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, 2024 December 31, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 98,614 $ 152,839 Accounts receivable, net of allowance of $ 211 and $ 0 , respectively 21,091 25,858 Inventories 21,284 22,234 Prepaid expenses and other current assets 4,161 6,178 Total current assets 145,150 207,109 ACCOUNTS RECEIVABLE NONCURRENT, net of allowance of $ 773 and $ 0 , respectively 5,211 — PROPERTY AND EQUIPMENT, net 13,057 9,154 OPERATING LEASE RIGHT OF USE ASSETS 7,266 8,268 INTANGIBLE ASSETS, net 76,856 91,099 GOODWILL 163,215 163,215 OTHER ASSETS 8,654 6,701 Total assets $ 419,409 $ 485,546 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and other accrued expenses $ 13,593 $ 24,740 Accrued compensation expenses 8,497 10,902 Operating lease liabilities, current 1,868 1,892 Customer deposit and deferred revenue 2,006 10,953 Total current liabilities 25,964 48,487 OPERATING LEASE LIABILITIES NONCURRENT 5,993 6,653 EARNOUT LIABILITY 3,932 46,852 DEFERRED TAX LIABILITIES 1,040 1,040 ACCRUED ROYALTIES NONCURRENT 1,652 1,897 Total liabilities 38,581 104,929 COMMITMENTS AND CONTINGENCIES (Note 14) STOCKHOLDERS’ EQUITY: Class A common stock, $ 0.0001 par value, 750,000,000 shares authorized as of September 30, 2024 and December 31, 2023, and 186,788,292 and 179,196,418 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 22 21 Class B common stock, $ 0.0001 par value, 10,000,000 shares authorized as of September 30, 2024 and December 31, 2023, and 0 shares issued and outstanding at both September 30, 2024 and December 31, 2023 — — Additional paid-in capital 725,739 680,790 Accumulated other comprehensive loss ( 7 ) ( 7 ) Accumulated deficit ( 344,926 ) ( 300,187 ) Total stockholders’ equity 380,828 380,617 Total liabilities and stockholders’ equity $ 419,409 $ 485,546 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 OPERATIONS (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share amounts) 2024 2023 2024 2023 NET REVENUES $ 21,681 $ 21,978 $ 65,324 $ 53,399 COST OF REVENUES (exclusive of amortization of intangible assets included below) 13,069 14,878 39,207 33,322 OPERATING EXPENSES: Research and development 17,828 16,553 57,028 50,740 Selling, general and administrative 15,040 14,419 46,509 46,629 Amortization of intangible assets 4,717 4,774 14,265 14,046 Total operating expenses 37,585 35,746 117,802 111,415 LOSS FROM OPERATIONS ( 28,973 ) ( 28,646 ) ( 91,685 ) ( 91,338 ) OTHER INCOME (EXPENSE), net: Interest income (expense), net ( 39 ) 47 ( 109 ) 1,298 Dividend income 1,210 1,648 4,251 2,107 Gain (loss) from change in fair value of earnout liabilities 9,171 34,473 42,920 ( 25,503 ) Other income 26 20 140 50 Total other income (expense), net 10,368 36,188 47,202 ( 22,048 ) INCOME (LOSS) BEFORE INCOME TAXES ( 18,605 ) 7,542 ( 44,483 ) ( 113,386 ) INCOME TAX PROVISION (BENEFIT) 125 23 256 ( 13 ) NET INCOME (LOSS) ( 18,730 ) 7,519 ( 44,739 ) ( 113,373 ) LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS — — — ( 518 ) NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTERESTS $ ( 18,730 ) $ 7,519 $ ( 44,739 ) $ ( 112,855 ) NET INCOME (LOSS) PER COMMON SHARE: Basic net income (loss) per share attributable to common stockholders $ ( 0.10 ) $ 0.04 $ ( 0.25 ) $ ( 0.68 ) Diluted net income (loss) per share attributable to common stockholders $ ( 0.10 ) $ 0.04 $ ( 0.25 ) $ ( 0.68 ) WEIGHTED AVERAGE COMMON SHARES USED IN NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS: Basic common shares 184,672 175,103 182,551 165,719 Diluted common shares 184,672 185,626 182,551 165,719 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 COMPREHENSIVE INCOME (LOSS) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 2024 2023 NET INCOME (LOSS) $ ( 18,730 ) $ 7,519 $ ( 44,739 ) $ ( 113,373 ) Other comprehensive income — — — — COMPREHENSIVE INCOME (LOSS) ( 18,730 ) 7,519 ( 44,739 ) ( 113,373 ) COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST — — — ( 518 ) TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ ( 18,730 ) $ 7,519 $ ( 44,739 ) $ ( 112,855 ) 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 STOCKHOLDERS’ EQUITY (unaudited) Stockholders' Equity NINE MONTHS ENDED SEPTEMBER 30, 2024 Class A 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 Issuance of common stock under employee stock option and stock award plans 505 — 1,123 — — — 1,123 Stock-based compensation expense related to employee and non-employee stock awards — — 11,388 — — — 11,388 Net loss — — — ( 22,328 ) — — ( 22,328 ) BALANCE AT JUNE 30, 2024 183,502 $ 21 $ 714,282 $ ( 326,196 ) $ ( 7 ) $ — $ 388,100 Issuance of common stock under employee stock option and stock award plans 3,337 1 789 — — — 790 Stock-based compensation expense related to employee and non-employee stock awards — — 10,668 — — — 10,668 Net loss — — — ( 18,730 ) — — ( 18,730 ) BALANCE AT SEPTEMBER 30, 2024 186,839 $ 22 $ 725,739 $ ( 344,926 ) $ ( 7 ) $ — $ 380,828 