Navitas Semiconductor Corp 10-Q

Item 1. Financial Statements. NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except shares and par value) September 30, 2023 December 31, 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 176,698 $ 110,337 Accounts receivable, net 17,573 9,127 Inventories 15,904 19,061 Prepaid expenses and other current assets 4,511 3,623 Total current assets 214,686 142,148 PROPERTY AND EQUIPMENT, net 8,392 6,532 OPERATING LEASE RIGHT OF USE ASSETS 5,950 6,381 INTANGIBLE ASSETS, net 96,176 105,620 GOODWILL 163,215 161,527 OTHER ASSETS 5,501 3,054 Total assets $ 493,920 $ 425,262 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and other accrued expenses $ 14,793 $ 14,653 Accrued compensation expenses 15,487 3,907 Operating lease liabilities, current 1,346 1,305 Deferred revenue 13,759 486 Total current liabilities 45,385 20,351 OPERATING LEASE LIABILITIES NONCURRENT 4,788 5,263 EARNOUT LIABILITY 38,567 13,064 DEFERRED TAX LIABILITIES 1,830 1,824 Total liabilities 90,570 40,502 COMMITMENTS AND CONTINGENCIES (Note 15) STOCKHOLDERS’ EQUITY: Common stock, $ 0.0001 par value, 750,000,000 shares authorized as of both September 30, 2023 and December 31, 2022, and 178,584,150 and 153,628,838 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 19 18 Additional paid-in capital 670,947 535,875 Accumulated other comprehensive loss ( 7 ) ( 7 ) Accumulated deficit ( 267,609 ) ( 154,754 ) Total stockholders’ equity of Navitas Semiconductor Corporation 403,350 381,132 Noncontrolling interest — 3,628 Total stockholders’ equity 403,350 384,760 Total liabilities and stockholders’ equity $ 493,920 $ 425,262 The accompanying condensed notes are an integral part of these condensed consolidated financial statements 2 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share amounts) 2023 2022 2023 2022 NET REVENUES $ 21,978 $ 10,243 $ 53,399 $ 25,594 COST OF REVENUES (exclusive of amortization of intangible assets included below) 14,878 9,852 33,322 18,655 OPERATING EXPENSES: Research and development 16,553 11,526 50,740 34,373 Selling, general and administrative 14,419 24,053 46,629 62,590 Amortization of intangible assets 4,774 2,241 14,046 2,413 Total operating expenses 35,746 37,820 111,415 99,376 LOSS FROM OPERATIONS ( 28,646 ) ( 37,429 ) ( 91,338 ) ( 92,437 ) OTHER INCOME (EXPENSE), net: Interest income, net 1,695 638 3,405 666 Gain from change in fair value of warrants — — — 51,763 Gain (loss) from change in fair value of earnout liabilities 34,473 ( 6,098 ) ( 25,503 ) 112,162 Other income (expense) 20 ( 74 ) 50 ( 1,215 ) Total other income (expense), net 36,188 ( 5,534 ) ( 22,048 ) 163,376 INCOME (LOSS) BEFORE INCOME TAXES 7,542 ( 42,963 ) ( 113,386 ) 70,939 INCOME TAX (BENEFIT) PROVISION 23 ( 10,135 ) ( 13 ) ( 9,862 ) NET INCOME (LOSS) 7,519 ( 32,828 ) ( 113,373 ) 80,801 LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS — ( 238 ) ( 518 ) ( 238 ) NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTERESTS $ 7,519 $ ( 32,590 ) $ ( 112,855 ) $ 81,039 NET INCOME (LOSS) PER COMMON SHARE: Basic net income (loss) per share attributable to common stockholders $ 0.04 $ ( 0.24 ) $ ( 0.68 ) $ 0.64 Diluted net income (loss) per share attributable to common stockholders $ 0.04 $ ( 0.24 ) $ ( 0.68 ) $ 0.58 WEIGHTED AVERAGE COMMON SHARES USED IN NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS: Basic common shares 175,103 138,455 165,719 127,390 Diluted common shares 185,626 138,455 165,719 140,134 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2023 2022 2023 2022 NET INCOME (LOSS) $ 7,519 $ ( 32,828 ) $ ( 113,373 ) $ 80,801 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments, net of tax — 54 — ( 6 ) Total other comprehensive income (loss) — 54 — ( 6 ) COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST 7,519 ( 32,774 ) ( 113,373 ) 80,795 COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST — ( 238 ) ( 518 ) ( 238 ) TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ 7,519 $ ( 32,536 ) $ ( 112,855 ) $ 81,033 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) Stockholder's Equity (Deficit) NINE MONTHS ENDED SEPTEMBER 30, 2023 Common stock Additional paid in capital Accumulated deficit Accumulated comprehensive income (loss) Noncontrolling interest Total Shares Amount BALANCE AT DECEMBER 31, 2022 153,629 $ 18 $ 535,875 $ ( 154,754 ) $ ( 7 ) $ 3,628 $ 384,760 Issuance of common stock under employee stock option and stock award plans 3,082 — 2,925 — — — 2,925 Shares issued in connection with buyout agreement (see Note 18) 4,232 — 7,509 — — ( 3,110 ) 4,399 Stock-based compensation expense related to employee and non-employee stock awards — — 14,884 — — — 14,884 Net loss — — — ( 61,847 ) — ( 518 ) ( 62,365 ) BALANCE AT MARCH 31, 2023 160,943 $ 18 $ 561,193 $ ( 216,601 ) $ ( 7 ) $ — $ 344,603 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 Issuance of common stock under employee stock option and stock award plans 4,934 — 2,178 — — — 2,178 Stock-based compensation expense related to employee and non-employee stock awards — — 10,239 — — — 10,239 Net income — — — 7,519 — — 7,519 BALANCE AT SEPTEMBER 30, 2023 178,584 $ 19 $ 670,947 $ ( 267,609 ) $ ( 7 ) $ — $ 403,350 5 Table of Contents Stockholder's Equity (Deficit) NINE MONTHS ENDED SEPTEMBER 30, 2022 Common stock Additional paid in capital Accumulated deficit Accumulated comprehensive income (loss) Noncontrolling interest Total Shares Amount BALANCE AT DECEMBER 31, 2021 117,751 $ 15 $ 294,190 $ ( 228,667 ) $ ( 2 ) $ — $ 65,536 Issuance of common stock under employee stock option and stock award plans 2,459 — 1,305 — — — 1,305 Repurchase of common stock ( 67 ) — ( 550 ) — — — ( 550 ) Exercise of warrants 3,318 — 29,641 — — — 29,641 Stock-based compensation expense related to employee and non-employee stock awards — — 24,072 — — — 24,072 Foreign currency translation adjustment — — — — ( 60 ) — ( 60 ) Net income — — — 79,792 — — 79,792 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 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. 