Navitas Semiconductor Corp 10-Q

Item 1. Financial Statements. NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except shares and par value) March 31, 2024 December 31, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 129,682 $ 152,839 Accounts receivable, net 22,199 25,858 Inventories 33,176 23,166 Prepaid expenses and other current assets 6,024 6,619 Total current assets 191,081 208,482 PROPERTY AND EQUIPMENT, net 11,773 9,154 OPERATING LEASE RIGHT OF USE ASSETS 7,805 8,268 INTANGIBLE ASSETS, net 86,325 91,099 GOODWILL 163,215 163,215 OTHER ASSETS 7,690 5,328 Total assets $ 467,889 $ 485,546 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and other accrued expenses $ 24,450 $ 26,637 Accrued compensation expenses 7,591 10,902 Operating lease liabilities, current 1,857 1,892 Customer deposit 8,074 10,953 Total current liabilities 41,972 50,384 OPERATING LEASE LIABILITIES NONCURRENT 6,307 6,653 EARNOUT LIABILITY 20,653 46,852 DEFERRED TAX LIABILITIES 1,040 1,040 Total liabilities 69,972 104,929 COMMITMENTS AND CONTINGENCIES (Note 13) STOCKHOLDERS’ EQUITY: Common stock, $ 0.0001 par value, 750,000,000 shares authorized as of March 31, 2024 and December 31, 2023, and 182,996,785 and 179,196,418 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 21 21 Additional paid-in capital 701,771 680,790 Accumulated other comprehensive loss ( 7 ) ( 7 ) Accumulated deficit ( 303,868 ) ( 300,187 ) Total stockholders’ equity 397,917 380,617 Total liabilities and stockholders’ equity $ 467,889 $ 485,546 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 March 31, (In thousands, except per share amounts) 2024 2023 NET REVENUES $ 23,175 $ 13,358 COST OF REVENUES (exclusive of amortization of intangible assets included below) 13,660 7,873 OPERATING EXPENSES: Research and development 20,229 17,394 Selling, general and administrative 16,087 19,058 Amortization of intangible assets 4,774 4,499 Total operating expenses 41,090 40,951 LOSS FROM OPERATIONS ( 31,575 ) ( 35,466 ) OTHER INCOME (EXPENSE), net: Interest income 1,682 903 Gain (loss) from change in fair value of earnout liabilities 26,199 ( 27,752 ) Other income 83 11 Total other income (expense), net 27,964 ( 26,838 ) LOSS BEFORE INCOME TAXES ( 3,611 ) ( 62,304 ) INCOME TAX PROVISION 70 61 NET LOSS ( 3,681 ) ( 62,365 ) LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS — ( 518 ) NET LOSS ATTRIBUTABLE TO CONTROLLING INTERESTS $ ( 3,681 ) $ ( 61,847 ) NET LOSS PER COMMON SHARE: Basic net loss per share attributable to common stockholders $ ( 0.02 ) $ ( 0.39 ) Diluted net loss per share attributable to common stockholders $ ( 0.02 ) $ ( 0.39 ) WEIGHTED AVERAGE COMMON SHARES USED IN NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS: Basic common shares 179,779 156,792 Diluted common shares 179,779 156,792 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 LOSS (unaudited) Three Months Ended March 31, (In thousands) 2024 2023 NET LOSS $ ( 3,681 ) $ ( 62,365 ) Other comprehensive income — — COMPREHENSIVE LOSS ( 3,681 ) ( 62,365 ) COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST — ( 518 ) TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO CONTROLLING INTEREST $ ( 3,681 ) $ ( 61,847 ) 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) Stockholders' Equity THREE MONTHS ENDED MARCH 31, 2024 Common stock Additional paid in capital Accumulated deficit Accumulated comprehensive loss Noncontrolling interest Total Shares Amount BALANCE AT DECEMBER 31, 2023 179,196 $ 21 $ 680,790 $ ( 300,187 ) $ ( 7 ) $ — $ 380,617 Issuance of common stock under employee stock option and stock award plans 3,801 — 10,734 — — — 10,734 Stock-based compensation expense related to employee and non-employee stock awards — — 10,247 — — — 10,247 Net loss — — — ( 3,681 ) — — ( 3,681 ) BALANCE AT MARCH 31, 2024 182,997 $ 21 $ 701,771 $ ( 303,868 ) $ ( 7 ) $ — $ 397,917 Stockholders' Equity THREE MONTHS ENDED MARCH 31, 2023 Common stock Additional paid in capital Accumulated deficit Accumulated comprehensive 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 3,083 — 2,925 — — — 2,925 Stock-based compensation expense related to employee and non-employee stock awards — — 14,884 — — — 14,884 Shares issued in connection with buyout agreement 4,232 — 7,509 — — ( 3,110 ) 4,399 Net loss — — — ( 61,847 ) — ( 518 ) ( 62,365 ) BALANCE AT MARCH 31, 2023 160,944 $ 18 $ 561,193 $ ( 216,601 ) $ ( 7 ) $ — $ 344,603 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited) Three Months Ended March 31, (In thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 3,681 ) $ ( 62,365 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 722 506 Amortization of intangible assets 4,774 4,536 Non-cash lease expense 601 512 Other — 86 Stock-based compensation expense 13,548 17,160 (Gain) loss from change in fair value of earnout liability ( 26,199 ) 27,752 Deferred income taxes — 5 Change in operating assets