7 TABLE OF CONTENTS Stockholders' Equity NINE MONTHS ENDED SEPTEMBER 30, 2023 Class A 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 3,082 — 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 160,943 $ 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 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 8 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited) Nine Months Ended September 30, (In thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 44,739 ) $ ( 113,373 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,197 1,550 Amortization of intangible assets 14,265 14,046 Non-cash lease expense 1,716 1,449 Other — 85 Stock-based compensation expense 38,011 41,810 Allowance for expected credit losses 1,053 — (Gain) loss from change in fair value of earnout liability ( 42,920 ) 25,503 Deferred income taxes — 5 Change in operating assets and liabilities: Accounts receivable ( 1,496 ) ( 8,446 ) Inventories 950 3,157 Prepaid expenses and other current assets 2,017 ( 888 ) Other assets 525 ( 1,649 ) Accounts payable, accrued compensation and other accrued expenses ( 9,867 ) 20,761 Operating lease liability ( 1,398 ) ( 1,452 ) Customer deposit and deferred revenue ( 8,947 ) — Net cash used in operating activities ( 48,633 ) ( 17,442 ) CASH FLOWS FROM INVESTING ACTIVITIES: Investment purchases ( 2,500 ) ( 1,000 ) Purchases of property and equipment ( 6,209 ) ( 3,410 ) Net cash used in investing activities ( 8,709 ) ( 4,410 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock in connection stock option exercises 434 1,754 Proceeds from issuance of common stock in May 2023 public offering — 86,941 Payment of May 2023 public offering costs — ( 482 ) Proceeds from employee stock purchase plan 2,683 — Net cash provided by financing activities 3,117 88,213 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 54,225 ) 66,361 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 152,839 110,337 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 98,614 $ 176,698 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $ 198 $ 64 Shares issued in connection with buyout agreement $ — $ 22,400 Capital expenditures in accounts payable $ 391 $ 764 The accompanying condensed notes are an integral part of these condensed consolidated financial statements. 9 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 September 30, 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 16, Noncontrolling Interest, for more information. 10 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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, 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/A filed for the fiscal year ended December 31, 2023, filed with the SEC on July 23, 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, the Company may be required to pay future consideration that is contingent upon the achievement of specified milestone events. The Company records contingent consideration resulting from a business combination at its fair value on the acquisition date. Each quarter thereafter, the Company revalues these obligations and record increases or decreases in their fair value within the Company’s 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 the Company’s results of operations in any given period. Actual results may differ from estimates. Reclassifications Certain items in the prior period’s condensed consolidated balance sheets and condensed consolidated statements of operations have been reclassified to conform to the presentation for the three and nine months ended September 30, 2024. Dividend income was previously included within interest income (expense), net. Additionally, for the prior period, the Company reclassed $ 0.9 million from inventories to prepaids and other current assets related to the sales returns inventory. Lastly, the Company reclassed $ 1.4 million from prepaids and other current assets to other assets and $ 1.9 million from accounts payable and other accrued expenses to its own line for accrued royalties related to an indemnity asset and royalty liability, respectively. There was no impact to net loss and retained earnings as a result of the reclassifications. 11 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Recently Issued Accounting Standards In November 2023, the Financial Accounting Standards Board (FASB) introduced Accounting Standard Update (ASU) 2023-07, titled Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update mandates that all public entities, including those with a single reportable segment, disclose one or more measures of segment profit or loss that the chief operating decision maker (CODM) uses to allocate resources and assess performance during interim and annual reporting periods. Furthermore, the standard requires the disclosure of significant segment expenses, other relevant segment items, and additional qualitative information. The new guidance will be effective for fiscal years starting after December 15, 2023, and for interim periods following December 15, 2024. The Company is currently assessing how this update will impact its disclosures. In December 2023, 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 the Company is currently assessing the impact of this standard, 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 the Company or are not anticipated to materially impact the condensed consolidated financial statements. 