such amount has been recognized as stock-based compensation expense during the six months ended June 30, 2023.

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 $ 1.9 million in cash and stock.

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 recognized $ 0.1 million and $ 0.6 million of stock-based compensation expense related to the vesting of these shares during the three and six months ended June 30, 2023, respectively.

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 three months ended March 31, 2023 and 2022 the Company recog nized $ 0.3 million and $ 6.3 million, respectively, of s tock-based compensation expense for the vesting of earnout shares.

At March 31, 2023, there was no remaining compensation cost related to unvested earnout shares.

During the six months ended June 30, 2023 the Company recognized $ 0.3 million of stock-based compensation expense for the vesting of earnout shares.

As of the beginning of the second quarter of fiscal year 2023, these earnout shares had fully vested.

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, 2023, there was no remaining compensation cost related to unvested earnout shares.

Refer to Note 11, Earnout Liability.

18 unchanged sentences

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 $ 81.4 million which resulted in a gain of $ 51.8 million due to the decrease in the fair value of the warrant liability in the three months ended March 31, 2022.

There were no outstanding warrants as of March 31, 2023.

There were no outstanding warrants as of June 30, 2023.

EARNOUT LIABILITY

Certain of the Company’s stockholders are entitled to receive up to 10,000,000 “earnout shares” of the Company’s Class A Common Stock if the earnout milestones are met.

Certain of the Company’s stockholders are entitled to receive up to 10,000,000 aggregate “earnout shares” of the Company’s Class A Common Stock if earnout milestones set forth in the Business Combination Agreement are met.

The earnout milestones represent three independent criteria, each of which entitles the eligible stockholders to 3,333,333 aggregate earn-out shares if the milestone is met.

Each earnout milestone is considered met if at any time 150 days following the Business Combination and prior to October 19, 2026, the

volume weighted average price of the Company’s Class A Common Stock is greater than or equal to $ 12.50 , $ 17.00 or $ 20.00 , respectively, for any twenty trading days within any thirty trading day period, respectively.

Each earnout milestone is considered met if, at any time 150 days

following the Business Combination and prior to October 19, 2026, the volume weighted average price of the Company’s Class A Common Stock is greater than or equal to $ 12.50 , $ 17.00 or $ 20.00 , respectively, for any twenty trading days within any thirty trading day period, respectively.

Further, the earnout milestones are also considered to be met if the Company undergoes a Sale.

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The earnout liability was initially measured at fair value at the closing of the Business Combination and subsequently remeasured at the end of each reporting period.

The change in fair value of the earn-out liability is recorded as part of Other income (expense), net in the consolidated statements of operations.

The change in fair value of the earnout liability is recorded as part of Other income (expense), net in the consolidated statements of operations.

The estimated fair value of the earnout liability was determined using a Monte Carlo analysis of 20,000 simulations of the future path of the Company’s stock price over the earnout period.

1 unchanged sentence

The valuation model utilized the following assumptions:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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 $ 96.1 million, which was recorded as a long-term liability and a reduction to additional paid in capital in the consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, the earnout liability had a fair value of $ 40.4 million and $ 12.5 million, respectively which resulted in a loss in the fair value of the earnout liability of $ 27.9 million for the three months ended March 31, 2023 due to the increase in the fair value of the earnout liability.

As of June 30, 2023 and December 31, 2022, the earnout liability had a fair value of $ 73.0 million and $ 12.5 million, respectively which resulted in a loss in the fair value of the earnout liability of $ 32.6 million and $ 60.0 million for the three and six months ended June 30, 2023, respectively, due to the increase in the fair value of the earnout liability.

GeneSiC Earnout Liability

2 unchanged sentences

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

As of March 31, 2023, the GeneSiC earnout probability is considered remote, and a liability of $ 0.4 million is recorded in earnout liability in the Company’s Condensed Consolidated Balance Sheets.