and liabilities: Accounts receivable 3,659 1,704 Inventories ( 10,010 ) 188 Prepaid expenses and other current assets 595 743 Other assets 138 ( 1,612 ) Accounts payable, accrued compensation and other accrued expenses ( 532 ) 3,376 Operating lease liability ( 519 ) ( 511 ) Customer deposit ( 2,879 ) — Net cash used in operating activities ( 19,783 ) ( 7,920 ) CASH FLOWS FROM INVESTING ACTIVITIES: Investment purchases ( 2,500 ) ( 1,000 ) Purchases of property and equipment ( 2,898 ) ( 815 ) Net cash used in investing activities ( 5,398 ) ( 1,815 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock in connection stock option exercises 236 221 Proceeds from employee stock purchase plan 1,788 — Net cash provided by financing activities 2,024 221 NET DECREASE IN CASH AND CASH EQUIVALENTS ( 23,157 ) ( 9,514 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 152,839 110,337 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 129,682 $ 100,823 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $ 27 $ 10 Shares issued in connection with buyout agreement $ — $ 22,400 Capital expenditures in accounts payable $ 942 $ 228 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 6 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”) devices 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, South Korea and the Philippines, with principal executive offices in Torrance, California. Investment in Third Party On January 3, 2024, the Company made an additional investment of $ 2.5 million in preferred interests in a third party . The Company’s new ownership percentage increased to 15.48 %. The investment is $ 5.0 million and $ 2.5 million as of March 31, 2024 and December 31, 2023, respectively. Such investment is included in Other Assets in the Condensed Consolidated Balance Sheets and is accounted for 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. 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 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 15, 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 months ended March 31, 2024, are not necessarily indicative of results to be expected for the full year ending December 31, 2024. 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 7 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 31, 2023, filed with the SEC on March 6, 2024. 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 March 6, 2024. 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 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 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 Issued Accounting Standards In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, titled Income Taxes (Topic 740): Improvements to Income Tax Disclosures. These amendments address investor requests for enhanced transparency regarding income tax information. Specifically, they improve income tax disclosures related to rate reconciliation and income taxes paid. ASU 2023-09 becomes effective for fiscal years beginning after December 15, 2024, with early adoption permitted. While we are currently assessing the impact of this standard, we anticipate it will result in disclosure changes only. This Form 10-Q does not include any other newly implemented accounting standards or pronouncements beyond those detailed above. Such exclusions were made because they either do not apply to our company or are not anticipated to materially impact the condensed consolidated financial statements. 3. INVENTORIES Inventories consist of the following (in thousands): March 31, 2024 December 31, 2023 Raw materials $ 4,576 $ 7,743 Work-in-process 23,000 10,863 Finished goods 5,600 4,560 Total $ 33,176 $ 23,166 8 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 4. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following (in thousands): March 31, 2024 December 31, 2023 Furniture and fixtures $ 277 $ 244 Computers and other equipment 12,778 10,339 Leasehold improvements 3,964 2,360 Construction in Progress 390 1,114 17,409 14,057 Accumulated depreciation ( 5,636 ) ( 4,903 ) Total $ 11,773 $ 9,154 The depreciation expense was $ 0.7 million and $ 0.5 million f or the three months ended March 31, 2024 and 2023 , 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 — 6 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 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 $ 113.0 million as of March 31, 2024 and $ 139.0 million for December 31, 2023. The following table presents the Company’s fair value hierarchy for financial liabilities as of March 31, 2024 (in thousands) : Level 1 Level 2 Level 3 Total Liabilities: Earnout liability $ — $ — $ 20,653 $ 20,653 Total $ — $ — $ 20,653 $ 20,653 The following table presents the Company’s fair value hierarchy for financial liabilities as of December 31, 2023 (in thousands): 9 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Level 1 Level 2 Level 3 Total Liabilities: Earnout liability $ — $ — $ 46,852 $ 46,852 Total $ — $ — $ 46,852 $ 46,852 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, 2023 $ 46,852 Fair value adjustment ( 26,199 ) Balance at March 31, 2024 $ 20,653 The Company did not transfer any investments between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2024. 