3. ACCOUNTS RECEIVABLE Accounts receivable trade, net consist of the following (in thousands): September 30, 2024 December 31, 2023 Accounts receivable, gross $ 26,206 $ 25,411 Unbilled receivables 1,080 447 Allowance for credit losses ( 984 ) — Accounts receivable (current and noncurrent), net $ 26,302 $ 25,858 Allowance for credit losses activity (in thousands): Allowance for Credit Losses Balance at December 31, 2022 $ — Provision for credit losses ( 314 ) Accounts written-off 314 Balance at December 31, 2023 $ — Provision for credit losses ( 1,053 ) Accounts written-off 69 Balance at September 31, 2024 $ ( 984 ) 4. INVENTORIES Inventories consist of the following (in thousands): September 30, 2024 December 31, 2023 Raw materials $ 4,712 $ 7,743 Work-in-process 13,446 10,863 Finished goods 3,126 3,628 Total $ 21,284 $ 22,234 12 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 5. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following (in thousands): September 30, 2024 December 31, 2023 Furniture and fixtures $ 450 $ 244 Computers and other equipment 13,562 10,339 Leasehold improvements 4,240 2,360 Construction in Progress 1,941 1,114 20,193 14,057 Accumulated depreciation ( 7,136 ) ( 4,903 ) Total $ 13,057 $ 9,154 The depreciation expense was $ 0.8 million and $ 2.2 million f or the three and nine months ended September 30, 2024 and $ 0.6 million and $ 1.6 million for three and nine months ended September 30, 2023, r espectively, 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 6. 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 $ 85.5 million as of September 30, 2024 and $ 139.0 million for December 31, 2023. The following table presents the Company’s fair value hierarchy for financial liabilities as of September 30, 2024 (in thousands) : Level 1 Level 2 Level 3 Total Liabilities: Earnout liability $ — $ — $ 3,932 $ 3,932 Total $ — $ — $ 3,932 $ 3,932 The following table presents the Company’s fair value hierarchy for financial liabilities as of December 31, 2023 (in thousands): 13 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 ( 42,920 ) Balance at September 30, 2024 $ 3,932 The Company did not transfer any investments between Level 1 and Level 2 of the fair value hierarchy during the three months ended September 30, 2024. 7. 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. As of the annual measurement date of September 30, 2024, the fair market value of the Company’s stock price remains above carrying value, and no indicators of impairment are present. The following table presents the Company’s intangible asset balance by asset class as of September 30, 2024 (in thousands): Intangible Asset Cost Accumulated Amortization Net Book Value Amortization Method Useful Life Trade Names $ 900 $ ( 900 ) $ — Straight line 2 years Developed Technology 53,500 ( 27,730 ) 25,770 Straight line 4 - 10 years In-process R&D 1,177 — 1,177 Indefinite N/A Patents 34,900 ( 5,219 ) 29,681 Straight line 5 - 15 years Customer Relationships 24,300 ( 5,164 ) 19,136 Straight line 10 years Non-Competition Agreements 1,900 ( 808 ) 1,092 Straight line 5 years Other 658 ( 658 ) — Straight line 5 years Total $ 117,335 $ ( 40,479 ) $ 76,856 14 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 Other adjustments 22 Amortization expense ( 14,265 ) Balance at September 30, 2024 $ 76,856 The amortization expense was $ 4.7 million and $ 14.3 million for the three and nine months ended September 30, 2024, an d $ 4.8 million and $ 14.0 million for the three and nine months ended September 30, 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) $ 4,665 2025 18,645 2026 14,042 2027 5,336 2028 4,690 Thereafter 28,301 Total $ 75,679 There were no impairment charges during the three and nine months ended September 30, 2024 and 2023. 8. LEASES: The Compa ny has entered into operating leases primarily for commercial buildings. As of September 30, 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 September 30, 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 $ 0.6 million and $ 2.0 million for the three and nine months ended September 30, 2024, respectively. 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. 