What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-06 compared with 2023-04-03 · 85 added, 83 removed, 181 unchanged (48% of the section changed)

3 unchanged sentences

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this annual report on Form 10-K.

This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties.

This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and that involve risks and uncertainties.

As a result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Statement About Forward-Looking Statements” sections and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements.

Navitas Semiconductor Corporation, a Delaware holding company, operates through its wholly owned subsidiaries, including Navitas Semiconductor Limited and GeneSiC Semiconductor LLC (“GeneSiC”).

Originally founded in 2014 as the legacy Navitas Semiconductor business, we were previously an SEC registrant named Live Oak Acquisition Corp.

II (“Live Oak”).

On October 19, 2021, we completed a business combination (which we refer to as the “Business Combination”) in which, among other transactions, Live Oak acquired Navitas Semiconductor Limited and its subsidiaries, changed our name to Navitas Semiconductor Corporation, and began trading on Nasdaq under the trading symbol “NVTS.” We acquired GeneSiC Semiconductor in August 2022.

Further details about the Business Combination and the acquisition of GeneSiC Semiconductor can be found in our SEC filings.

Founded in 2014, Navitas is a U.S.-based developer of gallium nitride power integrated circuits that provide superior efficiency, performance, size and sustainability relative to existing silicon technology.

Our solutions offer faster charging, higher power density and greater energy savings compared to silicon-based power systems with the same output power.

By unlocking this speed and efficiency, we believe we are leading a revolution in high-frequency, high-efficiency and high-density power electronics to electrify our world for a cleaner tomorrow.

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

By unlocking this speed and efficiency, we believe we are leading a revolution in high-frequency, high-efficiency and high-

density power electronics to electrify our world for a cleaner tomorrow.

We maintain operations around the world, including the United States, Ireland, Germany, Italy, Belgium, China, Taiwan, Thailand, South Korea, and the Philippines, with principal executive offices in Torrance, California.

We design, develop and market 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.

8 unchanged sentences

In support of our technology leadership, we have formed relationships with numerous Tier 1 manufacturers and suppliers over the past eight years, gaining significant traction in mobile and consumer charging applications.

Navitas GaN is now in mass production with 9 of the top world-wide 10 mobile OEMs across smartphone and laptops in development with 10 out of 10.

Navitas GaN has entered mass production and is being utilized by 9 out of the top 10 global mobile OEMs for the development of smartphones and laptops, with all 10 out of 10 currently in progress .

In addition, our supply chain partners have committed manufacturing capacity in excess of what we consider to be necessary to support our continued growth and expansion.

A core strength of our business lies in our industry leading IP position in GaN Power ICs.

Navitas invented the first commercial GaN Power ICs.

Today, we ha ve over 185 patents that are issued or pending.

In addition to our comprehensive patent portfolio, our biggest proprietary advantage is our process design kit (PDK), the ‘how-to’ guide for Navitas designers to create new GaN based device and circuits.

Our GaN power IC inventions and intellectual property translate across all of our target markets f rom mobile, consumer, EV, enterprise, and renewables.

We evaluate various complementary technologies and look to improve our PDK, in order to keep introducing newer generations of GaN technology.

In 2021 and 2022, we spent approximate ly 103% and 141%, respectively, o f our revenue on research and development.

A core strength of our business lies in our industry leading IP position.

Our GaN power IC inventions and intellectual property translate across all of our target markets from mobile, consumer, EV, enterprise, and renewables.

We evaluate various complementary technologies and look to improve our PDK, in order to keep introducing newer genera tions of GaN technology.

In the years ended December 31, 2023 and 2022, we spent approximately 87% and 133%, respectively, of our revenue on research and development.

Navitas’ research and development activities are located primarily in the US and China.

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.

Buyout of Elevation Semiconductor

On January 19, 2023, the Company announced an agreement to acquire the remaining minority interest in its silicon control IC joint venture from Halo Microelectronics International Corporation (“Halo”).