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. The following table presents the Company’s intangible asset balance by asset class as of March 31, 2024 (in thousands): Intangible Asset Cost Accumulated Amortization Net Book Value Amortization Method Useful Life Trade Names $ 900 $ ( 731 ) $ 169 Straight line 2 years Developed Technology 53,500 ( 21,047 ) 32,453 Straight line 4 - 10 years In-process R&D 1,177 — 1,177 Indefinite N/A Patents 34,900 ( 4,039 ) 30,861 Straight line 5 - 15 years Customer Relationships 24,300 ( 3,949 ) 20,351 Straight line 10 years Non-Competition Agreements 1,900 ( 618 ) 1,282 Straight line 5 years Other 658 ( 626 ) 32 Straight line 5 years Total $ 117,335 $ ( 31,010 ) $ 86,325 10 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents the changes in the Company’s intangible asset balance (in thousands): Intangible Assets, net Balance at December 31, 2023 $ 91,099 Additions to intangible assets — Amortization expense ( 4,774 ) Balance at March 31, 2024 $ 86,325 The amortization expense was $ 4.8 million and $ 4.5 million for the thre e months ended March 31, 2024 and 2023, respectively. Total future amortization expense of intangible assets is estimated to be as follows (in thousands): Fiscal Year Ending December 31, Total 2024 (remainder of fiscal 2024) $ 14,153 2025 18,645 2026 14,042 2027 5,336 2028 4,690 Thereafter 28,301 Total $ 85,167 There were no impairment charges during the three months ended March 31, 2024 and 2023. 7. LEASES: The Compa ny has entered into operating leases primarily for commercial buildings. These leases have remaining terms which range from 0.2 to 5.6 years. As of March 31, 2024, no operating lease agreements contain economic penalties for the Company to extend th e lease, and it is not reasonably certain the Company will exercise these extension options. Additionally, these operating lease agreements do not contain material residual value guarantees or material restrictive covenants. As of March 31, 2024, all leases recorded on the Company’s consolidated balance sheets were operating leases. 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 $ 0.8 million and $ 0.5 million for the three months ended March 31, 2024 and 2023 , 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 11 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) variable payments and does not include such costs as a lease component. Total variable expense was $ 0.1 million for the three months ended March 31, 2024 and not material for the three months ended March 31, 2023 . Information related to the Company right-of-use assets and related operating lease liabilities were as follows (in thousands): Three Months Ended March 31, 2024 2023 Cash paid for operating lease liabilities $ 566 $ 454 Operating lease cost $ 601 $ 512 Non-cash right-of-use assets obtained in exchange for new operating lease obligations $ 28 $ 590 Weighted-average remaining lease term 4.71 4.96 Weight-average discount rate 3.45 % - 9.25 % 4.25 % - 7.75 % Maturities of lease liabilities are as follows (in thousands): Remainder of fiscal year 2024 $ 1,574 Fiscal year 2025 1,876 Fiscal year 2026 1,766 Fiscal year 2027 1,772 Fiscal year 2028 1,687 Thereafter 486 9,161 Less imputed interest 997 Total lease liabilities $ 8,164 8. 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). 12 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 March 31, 2024 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 service period of the award, which may be explicit or derived, unless market or performance conditions result in a graded attribution. The following table summarizes the stock-based compensation expense recognized for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Research and development $ 7,370 $ 7,177 Selling, general and administrative 6,178 9,983 Total stock-based compensation expense $ 13,548 $ 17,160 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 months ended March 31, 2024 or 2023. A summary of stock options outstanding, excluding LTIP Options as of March 31, 2024, and activity during the three 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, 2023 2,657 $ 0.72 5.7 Exercised ( 423 ) 0.55 0 Forfeited or expired ( 14 ) 1.06 0 Outstanding at March 31, 2024 2,220 $ 0.76 5.6 Vested and Exercisable at March 31, 2024 2,050 $ 0.73 5.6 13 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) During both the three months ended March 31, 2024 and 2023, the Company recogni ze d $ 0.1 million o f stock-based compensation expense for the vesting of outstanding stock optio ns, excluding $ 1.9 