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 expenses were 15 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2024 and they were not material for the three and nine months ended September 30, 2023. Information related to the Company right-of-use assets and related operating lease liabilities were as follows (in thousands): Nine Months Ended September 30, 2024 2023 Cash paid for operating lease liabilities $ 1,716 $ 1,426 Operating lease cost $ 1,773 $ 1,449 Non-cash right-of-use assets obtained in exchange for new operating lease obligations $ 535 $ 776 Weighted-average remaining lease term in years 4.24 4.64 Weight-average discount rate 4.97 % 5.53 % Maturities of lease liabilities were as follows (in thousands): Fiscal Year Ending December 31, 2024 (remainder of fiscal 2024) $ 594 2025 2,083 2026 1,985 2027 1,869 2028 1,711 Thereafter 458 8,700 Less imputed interest ( 839 ) Total lease liabilities $ 7,861 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 Class A 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). 16 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 September 30, 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 and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Cost of goods sold $ 76 $ — $ 325 $ — Research and development 6,267 6,013 20,075 20,137 Selling, general and administrative 5,029 6,066 17,611 21,673 Total stock-based compensation expense $ 11,372 $ 12,079 $ 38,011 $ 41,810 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 and nine months ended September 30, 2024 or 2023. 17 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) A summary of stock options outstanding, excluding LTIP Options as of September 30, 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 5.72 Exercised ( 423 ) 0.55 — Forfeited or expired ( 14 ) 1.06 — Outstanding at March 31, 2024 2,220 $ 0.76 5.55 Exercised ( 192 ) 0.93 — Outstanding at June 30, 2024 2,028 $ 0.74 5.33 Exercised ( 27 ) 0.67 — Forfeited or expired ( 1 ) 1.06 — Outstanding at September 30, 2024 2,000 $ 0.74 5.03 Vested and Exercisable at September 30, 2024 1,979 $ 0.74 5.02 During the three and nine months ended September 30, 2024, the Company recogni ze d $ 0.0 million and $ 0.1 million o f stock-based compensation expense for the vesting of outstanding stock optio ns, excluding $ 1.0 million and $ 3.8 million, respectively, related to the LTIP Options described below. During the three and nine months ended September 30, 2023, the Company recognized $ 0.1 million and $ 0.4 million of stock-based compensation expense for the vesting of outstanding stock options, excluding $ 1.8 million and $ 6.1 million related to the LTIP Options. At September 30, 2024, unrecognized compensation cost related to unvested options was immaterial. The weighted-average period over which this remaining compensation cost will be recognized is 0.2 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 7.4 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 $ 0.8 million and $ 3.2 million of stock-based compensation expense for the three and nine months ended September 30, 2024, respectively. The Company recognized $ 1.6 million and $ 5.3 million of stock-based compensation expense for three and nine months ended September 30, 2023, respectively. The unrecognized compensation expense related to these LTIP Options is $ 3.0 million as of September 30, 2024, and compensation expense will be recognized over 2.7 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. 18 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 7.9 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 $ 0.2 million and $ 0.6 million of stock-based compensation expense for the three and nine months ended September 30, 2024, respectively. The Company recognized $ 0.3 million and $ 0.8 million of stock-based compensation expense for three and nine months ended September 30, 2023, respectively. The unrecognized compensation expense related to the LTIP Options is $ 1.1 million as of September 30, 2024, and compensation expense will be recognized over 2.7 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. 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, 2024 , and activity during the nine 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 Granted 557 4.27 Vested ( 314 ) 7.80 Forfeited ( 179 ) 4.45 Outstanding at June 30, 2024 14,270 $ 6.37 Granted 114 3.68 Vested ( 2,876 ) 4.64 Forfeited ( 115 ) 6.49 Outstanding at September 30, 2024 11,393 $ 6.77 During the three and nine months ended September 30, 2024, the Company recognized $ 9.1 million and $ 27.0 million of stock-based compensation expense for the vesting of RSUs, respectively. During 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. As of September 30, 2024, unrecognized compensation cost related to unvested RSU awards totaled $ 62.4 million. The weighted-average period over which this remaining compensation cost is expected be recognized is 2.4 years. 