Total consideration for the joint venture interests and certain intellectual property rights purchased from Halo, and certain other interests and agreements of Halo and joint venture employees, was approximately $22.4 million in Navitas stock.

As Navitas was already the majority shareholder, financial results from the joint venture have already been reflected in Navitas’ historical financial statements.

The transaction was completed on February 13, 2023.

In connection with the purchase of intellectual property, the Company recognized an intangible asset at its estimated fair value of $4.4 million related to acquired intellectual property.

Acquisition of GeneSiC

1 unchanged sentence

(“GeneSiC”) for $146.3 million of equity, $97.1 million of cash consideration, and potential future earn-out payments of up to an aggregate of $25.0 million in cash.

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

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

The future earn-out payments were fair valued at $0.6 million, for a total merger consideration of $244.0 million.

GeneSiC’s net assets and operating results since the merger date are included in the Company’s Consolidated Balance Sheet and Consolidated Statements of Operations as of and for the year ended December 31, 2022.

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.

Acquisition of VDDTech

On June 10, 2022, the Company’s wholly owned subsidiary, Navitas Semiconductor Limited, acquired all of the stock of VDDTECH srl, a private Belgian company (“VDDTech”), for approximately $1.9 million in cash and stock.

On June 10, 2022, the Company’s wholly owned subsidiary, Navitas Semiconductor Limited, acquired all of the capital 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 included in the Company’s Consolidated Balance Sheet and Consolidated Statement of Operations for the year ended December 31, 2023.

Business Combination and Reverse Recapitalization

On May 6, 2021, Navitas Semiconductor Limited (“Navitas Ireland”), a private company limited by shares organized under the Laws of Ireland and domesticated in the State of Delaware as Navitas Semiconductor Ireland, LLC, (“Navitas Delaware”, and together with Navitas Ireland, “Legacy Navitas”) a Delaware limited liability company, entered into a business combination agreement and plan of reorganization (the “Business Combination Agreement” or “BCA”) with Live Oak Acquisition Corp.

II, (“Live Oak”).

Pursuant to the BCA, Live Oak acquired all of the capital stock of Navitas Ireland by means of a tender offer, and a wholly owned subsidiary of Live Oak merged with and into Navitas, Delaware, with Navitas Delaware surviving the merger.

As a result, Legacy Navitas became a wholly owned subsidiary of Live Oak effective October 19, 2021.

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

The Business Combination was accounted for as a reverse recapitalization in accordance with US GAAP.

Under the guidance in Accounting Standards Codification (“ASC”) 805, “ Business Combinations” , Live Oak was treated as the “acquired” company for financial reporting purposes.

We were deemed the accounting predecessor and the post-combination company is the successor SEC registrant, meaning that our financial statements for previous periods were disclosed in our annual report Form 10-K filed with the SEC on March 31, 2022.

The Business Combination had a significant impact on our reported financial position and results as a consequence of the reverse recapitalization.

The most significant change in our reported financial position and results of operations was net cash proceeds of $298,054 from the merger transaction, which includes $173,000 in gross proceeds from the PIPE financing that was consummated in conjunction with the Business Combination.

The increase in cash was offset by transaction costs incurred in connection with the Business Combination of approximately $25 million.

Navitas expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.

Results of Operations

13 unchanged sentences

Our product revenue is recognized when the customer obtains control of the product and the timing of recognition is based on the contractual shipping terms of a contract.

We provide a non-conformity warranty which is not sold separately

and does not represent a separate performance obligation.

Our product revenue is well diversified across the United States, Europe, and Asia.

We provide a non-conformity warranty which is not sold separately and does not represent a separate performance obligation.

Our product revenue is diversified across the United States, Europe, and Asia.

Cost of Revenues

9 unchanged sentences

Interest Income

Interest income primarily consists of interest income earned from our cash on hand due to the increase of interest rates.