million and $ 2.5 million, respectively, related to the LTIP Options described below. At March 31, 2024, unrecognized compensation cost related to unvested options totaled $ 0.1 million . The weighted-average period over which this remaining compensation cost will be recognized is 0.5 years. Long-term Incentive Plan Stock Options The Company awarded a total of 6,500,000 LTIP Options (“2021 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 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 $ 15.51 per share and the average fair value on the grant date was $ 9.14 based on the Black-Scholes model and a Monte Carlo simulation incorporating 500,000 scenarios. The weighted average contractual period remaining is 7.8 years. The Company utilized the services of a professional valuation firm to finalize these assumptions during the fiscal year ended December 31, 2023. The valuation model utilized the following assumptions: Risk-free interest rates 1.47 % Expected volatility rates 67.33 % Expected dividend yield — Cost of equity (for derived service period) 11.77 % Weighted-average grant date fair value of options $ 9.14 In connection with the “2021 LTIP Options”, the Company recognized $ 1.6 million and $ 2.2 million of stock-based compensation expense for the three months ended March 31, 2024 and 2023, respectively. The unrecognized compensation expense related to these LTIP Options is $ 4.7 million as of March 31, 2024, and compensation expense will be recognized over 0.8 years. On a quarterly basis, after evaluating the 2021 LTIP Options based on the probability of achieving certain market and performance conditions, the Company may true up the 2021 LTIP Options expense as needed. The Company awarded a total of 3,250,000 performance stock options (“2022 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 $ 2.89 . The weighted average contractual period remaining is 8.3 years. Th e 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 68.48 % Expected dividend yield — Cost of equity (for derived service period) 14.64 % Weighted-average grant date fair value of options $ 2.89 In connection with the “2022 LTIP Options”, the Company recognized $ 0.3 million of stock-based compensation expense for both the three months ended March 31, 2024 and 2023, respectively. The unrecognized compensation expense related to the LTIP Options is $ 1.5 million as of March 31, 2024, and compensation expense will be recognized over 1.7 years. On a quarterly basis, after evaluating the 2022 LTIP Options based on the probability of achieving certain market and performance conditions, the Company may true up the 2022 LTIP Options expense as needed. 14 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Restricted Stock Units The Company regularly grants RSUs to employees as a component of their compensation. A summary of RSUs outstanding as of March 31, 2024 , and activity during the three months then ended, is presented below: Restricted Stock Unit Awards Shares (In thousands) Weighted-Average Grant Date Fair Value Per Share Outstanding at December 31, 2023 12,872 $ 6.70 Granted 4,346 5.66 Vested ( 2,985 ) 6.43 Forfeited ( 27 ) 6.04 Outstanding at March 31, 2024 14,206 $ 6.43 During the three months ended March 31, 2024 and 2023, the Company recognized $ 8.2 million and $ 7.1 million of stock-based compensation expense for the vesting of RSUs, respectively. As of March 31, 2024, unrecognized compensation cost related to unvested RSU awards totaled $ 79.2 million. The weighted-average period over which this remaining compensation cost is expected be recognized is 2.5 years. The Company’s annual bonus plan of $ 2.5 million related to fiscal year 2024 (included in accrued compensation expense liability on the condensed consolidated balance sheets), will be issued with a variable number of fully-vested restricted stock units to its employees and is expected to be settled in the first quarter of 2025. Based on the closing share price of the Company’s Class A Common Stock of $ 4.77 on March 28, 2024, approximately 518,942 shares would be issued, however the actual number of shares will be based on the share price at the date of settlement. 