6 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited) Nine Months Ended September 30, (In thousands) 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ ( 113,373 ) $ 80,801 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 1,550 632 Amortization of intangible assets 14,046 2,408 Non-cash lease expense 1,449 480 Other 85 2,174 Stock-based compensation expense 41,810 52,136 Amortization of debt discount and issuance costs — 7 Gain from change in fair value of warrants — ( 51,763 ) (Gain) loss from change in fair value of earnout liability 25,503 ( 112,162 ) Deferred income taxes 5 ( 10,185 ) Change in operating assets and liabilities: Accounts receivable ( 8,446 ) ( 479 ) Inventory 3,157 ( 2,731 ) Prepaid expenses and other current assets ( 888 ) 335 Other assets ( 1,649 ) 498 Accounts payable, accrued compensation and deferred revenue 20,761 2,778 Operating lease liability ( 1,452 ) ( 466 ) Net cash used in operating activities ( 17,442 ) ( 35,537 ) CASH FLOWS FROM INVESTING ACTIVITIES: Investment purchases ( 1,000 ) — Business acquisitions, net of cash acquired — ( 96,355 ) Investment in Joint Venture — ( 5,204 ) Investment in preferred stock — ( 1,500 ) Purchases of property and equipment ( 3,410 ) ( 3,485 ) Receipts on notes receivable — 97 Net cash used in investing activities ( 4,410 ) ( 106,447 ) CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of warrants — ( 38 ) Repurchase of common stock — ( 550 ) Proceeds from issuance of common stock in connection stock option exercises 1,754 1,512 Proceeds from issuance of common stock in May 2023 public offering 86,941 — Payment of May 2023 public offering costs ( 482 ) — Payment of debt issuance costs — ( 2,400 ) Net cash provided by (used in) financing activities 88,213 ( 1,476 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 66,361 ( 143,460 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 110,337 268,252 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 176,698 $ 124,792 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Net assets acquired through change in control of joint venture $ — $ 6,444 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $ 64 $ 363 Cash paid for interest $ — $ 205 Shares issued in connection with buyout agreement (see Note 18) $ 22,400 $ — Shares issued for business acquisition $ — $ 147,380 Capital expenditures in accounts payable $ 764 $ 803 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION Navitas Semiconductor Corporation (“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. Power supplies incorporating the Company’s products may be used in a wide variety of applications including fast chargers for mobile phones and laptops, consumer electronics, data centers, solar products, electric vehicles and infrastructure, among numerous other applications. The Company’s products provide superior efficiency, performance, size, cost and sustainability relative to existing silicon technology. 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, Thailand, Korea and the Philippines, with principal executive offices in Torrance, California. 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. Acquisitions 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. S ee Note 17, Business Combinations, for more information. In January 2023, the Company announced an agreement to acquire the remaining minority interest in its silicon control IC joint venture from Halo Microelectronics International Corporation for a purchase price of $ 22.4 million in Navitas stock. The transaction was completed in February 2023. See Note 18, Noncontrolling Interest, for more information. Basis of Presentation The unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information contained in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are in the opinion of management, necessary for a fair presentation of such condensed consolidated financial statements. Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of results to be expected for the full year ending December 31, 2023. Certain footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America have been condensed or omitted pursuant to SEC rules and regulations relating to interim financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 3, 2023. Except as further described below, there have been no significant changes in the Company’s accounting policies from those disclosed in its Form 10-K filed with the SEC on April 3, 2023. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the 8 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Business Combinations We account for business combinations using the acquisition method of accounting, in accordance with Accounting Standards Codification (“ASC”) 805 , “ Business Combinations” . The acquisition method requires identifiable assets acquired and liabilities assumed to 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 Condensed Consolidated Statements of Operations 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 Standards Credit Losses In June 2016, the Financial Accounting Standards Board (“FASB”) amended guidance related to impairment of financial instruments as part of ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which replaced the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. This ASU requires entities to measure the impairment of certain financial instruments, including accounts receivable, based on expected losses rather than incurred losses. For companies that qualify under the emerging growth company exemptions, this ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, and is effective for the Company beginning in 2023. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. We pool financial assets based on their risk characteristics, which include class of customer, geographic location of the customer, contractual life of the financial asset, and age of the open receivable balance. The allowance for credit losses pool is estimated based on historical credit loss rates adjusted for management’s reasonable and supportable expectations of future economic conditions, which consider macroeconomic, industry and market trends that could impact future credit loss rates. Additions to the allowance are charged to general and administrative expenses in the consolidated statements of operations. Accounts receivables are written off against the allowance when the probability of collection of an account balance is deemed remote. 9 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 3. INVENTORY Inventory consists of the following (in thousands): September 30, 2023 December 31, 2022 Raw materials $ 4,776 $ 4,314 Work-in-process 8,767 9,166 Finished goods 2,361 5,581 Total $ 15,904 $ 19,061 4. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following (in thousands): September 30, 2023 December 31, 2022 Furniture and fixtures $ 240 $ 215 Computers and other equipment 9,736 7,251 Leasehold improvements 2,434 2,054 Construction in Progress 737 — 13,147 9,520 Accumulated depreciation ( 4,755 ) ( 2,988 ) Total $ 8,392 $ 6,532 For the three and nine months ended September 30, 2023, depreciation expense was $ 0.6 million and $ 1.6 million, respectively. For the three and nine months ended September 30, 2022, depreciation e xpense w as $ 0.3 million and $ 0.6 million, respectively, and was determined using the straight-line method over the following estimated useful lives: Furniture and fixtures 3 — 7 years Computers and other equipment 2 — 5 years Leasehold improvements 2 — 5 years 5. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The accounting guidance on fair value measurements clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. 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 $ 159.5 million and not material as of September 30, 2023 and December 31, 2022, respectively. 10 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents the Company’s fair value hierarchy for financial liabilities as of September 30, 2023 (in thousands) : Level 1 Level 2 Level 3 Total Liabilities: Earnout liability $ — $ — $ 38,567 $ 38,567 Total $ — $ — $ 38,567 $ 38,567 The following table presents the Company’s fair value hierarchy for financial liabilities as of December 31, 2022 (in thousands): Level 1 Level 2 Level 3 Total Liabilities: Earnout liability $ — $ — $ 13,064 $ 13,064 Total $ — $ — $ 13,064 $ 13,064 The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands): Fair Value Measurements Using Significant Unobservable Inputs Balance at December 31, 2022 $ 13,064 Fair value adjustment 25,503 Balance at September 30, 2023 $ 38,567 The Company did not transfer any investments between Level 1 and Level 2 of the fair value hierarchy during the three and nine months ended September 30, 2023. 6. GOODWILL AND INTANGIBLES 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. 11 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents the changes in the Company’s goodwill balance (in thousands): Goodwill Balance at December 31, 2022 $ 161,527 Purchase price adjustment 1,688 Balance at September 30, 2023 $ 163,215 Refer to Note 17, Business Combinations, for further details. The following table presents the Company’s intangible asset balance by asset class as of September 30, 2023 (in thousands): Intangible Asset Cost Accumulated Amortization Net Book Value Amortization Method Useful Life Trade Names $ 900 $ ( 506 ) $ 394 Straight line 2 years Developed Technology 53,500 ( 14,359 ) 39,141 Straight line 4 - 10 years In-process R&D 1,177 — 1,177 Indefinite N/A Patents 34,900 ( 2,759 ) 32,141 Straight line 5 - 15 years Customer Relationships 24,300 ( 2,734 ) 21,566 Straight line 10 years Non-Competition Agreements 1,900 ( 428 ) 1,472 Straight line 5 years Other 1,166 ( 881 ) 285 Straight line 5 years Total $ 117,843 $ ( 21,667 ) $ 96,176 The following table presents the changes in the Company’s intangible asset balance (in thousands): Intangible Assets, net Balance at December 31, 2022 $ 105,620 Additions to intangible assets 4,602 Amortization expense ( 14,046 ) Balance at September 30, 2023 $ 96,176 The amortization expense was $ 4.8 million and $ 14.0 million for the thre e and nine months ended September 30, 2023, respectively. The amortization expense was $ 2.2 million and $ 2.4 million for the three and nine months ended September 30, 2022, respectively. There were no impairment charges during the three months ended September 30, 2023 and 2022. 7. 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 September 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 no longer outstanding 12 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) by December 31, 2022, and amortization of debt discount and issuance costs was not significant any of the three or nine months ended September 30, 2023 or 2022. 