Interest income primarily consists of interest earned from our cash on hand.

Interest Expense

Interest expense primarily consists of interest under our term loan facility held during the year.

Interest expense primarily consists of interest under our term loan facility, held during the fiscal year 2022.

The term loan was paid off as of December 31, 2023.

Legacy N avitas is a dual domesticated corporation for Ireland and U.S.

2 unchanged sentences

Results of Operations

The table and discussion below summarizes operating data for our consolidated operations (in thousands):

The tables and discussion below present our results for the years ended December 31, 2023 and 2022 (in thousands):

December 31, Change

1 unchanged sentence

Net revenues (including $0 and $1,528 of related party revenues)

$ 79,456 $ 37,943 $ 41,513 109 %

Cost of revenues (exclusive of amortization of intangibles included below) 48,392 25,996 22,396 86 %

6 unchanged sentences

Other income (expense), net:

Interest income (expense), net 1,387 (257) 1,644 (640) %

Gain (loss) from change in fair value of warrants 51,763 (45,625) 97,388 (213) %

Interest income, net 5,368 1,387 3,981 287 %

Gain from change in fair value of warrants — 51,763 (51,763) (100) %

Gain (loss) from change in fair value of earnout liabilities (33,788) 121,709 (155,497) (128) %

2 unchanged sentences

Income (loss) before income taxes (146,468) 50,075

Income tax (benefit) provision (22,812) 47 (22,859) (48636) %

Income tax benefit (517) (22,812) 22,295 (98) %

Net income (loss) $ (145,951) $ 72,887 $ (218,838) (300) %

net income (loss) attributable to noncontrolling interests (1,026) — $ (1,026)

Net income (loss) attributable to controlling interests $ 73,913 $ (152,685) $ 226,598 (148) %

net loss attributable to noncontrolling interest (518) (1,026) 508 (50) %

Net income (loss) attributable to controlling interest $ (145,433) $ 73,913 $ (219,346) (297) %

Comparison of the Years ended December 31, 2023 and 2022

Net revenues for the twelve months ended December 31, 2023 were $79.5 million compared to $37.9 million for the twelve months ended December 31, 2022, an increase of $41.6 million, or 109%.

The significant increase was driven by revenues derived from the GeneSiC acquisition and increased unit sales in the home appliance market, partially offset by declines in the China mobile market.

The increase was driven primarily by revenues derived from a full year of operations from the GeneSiC acquisition that closed on August 15, 2022, partially offset by decreased unit sales in the home appliance market.

Cost of Revenues

Cost of revenues for the twelve months ended December 31, 2023 was $48.4 million, an increase of $22.4 million or 86% compared to the twelve months ended December 31, 2022.

The increase was primarily driven by significant revenue growth, including the acquisition of GeneSiC, inventory charges of $2.8 million and higher wafer prices from TSMC.

The increase was primarily driven by revenue growth and the acquisition of GeneSiC.

Research and Development Expense

Research and development expense for the twelve months ended December 31, 2022 of $50.3 million increased by $22.8 million, or 83%, when compared to the twelve months ended December 31, 2021, primarily driven by increases in stock based compensation of $13.2 million and $8.2 million in higher compensation costs related to growth in headcount as the Company developed products in the home appliances, solar, data center, industrial, and EV markets.

Research and development expense for the twelve months ended December 31, 2023 of $68.8 million increased by $18.5 million, or 37%, when compared to the twelve months ended December 31, 2022, primarily driven by increases of $7.0 million in stock based compensation and payroll due to growth in headcount as the Company develops new products.

We expect research and development expense to continue to increase as we grow our headcount to continue our diversification into new applications.

Sellin g, General and Administrative Expense

Selling, general and administrative expense for the twelve months ended December 31, 2022 of $78.4 million increased by $27.0 million, or 53%, when compared to the twelve months ended December 31, 2021.