2022 Employee Stock Purchase Plan In August 2022, the Company’s board of directors adopted the Company’s 2022 Employee Stock Purchase Plan (the “2022 ESPP”), subject to stockholder approval. The 2022 ESPP was approved by stockholders at the Company’s annual stockholders’ meeting held November 10, 2022. The Company authorized the issuance of 3,000,000 shares of common stock under the 2022 ESPP. Under the 2022 ESPP, eligible employees are granted the right to purchase shares of common stock at the lower of 85 % of the fair value at the time of offering or 85 % of the fair value at the time of purchase, generally over a six-month period. The first offering period under the 2022 ESPP commenced in February 2023 and the second offering in September 2023. For the three months ended March 31, 2024, employees who elected to participate in the ESPP purchased 393,139 shares of common stock under the 2022 ESPP, resulting in cash proceeds to the Company of $ 1.8 million. The purchase price was $ 4.55 , which was 15 % of the fair market value in March 2024. As of March 31, 2024, the Company had 2,348,898 remaining authorized shares available for purchase. As the plan was newly adopted in 2023, there were no shares issued or stock-based compensation expense for the 2022 ESPP as of March 31, 2023. During the three months ended March 31, 2024, the Company recognized $ 0.8 million of stock-based compensation expense for the 2022 ESPP. Other Share Awards In connection with the acquisition of the remaining minority interest of a silicon control IC joint venture, as described in Note 15, the Company issued 841,729 fully vested shares to certain former employees of the joint venture with a grant date fair value totaling $ 4.5 million. Such amount has been recognized as stock-based compensation expense during the three months ended March 31, 2023. 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 four and three years , respectively, following the date of issue. These restricted shares are subject to certain individuals maintaining employment with the Company and, therefore, are accounted for under ASC 718. The Company 15 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) recognized $ 0.1 million and $ 0.4 million of stock-based compensation expense related to the vesting of these shares during the three months ended March 31, 2024 and 2023, respectively. Unvested Earnout Shares A portion of the earnout shares (discussed in Note 9 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. As of the beginning of the second quarter of fiscal year 2023, these earnout shares had fully vested. At March 31, 2024, there was no remaining compensation cost related to unvested earnout shares. During the three months ended March 31, 2023, the Company recognized $ 0.3 million of stock-based compensation expense for the vesting of earnout shares. Refer to Note 9, Earnout Liability. 9. EARNOUT LIABILITY Certain of the Company’s stockholders are entitled to receive up to an aggregate of 10,000,000 “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. 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: March 31, 2024 December 31, 2023 Risk-free interest rate 4.48 % 4.05 % Equity volatility rate 80.00 % 70.00 % As of March 31, 2024 and December 31, 2023, the earnout liability had a fair value of $ 20.7 million and $ 46.9 million, respectively, which resulted in a gain in the fair value of the earnout liability of $ 26.2 million. The loss in the earnout liability was $ 27.8 million for the three month period ended March 31, 2023. 10. 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 months ended March 31, 2024 and 2023: 16 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Three Months Ended March 31, Customer 2024 2023 Distributor A 68 % * Distributor B * 35 % Distributor C * 19 % Distributor D * 17 % *Total customer net revenues were less than 10% of total net revenues. Revenues by Geographic Area The Company considers the domicile of its end customers, rather than the distributors it sells to directly, to be the basis for attributing revenues from external customers to individual countries. Revenues for the three months ended March 31, 2024 and 2023 were attributable to end customers in the following countries or regions: Three Months Ended March 31, Country 2024 2023 China 74 % 57 % Europe* 10 28 United States 9 11 Asia excluding China 7 4 Total 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. The following customers represented 10% or more of the Company’s accounts receivable. Customer March 31, 2024 December 31, 2023 Distributor A 78 % 77 % *Total customer accounts receivable was less than 10% of total net accounts receivable. The Company has a customer deposit from a primary customer of $ 8.1 million and the Company intends to apply a portion of the customer deposit to outstanding accounts receivable from time-to-time. 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 17 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. The Company entered into an agreement to purchase raw materials from a supplier from September 29, 2022 through December 31, 2025, and accordingly made a $ 2.0 million refundable deposit. The Company is not obligated to purchase from this supplier, however, if the Company does not meet minimum purchase requirements during the term, the Company may forfeit all or a portion of its $ 2.0 million deposit. 