19 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Of the Company’s $ 5.2 million bonus plan for the fiscal year 2024 (included in accrued compensation expense liability on the condensed consolidated balance sheets), $ 4.9 million will be distributed as fully vested restricted stock units with a variable share count and is expected to settle in the first quarter of 2025. Additionally, the Company accrued a $ 0.3 million cash bonus for the President and CEO. Based on the closing share price of the Company’s Class A common stock of $ 2.45 on September 30, 2024, approximately 1,993,244 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 and nine months ended September 30, 2024, employees who elected to participate in the ESPP purchased 408,326 and 801,465 shares of common stock under the 2022 ESPP, resulting in cash proceeds to the Company of $ 0.9 million and $ 2.7 million for the three and nine months ended September 30, 2024. The purchase price was $ 4.55 and $ 2.19 , which was 15 % of the fair market value in March and September 2024, respectively. As of September 30, 2024, the Company had 1,940,572 remaining authorized shares available for purchase. During the three and nine months ended September 30, 2024, the Company recognized $ 0.4 million and $ 1.5 million of stock-based compensation expense for the 2022 ESPP, respectively. During the three and nine months ended September 30, 2023, the Company recognized $ 0.3 million and $ 0.8 million of stock-based compensation expense for the 2022 ESPP, respectively. Other Share Awards In connection with the acquisition of the remaining minority interest of a silicon control IC joint venture, as described in Note 16, 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 recognized $ 0.1 million and $ 0.4 million of stock-based compensation expense related to the vesting of these shares during three and nine months ended September 30, 2024, respectively. 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 (discussed in Note 10 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. The Company recognized $ 0.0 million and $ 0.2 million of stock-based compensation expense related to the vesting of these shares during three and nine months ended September 30, 2024, respectively. The Company recognized $ 0.0 million and $ 0.3 million of stock-based compensation expense related to the vesting of these shares during the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, there was no remaining compensation cost related to unvested earnout shares, except for forfeitures. Refer to Note 10, Earnout Liability. 10. EARNOUT LIABILITY 20 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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: September 30, 2024 December 31, 2023 Risk-free interest rate 3.66 % 4.05 % Equity volatility rate 80.00 % 70.00 % As of September 30, 2024 and December 31, 2023, the earnout liability had a fair value of $ 3.9 million and $ 46.9 million, respectively, which resulted in a gain in the fair value of the earnout liability of $ 9.2 million and $ 42.9 million for the three and nine months ended September 30, 2024, respectively. As of September 30, 2023, the earnout liability had a fair value of $ 38.6 million, 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. 11. 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, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, Customer 2024 2023 2024 2023 Distributor A 54 % 53 % 60 % 29 % Distributor B * * * 14 % *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, 2024 and 2023 were attributable to end customers in the following countries or regions: 21 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Three Months Ended September 30, Nine Months Ended September 30, Country 2024 2023 2024 2023 China 54 % 61 % 65 % 55 % United States 24 13 15 15 Asia excluding China 14 12 11 8 Europe* 8 14 9 22 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. The following customers represented 10% or more of the Company’s accounts receivable. Customer September 30, 2024 December 31, 2023 Distributor A 77 % 77 % The Company has a customer deposit from a primary customer of $ 2.0 million and $ 11.0 million, as of September 30, 2024 and December 31, 2023, respectively, and the Company intends to apply a portion of the customer deposit to outstanding accounts receivable. As of September 30, 2024, the Company reassessed the risk pooling of its accounts receivable and determined that certain customer trade receivables associated with a customer have an expected term greater than one year. These receivables were discounted to present value using a discounted cash flow model based on the Company’s expectation of the timing of future payments over the next two years and are presented as accounts receivable noncurrent within the condensed consolidated balance sheets. A $ 0.8 million allowance for credit losses was recorded associated with this reassessment. 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. 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 deposit to be received as invoice credits toward future purchases. 