8. LEASES: The Compa ny has entered into operating leases primarily for commercial buildings. These leases have terms which range from 0.1 to 5.2 years. As of September 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 September 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 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 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 $ 1.5 million for the three and nine months ended September 30, 2023, respectively. Rent expense, including short term lease cost, was $ 0.7 million and $ 1.4 million for the three and nine months ended September 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 and nine months ended September 30, 2023 and 2022. Information related to the Company right-of-use assets and related operating lease liabilities were as follows (in thousands): Nine Months Ended September 30, 2023 2022 Cash paid for operating lease liabilities $ 1,426 $ 425 Operating lease cost $ 1,449 $ 573 Non-cash right-of-use assets obtained in exchange for new operating lease obligations $ 776 $ 5,805 Weighted-average remaining lease term 4.64 years 2.26 years Weight-average discount rate 4.25 % - 8.25 % 4.25 % - 5.50 % 13 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Maturities of lease liabilities are as follows (in thousands): Remainder of fiscal year 2023 $ 464 Fiscal year 2024 1,619 Fiscal year 2025 1,324 Fiscal year 2026 1,229 Fiscal year 2027 1,218 Thereafter 1,112 6,966 Less imputed interest 832 Total lease liabilities $ 6,134 9. SHARE BASED COMPENSATION: Equity Incentive Plans The Navitas Semiconductor Limited 2020 Equity Incentive Plan, initially adopted by the Company’s board of directors on August 5, 2020 as an amendment and restatement of the 2013 Equity Incentive Plan (“2013 Plan”), was amended and restated as the Amended and Restated Navitas Semiconductor Limited 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit (“RSU”) awards, stock appreciation rights, and other stock awards to employees, directors and consultants. Pursuant to the 2020 Plan, the exercise price for incentive stock options and non-statutory stock options is generally at least 100% of the fair market value of the underlying shares on the date of grant. Options generally vest over 48 months measured from the date of grant. Options generally expire no later than ten years after the date of grant, subject to earlier termination upon an optionee’s cessation of employment or service. Under the terms of the 2020 Plan, the Company is authorized to issue 18,899,285 shares of common stock pursuant to awards under the 2020 Plan. As of October 19, 2021, the Company had issued an aggregate of 11,276,706 stock options and non-statutory options to its employees and consultants and 4,525,344 RSUs to employees, directors and consultants under the 2020 Plan. No awards have or will be issued under the 2020 Plan after October 19, 2021. Shares of Common Stock subject to awards under the 2020 Plan that are forfeited, expire or lapse after October 19, 2021 will become authorized for issuance pursuant to awards under the 2021 Plan (as defined below). The Navitas Semiconductor Corporation 2021 Equity Incentive Plan (the “2021 Plan”) was adopted by the Company’s board of directors on August 17, 2021 and adopted and approved by the Company’s stockholders on October 12, 2021. Under the terms of the 2021 Plan, the Company is authorized to issue, pursuant to awards granted under the 2021 Plan, (a) up to 16,334,527 shares of Common Stock; 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 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 September 30, 2023 the Company has issued 9,750,000 non- statutory stock options under the 2021 Plan. Stock-Based Compensation The Company recognizes the fair value of stock-based compensation in its financial statements over the requisite service period of the individual grants, which generally equals a four-year vesting period, except for long-term incentive performance stock options (“LTIP Options”) discussed below. The Company uses estimates of volatility, expected term, risk-free interest rate and dividend yield in determining the fair value of these awards and the amount of compensation expense to recognize. The Company uses the straight-line method to amortize stock awards granted over the requisite 14 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 nine months ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Research and development $ 6,013 $ 5,227 $ 20,137 $ 15,758 Selling, general and administrative 6,066 10,547 21,673 36,378 Total stock-based compensation expense $ 12,079 $ 15,774 $ 41,810 $ 52,136 Stock Options Generally, stock options granted under the Plans have terms of ten years and vest in 1/4th increments on the anniversary of the vesting commencement date and in 1/48th increments monthly thereafter. Stock options with performance vesting conditions begin to vest upon achievement of the performance condition. Expense is recognized beginning in the period in which performance is considered probable. 