As of June 30, 2023, the GeneSiC earnout probability is considered remote, and no liability was recorded in earnout liability in 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 three months ended March 31, 2023 and 2022:

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31,

The following customers represented 10% or more of the Company’s net revenues for the three and six months ended June 30, 2023 and 2022:

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

Customer 2023 2022 2023 2022

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Distributor E * 22 10 12

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

Distributor F * 21 * 29

Distributor G * 16 * *

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

Revenues by Geographic Area

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 months ended March 31, 2023 and 2022 were attributable to end customers in the following countries or regions:

Three Months Ended March 31,

Revenues for the three and six months ended June 30, 2023 and 2022 were attributable to end customers in the following countries or regions:

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

Country 2023 2022 2023 2022

China 50 % 32 % 53 % 44 %

Europe* 31 38 30 21

1 unchanged sentence

Rest of Asia 10 12 7 10

All others — —

Total 100 % 100 % 100 % 100 %

*Impractical to disclose the revenue percentages by individual countries within Europe and therefore Europe is presented in total.

6 unchanged sentences

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

Customer March 31, 2023 December 31, 2022

Customer June 30, 2023 December 31, 2022

Distributor A 26 % *

1 unchanged sentence

Distributor C 14 *

Distributor D * 19 %

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

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

Loss of the relationship with either of these suppliers could have a substantial negative

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

effect on the Company.

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.

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Numerator - basic and diluted:

12 unchanged sentences

Shares excluded from diluted weighted average shares 20,126 23,358 20,126 22,756

(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 months ended March 31, 2023.

(1) The Company’s potentially dilutive securities, which include unexercised stock options, unvested shares, and earnout 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, 2023.

NAVITAS SEMICONDUCTOR CORPORATION

2 unchanged sentences

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 March 31, 2023 and 2022 was ( 0.03 )% and 0.0 %, respectively.

The Company’s effective tax rate for the three and six months ended June 30, 2023 was 0.2 % and 0.0 %, respectively.

The Company’s effective tax rate for the three and six months ended June 30, 2022 was 0.8 % and 0.2 %, respectively.

The effective tax rate was impacted by nondeductible executive compensation and other expenses, stock compensation, state taxes, and the change in valuation allowance in the U.S.

1 unchanged sentence

The effective tax rate for 2023 differs from the prior year primarily as a result of tax expense in certain foreign jurisdictions not impacted by valuation allowance.

The effective tax rate as of March 31, 2022 is reflective of a full valuation allowance in all jurisdictions.

The effective tax rate as of June 30, 2022 is reflective of a full valuation allowance in all jurisdictions.

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 stock-based compensation, and the effects of its foreign entities.

The Company had no unrecognized tax benefits for the three months ended March 31, 2023 and 2022.

The Company had no unrecognized tax benefits for the three and six months ended June 30, 2023 and 2022.

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

No such interest and penalties were recognized during the three months ended March 31, 2023 and 2022.

No such interest and penalties were recognized during the three and six months ended June 30, 2023 and 2022.

COMMITMENTS and CONTINGENCIES

Purchase Obligations

At March 31, 2023, the Company had no non-cancelable contractual arrangements that were due beyond one year besides lease obligations.

At June 30, 2023, the Com pany had no non-cancelable contractual arrangements that were due beyond one year besides lease obligations.

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 dis ability.

The Company has entered into agreements with certain employees to provide severance payments to the employees in the event of the termination of their employment 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 $ 2.1 million.

A t March 31, 2023, no terminations have occurred or are expected to occur pursuant to these arrangements and, accordingly, no termination benefits have been accrued.

At June 30, 2023, no terminations have occurred or are expected to occur pursuant to these arrangements and, accordingly, no termination benefits have been accrued.

Indemnification

5 unchanged sentences

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 March 31, 2023.

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, 2023.

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

Notes Receivable

The Company had outstanding interest-bearing notes receivable from an employee.

The Company had outstanding interest-bearing notes receivable from a non-executive employee.

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

As of December 31, 2022, Note 1 was forgiven for a loss of $ 0.1 million and Note 2 was paid off in the amount of $ 0.1 million.

The Company did not recognize significant interest income from the notes for the three months ended March 31, 2023 or 2022.

The Company did not recognize significant interest income from the notes for the three and six months ended June 30, 2023 or 2022.