18 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 11. NET LOSS PER SHARE: Basic loss per share is calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted loss per share is calculated by dividing net 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 March 31, 2024 2023 Weighted-average common shares - basic common stock 179,779 156,792 Stock options and other dilutive awards — — Weighted-average common shares - diluted common stock 179,779 156,792 Shares excluded from diluted weighted-average shares: ¹ Dilutive shares excluded ² 5,317 9,083 Earnout shares (potentially issuable common shares) 10,000 10,000 Unvested restricted stock units and restricted stock awards 100 376 Stock options potentially exercisable for common shares 9,750 9,750 Shares excluded from diluted weighted average shares 25,167 29,209 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 both the three months ended March 31, 2024 and 2023. ² We exclude the impact of restricted stock from the calculation of diluted net loss per common share in periods where we have a net loss or when their inclusion would be antidilutive. 12. 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 months ended March 31, 2024 and 2023 was ( 1.93 )% and ( 0.03 )%, respectively. The effective tax rate for 2024 differs from the prior year primarily due to tax expense in foreign as a result of tax expense in foreign jurisdictions not impacted by valuation allowance. In each quarter, the Company updates its estimated annual effective tax rate, and if the estimated annual effective tax rate changes, a cumulative adjustment is recorded in that quarter. The Company's quarterly income tax provision and quarterly estimate of the annual effective tax rate are subject to volatility due to several factors, including our ability to accurately predict the proportion of our loss before provision for income taxes in multiple jurisdictions, the tax effects of our stock-based compensation, and the effects of its foreign entities. 19 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The Company had no unrecognized tax benefits for the three months ended March 31, 2024 and 2023. The Company recognizes interest and penalties related to unrecognized tax benefits in operating expenses. No such interest and penalties were recognized during the three months ended March 31, 2024 and 2023. 13. COMMITMENTS and CONTINGENCIES Purchase Obligations At March 31, 2024, the Com pany had no non-cancelable contractual arrangements that were due beyond one year besides lease obligations. 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 March 31, 2024. 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. Release and license agreement In March 2023, the Company entered into a Release and License Agreement (the “Agreement”) with a university. The Agreement stipulates the Company pay the university a total of $ 1.0 million over a period of three years , with the final payment by March 1, 2026. The agreement licenses the Company to sell certain products covered by a patent owned by the university, subject to the Company paying a royalty fee on revenues for covered products sold during the term. Based on an indemnity agreement entered into in connection with the Company’s acquisition of GeneSiC Semiconductor Inc. in August 2022, the Company expects to be indemnified by the sellers in that transaction for the royalty amounts up to approximately $ 1.0 million. 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. 14. RELATED PARTY TRANSACTIONS 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 20 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) contribution to the joint venture was the commitment to sell its GaN integrated circuit die at prices representing cost plus insignificant handling fees, in exchange for a minority interest, with the right to acquire the balance of the joint venture based on the future results of the venture (among other rights and obli 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. See Note 15, Noncontrolling Interest, for more information. Related Party Leases The Company leases certain property from an entity that it is owned by an executive of the Company, which expired in September 2023 and is now a month-to-month lease. During the three months ended March 31, 2024 , 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 expired in March 2024, and is now a month-to-month lease. During the three months ended March 31, 2024 , 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. There was no rent obligation as of March 31, 2024 . 21 Table of Contents NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 15. 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 14. 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 noncontrolling 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. 16. SUBSEQUENT EVENTS The Company evaluated material subsequent events from the consolidated balance sheet date of March 31, 2024, through May 15, 2024, the date the condensed consolidated financial statements were issued. There were no material subsequent events as of May 15, 2024. 22 Table of Contents