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. Currently the Company is not projecting to meet the minimum purchase requirements, therefore, the Company does not expect to receive any credits within the next 12 months beginning in the fourth quarter of 2024. 22 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 12. 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Weighted-average common shares - basic common stock 184,672 175,103 182,551 165,719 Stock options and other dilutive awards — 10,523 — — Weighted-average common shares - diluted common stock 184,672 185,626 182,551 165,719 Shares excluded from diluted weighted-average shares: ¹ Dilutive shares excluded ² 3,584 — 4,658 10,731 Earnout shares (potentially issuable common shares) 10,000 10,000 10,000 10,000 Unvested restricted stock units and restricted stock awards 50 263 50 263 Stock options potentially exercisable for common shares 8,775 9,750 8,775 9,750 Shares excluded from diluted weighted average shares 22,409 20,013 23,483 30,744 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 and nine months ended September 30, 2024 and the nine months ended September 30, 2023. ² The Company 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. 13. 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, 2024 was ( 0.7 )% and ( 0.6 )%, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2023 was 0.3 % and 0.0 %, 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 the Company’s ability to accurately predict the proportion of the Company’s income (loss) before provision for income taxes in multiple jurisdictions, the tax effects of the Company’s stock-based compensation, and the effects of its foreign entities. The Company had no unrecognized tax benefits for the three and nine months ended September 30, 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 and nine months ended September 30, 2024 and 2023. 23 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 14. COMMITMENTS and CONTINGENCIES Purchase Obligations At September 30, 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 September 30, 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. 15. 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 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 16, Noncontrolling Interest, for more information. 24 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Related Party Leases 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 and nine months ended September 30, 2024, the Co mpany paid an immaterial amount in rental payments. These payments were made at standard market rates in the ordinary course of business. There was no rent obligation as of September 30, 2024 . The Company leases certain property from an entity that it is owned by an executive of the Company, which expired in September 2023, and was on a month-to-month lease through May 2024, and then was terminated. 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. 16. 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 15. 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. 25 TABLE OF CONTENTS NAVITAS SEMICONDUCTOR CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 17. SUBSEQUENT EVENTS The Company evaluated material subsequent events from the consolidated balance sheet date of September 30, 2024, through November 5, 2024, the date the condensed consolidated financial statements were issued. There were no material subsequent events as of November 5, 2024, except as discussed below. On October 25, 2024, the Company entered into a second amended and restated voting agreement (the “Voting Agreement”) with a third party (see Note 1 Investment in Third Party ) that grants the Company the right to appoint a member to the third party’s Board of Directors. The Company has assessed the impact of the Voting Agreement under ASC 323 Investments - Equity Method and Joint Ventures , and determined that the Company has significant influence and therefore will account for the investment in the third party as an equity method investment during the fourth quarter of 2024. The Company expects to fair value its investment in the third party on the Company’s balance sheet and then record the Company’s proportionate share of gains/losses in other income (expense) in the Company’s statements of operations. The Company expects the change in accounting to not have a material impact on its financial statements. On October 15, 2024, the Company announced a cost-reduction plan to streamline the organization with increased focus on artificial intelligence data center, EV and mobile applications, accelerating the Company’s path to profitability. The cost-reduction plan includes a 14 % reduction in headcount with a majority of the costs consisting of severances and stock-based compensation, the expense of which the Company is still determining, but amounts are not expected to be significant. The Company expects to incur the majority of these expenses associated with this cost-reduction plan during the fourth quarter of 2024. 26 TABLE OF CONTENTS