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 the three or nine months ended September 30, 2023 or 2022. A summary of stock options outstanding, excluding LTIP Options as of September 30, 2023, and activity during the nine months then ended, is presented below: Stock Options Shares (In thousands) Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (In years) Outstanding at December 31, 2022 6,775 $ 0.59 6.20 Exercised ( 3,729 ) 0.47 — Forfeited or expired ( 215 ) 1.06 — Outstanding at September 30, 2023 2,831 $ 0.74 6.03 Vested and Exercisable at September 30, 2023 2,269 $ 0.66 5.77 During both the three and nine months ended September 30, 2023, the Company recogni zed $ 0.1 million and $ 0.4 million o f stock-based compensation expense for the vesting of outstanding stock optio ns, excluding $ 1.8 million and $ 6.1 million related to the LTIP Options described below. During the three and nine months ended September 30, 2022, the Company recognized $ 0.1 million and $ 0.4 million of stock-based compensation expense for the vesting of outstanding stock options, excluding $ 1.4 million related to LTIP options described below. At September 30, 2023, unrecognized compensation cost related to unvested awards totaled $ 0.2 million. The weighted-average period over which this remaining compensation cost will be recognized is 0.7 years. Long-term Incentive Plan Stock Options 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 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 15 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) period remaining is 8.3 years. The Company utilized the services of a professional valuation firm to finalize these assumptions during the fiscal year ended December 31, 2022. The valuation model utilized the following assumptions: Risk-free interest rates 1.47 % Expected volatility rates 58 % Expected dividend yield — Cost of equity (for derived service period) 9.96 % Weighted-average grant date fair value of options $ 8.13 In connection with LTIP Options granted in 2021, the Company recognized $ 1.6 million and $ 5.3 million of stock-based compensation expense for the three and nine months ended September 30, 2023, respectively. The Company recognized $ 1.4 million and $ 4.2 million related to these LTIP Options during the three and nine months ended September 30, 2022, respectively. The unrecognized compensation expense related to these LTIP Options is $ 48.5 million as of September 30, 2023, and compensation expense will be recognized over 2.7 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. The options vest in increments subject to achieving certain market and 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 $ 10.00 per share and the average fair value on the grant date was $ 2.51 . The weighted average contractual period remaining is 8.9 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 In connection with LTIP Options granted in 2022, the Company recognized $ 0.3 million and $ 0.8 million of stock-based compensation expense for the three and nine months ended September 30, 2023, respectively. The Company recognized $ 0.1 million related to these LTIP Options during the three and nine months ended September 30, 2022. The unrecognized compensation expense related to the LTIP Options is $ 8.2 million as of September 30, 2023, and compensation expense will be recognized over 3.3 years. Restricted Stock Units The Company regularly grants RSUs to employees as a component of their compensation. A summary of RSUs outstanding as of September 30, 2023 , and activity during the nine months then ended, is presented below: Shares (In thousands) Weighted-Average Grant Date Fair Value Per Share Outstanding at December 31, 2022 11,606 $ 5.93 Granted 5,861 6.37 Vested ( 4,303 ) 5.70 Forfeited ( 44 ) 7.16 Outstanding at September 30, 2023 13,120 $ 6.73 16 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) During the three and nine months ended September 30, 2023, the Company recognized $ 8.1 million and $ 23.5 million of stock-based compensation expense for the vesting of RSUs, respectively. 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. As of September 30, 2023, unrecognized compensation cost related to unvested RSU awards totaled $ 77.4 million. The weighted-average period over which this remaining compensation cost is expected be recognized is 2.7 years. 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 $ 5.7 million accrued as of September 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 September 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 nine months ended September 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 $ 0.7 million of stock-based compensation expense related to the vesting of these shares during the three and nine months ended September 30, 2023, respectively. Unvested Earnout Shares A portion of the earnout shares related to the Business Combination (discussed in Note 11 below) may be issued to individuals with unvested equity awards. While the payout of these shares requires achievement of share price targets based on the volume weighted average price of the Company’s common stock, the individuals are required to complete the remaining service period associated with these unvested equity awards to be eligible to receive the earnout shares. 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 and nine months ended September 30, 2023 the Company recognized $ 0.0 million and $ 0.3 million, respectively, 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. At September 30, 2023, there was no remaining compensation cost related to unvested earnout shares. During the three and nine months ended September 30, 2022, the Company recognized $ 4.3 million and $ 11.5 million, respectively, of stock-based compensation expense for the vesting of earnout shares. Refer to Note 11, Earnout Liability. 