Joint Venture

4 unchanged sentences

affiliate for a total purchase price of $ 22.4 million in Navitas stock.

Total related party revenues recognized by the Company as a result of arrangements with its joint venture were $ 0.0 million and $ 0.6 million for the three months ended March 31, 2023 and 2022 , respectively, and are included in Net Revenues in the Condensed Consolidated Statements of Operations.

Total related party revenues recognized by the Company as a result of arrangements with its joint venture were $ 0.0 million f or both the three and six months ended June 30, 2023 , and $ 0.0 million and $ 0.7 million for the three and six months ended June 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 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.

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 a bove.

During the first quarter of 2023 the Company made an additional investment of $ 1.0 million in the entity.

Such investment is included in Other Assets in the Condensed Consolidated Balance Sheets as of March 31, 2023 and is accounted for as an equity investment under ASC 321 Investments - Equity Securities .

Such investment is included in Other Assets in the Condensed Consolidated Balance Sheets as of June 30, 2023 and is accounted fo r as an equity investment under ASC 321 Investments - Equity Securities .

In accordance with ASC 321, the Company elected to use the measurement alternative to measure such investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any.

Related Party Advance

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

The outstanding amount as of March 31, 2023 was not material.

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

The outstanding amount as of June 30, 2023 was not material.

Related Party Leases

The Company leases certain property from an entity that it is owned by an executive of the Company, which expires in September 2023.

During the three months ended March 31 2023, the Company paid an immaterial amount in rental payments in relation to this lease.

During the three and six months ended June 30, 2023, the Company paid an immaterial amount in rental payments in relation to this lease.

These payments were made at standard market rates in the ordinary course of business.

The total rent obligation as of March 31, 2023 was $ 0.1 million through September 30, 2023.

The total rent obligation as of June 30, 2023 was $ 27 thousand through September 30, 2023.

The Company leases certain property from the family member of a senior executive of the Company, which expires in March 2024.

During the three months ended March 31 2023, the Company paid an immaterial amount in rental payments in relation to this lease.

During the three and six months ended June 30, 2023, the Co mpany paid an immaterial amount in rental payments in relation to this lease.

These payments were made at standard market rates in the ordinary course of business.

The total rent obligation as of March 31, 2023 was $ 43 thousand through March 31, 2024.

The total rent obligation as of June 30, 2023 was $ 32 thousand through M arch 31, 2024.

NAVITAS SEMICONDUCTOR CORPORATION

4 unchanged sentences

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 Statements of Operations and were not material for the three months ended March 31, 2022.

VDDTech’s net assets and operating results since the acquisition date are inc luded in the Company’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations.

11 unchanged sentences

The Company has determined 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

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

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

Merger Consideration Fair Value

21 unchanged sentences

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

During the Company’s second quarter of 2023, the Company received information regarding products shipped by GeneSiC to a distributor prior to the Company’s acquisition of GeneSiC.

GeneSiC had the option, but not the obligation, to accept returns sold to the distributor.

The Company determined that a $ 1.7 million return liability should have been recorded as of the close of the acquisition on August 15, 2022.

The Company recorded the return liability as a purchase price adjustment as of June 30, 2023, resulting in an increase to goodwill and accounts payable and other accrued expenses of $ 1.7 million.

The Company’s cumulative purchase price allocation adjustment through June 30, 2023 was $ 1.6 million, primarily due to sales returns discussed above, inventory reserve, working capital adjustment and employee bonuses.

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

10 unchanged sentences

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

NAVITAS SEMICONDUCTOR CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

12 unchanged sentences

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

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, 2022 (in thousands):

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

Revenue $ 13,720 $ 25,196

23 unchanged sentences

SUBSEQUENT EVENTS

The Company evaluated material subsequent events from the consolidated balance sheet date of March 31, 2023, through May 15, 2023, the date the condensed consolidated financial statements were issued.

There were no material subsequent events as of May 15, 2023.

The Company evaluated material subsequent events from the consolidated balance sheet date of June 30, 2023, through August 14, 2023, the date the condensed consolidated financial statements were issued.

There were no material subsequent events as of August 14, 2023.

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