The increase is primarily due to a $8.8 million increase in stock-based compensation, along with an increase of $3.0 million in compensation costs related to growth in headcount.

In addition, the Company incurred $5.9 million of transaction expenses related to the acquisition of GeneSiC and a $3.7 million increase in costs associated with the operating of a public company.

We expect selling, general and administrative costs to increase to support our revenue growth.

Selling, General and Administrative Expense

Selling, general and administrative expense for the twelve months ended December 31, 2023 of $61.6 million decreased by $16.8 million, or 21%, when compared to the twelve months ended December 31, 2022.

The decrease is primarily driven by decreases of $16.2 million in stock based compensation.

Amortization of Definite-Lived Intangible Assets

Amortization of definite-lived intangible assets for the twelve months ended December 31, 2023 of $18.8 million increased by $11.9 million, or 172%, when compared to the twelve months ended December 31, 2022.

The increase is primarily due to business acquisitions that occurred during the fiscal year ended December 31, 2022.

The increase is primarily due to having a full year of amortization expense in 2023 compared to 2022, as a result of business acquisitions that occurred during the fiscal year ended December 31, 2022.

Other Income (Expense), net

Net interest income for the twelve months ended December 31, 2023 o f $5.4 million compared to expense of $1.4 million for the twelve mo nths ended December 31, 2022, primarily due to higher interest earned on cash equivalents.

During the twelve months ended December 31, 2022, we recognized a $51.8 million gain from the change in fair value of our warrant liabilities, a $121.7 million decrease in fair value of our earn out liabilities and a $1.1 million loss from equity method investment, as follows:

The change in fair value of our warrant liability is due to the Company issuing a notice of redemption on February 4, 2022 and the Company revaluing the liability just before the exercise and redemptions which resulted in a valuation change of $51.8 million.

ii) Earnout liability:

Subsequent to the recognition of the earnout liability upon the consummation of the Business Combination on October 19, 2021, we remeasure the fair value of this liability at each reporting date.

The decrease in fair value of our earn-out liability of $121.7 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq, resulting in the decline in the estimated fair value of the earnout shares from $16.09 as of December 31, 2021 to $1.47 as of December 31, 2022 .

iii) Other expense primarily reflects our minority interest in the net loss of a joint venture through August 18, 2022.

Income Tax (Benefit) Provision

Income tax benefit for the twelve months ended December 31, 2022 was $22.8 million while for the twelve months ended December 31, 2021, income tax expense was not significant.

During the twelve months ended December 31, 2023, we recognized a $33.8 million loss from an increase in fair value of our earnout liabilities and a $0.1 million loss from equity method investment.

The loss of $33.8 million in our earn-out liability was primarily a result of the increase of the closing price of our Class A common stock listed on the Nasdaq, resulting in an increase in the estimated fair value of the earnout shares from $1.47 as of December 31, 2022 to $5.50 as of December 31, 2023 .

Income Tax Benefit

Income tax benefit for the twelve months ended December 31, 2023 was $0.5 million while for the twelve months ended December 31, 2022, income tax benefit was $22.8 million.

As a result of the GeneSiC Semiconductor Inc.

acquisition, (see Note 18, Business Combinations), the Company released $20.5 million of its U.S.

acquisition in 2022, (see Note 17, Business Combinations), the Company released $20.5 million of its U.S.

federal valuation allowance .

The release was primarily attributable to the $23.1 million of net federal deferred tax liability recorded on

GeneSiC’s opening balance sheet that is available to offset most of the U.S.

The release was primarily attributable to the $23.1 million of net federal deferred tax liability recorded on GeneSiC’s opening balance sheet that is available to offset most of the U.S.

federal deferred tax assets of Navitas.

19 unchanged sentences

We derive liquidity primarily from cash on hand, debt, and equity financing activities.

As of December 31, 2022, our balance of cash and cash equivalents was $110.3 million, which is a decrease of $157.9 million or 59% co mpared to December 31, 2021.