10. WARRANT LIABILITY On February 4, 2022, the Company issued a notice of redemption that it would redeem, at 5:00 p.m. New York City time on March 7, 2022 (the “ Redemption Date ”), all of the Company’s outstanding Public Warrants and Private Placement Warrants to purchase shares of the Company’s Class A Common Stock that were governed by the Warrant Agreement, dated as of December 2, 2020 (the “ Warrant Agreement ”), between the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”), at a redemption price of $ 0.10 per Warrant (the “ Redemption Price ”). On February 22, 2022, the Company issued a notice that the “Redemption Fair Market Value,” determined in accordance with the Warrant Agreement based on the volume weighted average price of the Common Stock for the 10 trading days immediately following the date on which notice of redemption was sent, was $ 10.33 and, accordingly, that holders exercising Warrants on a “cashless” basis before the Redemption Date would receive 0.261 shares of Common Stock per Warrant exercised. The Warrants were exercisable by their holders until immediately before 5:00 p.m. New York City time 17 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. 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); an aggregate of 3,333,650 shares of Common Stock were issued upon exercise of the Warrants (including 17,785 shares in respect of cash exercises and 3,315,865 shares in respect of “cashless” exercises). 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 nine months ended September 30, 2022. There were no outstanding warrants as of September 30, 2023. See footnote 10, Warrant Liability to the Company’s consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 3, 2023 for further details. 11. EARNOUT LIABILITY 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 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. See footnote 11, Earnout Liability to the Company’s consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 3, 2023 for further details. The earnout liability is remeasured at the end of each reporting period. 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. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones including projected stock price, volatility, and risk-free rate. The valuation model utilized the following assumptions: September 30, 2023 December 31, 2022 Risk-free interest rate 4.79 % 4.13 % Equity volatility rate 70.00 % 65.00 % As of September 30, 2023 and December 31, 2022, the earnout liability had a fair value of $ 38.6 million and $ 12.5 million, respectively which resulted in a gain in the fair value of the earnout liability of $ 34.5 million and a loss in the fair value of the earnout liability of $ 25.5 million for the three and nine months ended September 30, 2023, respectively, due to the fluctuations in the fair value of the earnout liability. GeneSiC Earnout Liability In connection with the acquisition of GeneSiC 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 Brownian 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, 2023, the GeneSiC earnout was not achieved, and no liability was recorded in earnout liability in the Company’s Condensed Consolidated Balance Sheets. 18 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 12. SIGNIFICANT CUSTOMERS AND CREDIT CONCENTRATIONS Customer Concentration A majority of the Company’s revenues are attributable to sales of the Company’s products to distributors of electronic components. 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 and nine months ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, Customer 2023 2022 2023 2022 Distributor A 53 % * 29 % * Distributor B * * 14 15 % Distributor C * 34 % * 20 Distributor D * 15 * 21 Distributor E * 15 * * *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 and nine months ended September 30, 2023 and 2022 were attributable to end customers in the following countries or regions: Three Months Ended September 30, Nine Months Ended September 30, Country 2023 2022 2023 2022 China 61 % 20 % 55 % 34 % Europe* 14 47 22 31 United States 13 28 15 27 Rest of Asia 12 3 8 7 All others — 2 — 1 Total 100 % 100 % 100 % 100 % *Impractical to disclose the revenue percentages by individual countries within Europe and therefore Europe is presented in total. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consisted principally of cash, cash equivalents and trade receivables. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed federally insured limits. The Company has not experienced any losses on cash or cash equivalents held at financial institutions. The Company does not have any off-balance-sheet credit exposure related to its customers. 19 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following customers represented 10% or more of the Company’s accounts receivable. Customer September 30, 2023 December 31, 2022 Distributor A 58 % * Distributor B * 25 % Distributor C * 19 % *Total customer accounts receivable was less than 10% of total net accounts receivable. Concentration of Supplier Risk 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 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. Disruption or termination of supply sources or subcontractors, including due to pandemics or natural disasters such as an earthquake or other causes, could delay shipments and could have a material adverse effect on the Company. 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 the third-party foundry that supplies 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. 20 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 13. NET INCOME (LOSS) PER SHARE: Basic income (loss) per share is calculated by dividing net income (loss) by the weighted-average shares of common stock outstanding during the period. Diluted earnings per share are calculated by dividing net income (loss) by the weighted-average shares of common stock and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares included in this calculation consist of dilutive shares issuable upon the assumed exercise of outstanding common stock options, the assumed vesting of outstanding restricted stock units and restricted stock awards, the assumed issuance of awards for contingently issuable performance-based awards, as computed using the treasury stock method. Performance-based restricted stock units and restricted stock awards are included in the number of shares used to calculate diluted earnings per share after evaluating the applicable performance criteria as of period end and under the assumption the end of the reporting period was the end of the contingency period, and the effect is dilutive. Restricted stock awards (but not restricted stock unit awards) are eligible to receive all dividends declared on the Company’s common shares during the vesting period; however, such dividends are not paid until the restrictions lapse. The Company has no plans to declare dividends. Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Weighted-average common shares - basic common stock 175,103 138,455 165,719 127,390 Stock options and other dilutive awards 10,523 — — 12,744 Weighted-average common shares - diluted common stock 185,626 138,455 165,719 140,134 Shares excluded from diluted weighted-average shares: (1) Earnout shares (potentially issuable common shares) 10,000 10,000 10,000 10,000 Unvested restricted stock units and restricted stock awards 263 10,995 263 225 Stock options potentially exercisable for common shares 9,750 9,750 9,750 9,750 Shares excluded from diluted weighted average shares 20,013 30,745 20,013 19,975 (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 nine months ended September 30, 2023. 14. 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 during the quarter. The Company’s effective tax rate for the three and nine months ended September 30, 2023 was 0.3 % and 0.0 %, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2022 was 23.6 % and ( 13.9 )%, respectively. The effective tax rate for 2023 differs from the prior year primarily as a result of tax expense in foreign jurisdictions that are in a full valuation allowance as the effective tax rate as of September 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 our stock-based compensation, and the effects of its foreign entities. The Company had no unrecognized tax benefits for the nine months ended September 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 nine months ended September 30, 2023 and 2022. 21 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 15. COMMITMENTS and CONTINGENCIES Purchase Obligations At September 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 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. At September 30, 2023, no terminations have occurred or are expected to occur pursuant to these arrangements and, accordingly, no termination benefits have been accrued. Indemnification The Company sells products to its distributors under contracts, collectively referred to as Distributor Sales Agreements (“DSAs”). 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. 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 September 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. Legal proceedings and contingencies From time to time in the ordinary course of business, the Company may become involved in lawsuits, or end customers, distributors, suppliers or other third parties may make claims against the Company. The Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company is not currently subject to any pending actions or regulatory proceedings that either individually or in the aggregate are expected to have a material impact on its condensed consolidated financial statements. 16. RELATED PARTY TRANSACTIONS Notes Receivable 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. No interest income was recognized for the three and nine months ended September 30, 2023, and interest income recognized for the three and nine months ended September 30, 2022 was not material. Joint Venture In 2021, Navitas entered into a silicon control IC joint venture with Halo Microelectronics Co., Ltd. (“Halo”), a manufacturer of power management ICs, to develop products and technology relating to AC/DC converters. Navitas’ initial contribution to the joint venture was the commitment to sell its GaN integrated circuit die at prices representing cost plus 22 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 gat ions). On January 19, 2023, the Company announced an agreement to acquire the remaining minority interest in the joint venture as well as rights to certain intellectual property from Halo and its U.S. 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 f or both the three and nine months ended September 30, 2023 , and $ 0.0 million and $ 0.7 million 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 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 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 September 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 partner in the joint venture described above in order to facilitate orders of raw materials. The outstanding amount as of September 30, 2023 was $ 0.3 million. 