As of December 31, 2022 we had no debt outstanding while we had $6.9 million of total debt outstanding at December 31, 2021.

As of December 31, 2023, our balance of cash and cash equivalents was $152.8 million, which is an increase of $42.5 million or 39% co mpared to December 31, 2022.

As of December 31, 2023 and 2022, we had no debt outstanding.

Operating Activities

For the year ended Dec ember 31, 2022, net cash used in operating activities was $44.5 million, which primarily reflects a net income of $72.9 million, adjusted for non-cash share-based compensation of $63.3 million, non-cash gains of $173.5 million in earnout and warrant liabilities due to changes in fair value and an aggregate cash provided by operating assets and liabilities of $2.7 million.

For the year ended December 31, 2023, net cash used in operating activities was $40.1 million, which primarily reflects a net loss of $146.0 million, adjusted for non-cash share-based compensation of $54.0 million, non-cash losses of $33.8 million in earnout due to changes in fair value and an aggregate cash used in operating assets and liabilities of $4.3 million.

Specifically, the changes reflect $16.7 million increase in accounts receivable and $4.1 million increase inventory, both as a result of higher revenues, $3.0 million increase in prepaids and $1.2 million increase in other current assets, partially offset by an increase of $12.2 million in accounts payable primarily due to timing of disbursements and higher inventory, and an increase of $10.5 million in deferred revenue.

For the year ended December 31, 2022, net cash used in operating activities was $44.5 million , which primarily reflects net income of $72.9 million , adjusted for non-cash share-based compensation of $63.3 million and non-cash, non-operating losses of $173.5 million in earnout and warrant liabilities due to changes in fair value and an aggregate cash provided by operating assets and liabilities of $2.7 million.

Specifically, $1.3 million decrease in account receivable, $4.7 million increase in inventory, and $7.1 million increase in accounts payable, due to increased sales, partially offset by $1.1 million decrease in operating lease liability.

For the year ended December 31, 2021, net cash used in operating activities was $41.7 million, which primarily reflects a net loss of $152.7 million, adjusted for non-cash share-based compensation of $41.4 million and non-cash, non-operating losses of $83.7 million and includes an aggregate decrease of $15.2 million due to higher operating assets.

Investing Activities

N et cash used in investing activities for the year ended December 31, 2022 of $107.6 million was primarily due to $96.4 million in business acquisitions, $5.2 million cash funding of a joint venture and $4.6 million for purchases of fixed assets.

Net cash used in investing activities for the year ended December 31, 2021 of $3.5 million was primarily due to $0.7 million cash co nsideration paid for an asset acquisition, $0.7 million cash funding of a joint venture and $2.1 million for purchases of fixed assets.

N et cash used in investing activities for the year ended December 31, 2023 of $5.8 million was primarily due to purchases of fixed assets of $4.8 million and $1.0 million cash funding of a joint venture.

Net cash used in investing activities for the year ended December 31, 2022 of $107.6 million was primarily due to $96.4 million in business acquisitions, $5.2 million cash funding of a joint venture and $4.6 million for purchases of fixed assets.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2022 of $5.8 million was primarily the result of $6.9 million repayment of debt, partially offset by $1.7 million of issuance of common stock in connection with option exercises.

Net cash provided by financing activities for the year ended December 31, 2021 of $274.5 million was primarily the result of $298.1 million in proceeds from the reverse recapitalization an d $0.9 million in net proceeds from the issuance and repayment of debt, offset by $25.0 million of stock issuance costs.

Net cash provided by financing activities for the year ended December 31, 2023 of $88.4 million was primarily the result of proceeds from the issuance of common stock in our May 2023 public offering, net of issuance costs, of $86.5 million and proceeds from the issuance of common stock in connection with stock option exercises of $1.9 million.

Net cash used in financing activities for the year ended December 31, 2022 of $5.8 million was primarily the result of $6.9 million repayment of debt, partially offset by $1.7 million from the issuance of common stock in connection with option exercises.

Contractual Obligations, Commitments and Contingencies

In the ordinary course of business, we enter into contractual arrangements that may require future cash payments.

As of December 31, 2022, our non-cancellable contractual arrangements consisted entirely of a contract to guarantee future production capacity, of which $1.6 million remains outstanding as of year end.

As of December 31, 2023 , our non-cancellable contractual arrangements consisted entirely of lease obligations.

Refer to Note 7 - Leases for further information on our minimum future payments related to lease obligations.

8 unchanged sentences

Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

Our most critical accounting estimates include revenue recognition and the assumptions used in the valuation of intangible assets, determination of accounting for earnout shares, and share-based compensation.

There have been no material changes to our critical accounting policies and estimates from the information in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 2022 annual report on Form 10-K, except for our inventory reserve.

Revenue Recognition

Revenue is recognized when a customer obtains control of products or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements within the scope of ASC 606, “Revenue from Contracts with Customers” , we perform the following five steps:

To determine revenue recognition for arrangements within the scope of ASC 606, “Revenue from Contracts with Customers” , we perform the following five

(1) identify the contract(s) with a customer;

18 unchanged sentences

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Valuation of Inventory

We assess inventory to address potential obsolescence and declining values through periodic assessments, considering factors like aging analysis, known risks, and assumptions about future demand.

Identified impaired inventory items are adjusted to reflect net realizable values.

The valuation of inventory requires management to make significant assumptions and subjective judgments about the future salability of the inventory and the value of obsolete and unmarketable inventory.

These assumptions include the assessment of market conditions and trends, sales forecasts, historic usage, expected demand, anticipated sales price, new product development schedules, product obsolescence, customer design activity, customer concentrations, product merchantability and other factors.

For example, we adjust our inventory reserve for items that are considered obsolete based on changes in customer demand or new product introductions that may eliminate the demand for such products.

Share-Based Compensation

1 unchanged sentence

The value of an award is recognized as expense over the requisite service period in the consolidated statements of operations.

The option pricing model requires management to

make assumptions and to apply judgment in determining fair value of the awards.

The most significant assumptions and judgments include the expected volatility, risk-free interest rate, expected dividend rate and expected term of the award, in addition to the fair value of the underlying common stock.

The option pricing model requires management to make assumptions and to apply judgment in determining fair value of the awards.

The most significant assumptions and judgments include the expected volatility, risk-free interest rate, expected dividend rate and expected term of the award, in

addition to the fair value of the underlying common stock.

We have also granted long term performance stock options (“LTIP Options”) to certain members of senior management.

20 unchanged sentences

Earnout Shares

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.

The Earnout Milestones represents three independent criteria, which each entitles the eligible stockholders to 3,333,333 earn-out shares per milestone met.

Each Earnout Milestone is

considered met if at anytime 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 for any twenty trading days within any thirty trading day period, respectively

Certain shareholders of the Company are eligible to receive up to 10,000,000 Earnout Shares of the Company's Class A common stock, contingent upon the fulfillment of Earnout Milestones.

These milestones consist of three distinct criteria, with each criterion granting eligible stockholders 3,333,333 earn-out shares upon meeting the specified conditions.

Each Earnout Milestone is deemed achieved if, at any time within 150 days following the Business Combination and before

October 19, 2026, the volume-weighted average price of the Company's Class A common stock reaches or exceeds $12.50, $17.00, or $20.00 for any twenty trading days within a thirty trading day period, respectively.

These earnout shares have been categorized into two components:

10 unchanged sentences

See Not e 2 to our consolidated financial statements included elsewhere in this annual report for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies, allowing them to delay the adoption of those standards until those standards would otherwise apply to private companies.

We have elected to use this extended transition period under the JOBS Act.

As a result, following the Business Combination, our consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make common stock less attractive to investors.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

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-K

Item 7. Management’s Discussion and Analysis