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 and nine months ended September 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 Company leases certain property from the family member of a senior executive of the Company, which expires in March 2024. During the three and nine months ended September 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 September 30, 2023 was $ 21 thousand through M arch 31, 2024. 17. BUSINESS COMBINATIONS Acquisition of VDDTECH srl 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. 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 Balance Sheets and Condensed Consolidated Statements of Operations. 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 an 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 valuation of the intangible assets acquired was calculated at $ 1.2 million . During the third quarter of fiscal year 2022, the Company reclassified the goodwill to an intangible asset. 23 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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., a silicon carbide (“SiC”) pioneer with deep expertise in SiC power device design and process, based in Dulles, Virginia. Total merger consideration was approximately $ 244.0 million and consisted of approximately $ 146.3 million of common stock, $ 97.1 million of cash consideration, and potential future cash earn-out payments of up to an aggregate of $ 25.0 million which were fair valued at $ 0.6 million. The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company has determined fair values of the assets acquired and liabilities assumed. 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 Cash consideration at closing $ 97,116 Equity consideration at closing 146,314 Contingent earn-out 600 Total $ 244,030 Estimate of purchase price allocation Cash and cash equivalents $ 951 Accounts receivable 823 Inventory 1,539 Fixed assets 226 Other assets 5 Intangible assets 110,100 Goodwill 157,699 Total assets acquired $ 271,343 Liabilities assumed: Interest bearing debt 16 Other current liabilities 2,749 Deferred tax liabilities 24,548 Total liabilities acquired 27,313 Estimated fair value of net assets acquired $ 244,030 Goodwill represents the excess of the merger price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed. 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. 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 24 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 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 $ 5.9 million of transaction costs in the fiscal year ended December 31, 2022. These costs were 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. 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 15 % to determine the fair value. 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 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 from 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 1 % 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 from 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 5 % 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. Based on this method 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 comparable business combinations and adjusting accordingly after taking into account circumstances that may be unique to 25 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) GeneSiC. Net tangible assets and intangibles assets assumed as well as goodwill recognized are presented as continuing operations in the consolidated balance sheets. 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 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Revenue $ 11,070 $ 36,266 Net income (loss) $ ( 38,479 ) $ 77,877 Basic net income per share $ ( 0.24 ) $ 0.55 Diluted net income per share $ ( 0.25 ) $ 0.50 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, 2022, nor is the pro forma financial information indicative of the results of operations that may occur in the fut ure. 26 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 18. 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. Refer to Note 16 above. On August 19, 2022, the Company obtained control of the joint venture, and 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 noncontrolling interest and net assets is based on 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. Goodwill of $ 3.1 million was recorded in connection with this transaction. On January 19, 2023, the Company announced an agreement to acquire the remaining minority interest in the joint venture as well as rights to certain intellectual property from Halo and its U.S. affiliate for a total purchase price of $ 22.4 million in Navitas stock. The transaction was completed on February 13, 2023. In connection with the purchase of intellectual property, the Company recognized developed technology as an intangible asset at its estimated fair value o f $ 4.4 million . As a result of this transaction, the Company recorded a net increase to additional paid in capital of $ 7.5 million representing the difference between the fair value of share consideration related to the acquisition of the remaining noncontrolling interest and the carrying value of the noncontrolling interest at the date of the transaction. The fair value of the developed technology 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 10 % to determine the fair value. 19. SUBSEQUENT EVENTS The Company evaluated material subsequent events from the consolidated balance sheet date of September 30, 2023, through November 9, 2023, the date the condensed consolidated financial statements were issued. There were no material subsequent events as of November 9, 2023. 27 Table of Contents