What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-19 compared with 2024-03-06 · 135 added, 103 removed, 163 unchanged (59% of the section changed)

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II (“Live Oak”).

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

We acquired GeneSiC Semiconductor in August 2022.

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

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

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

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

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

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

We maintain operations around the world,

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

We design, develop and market next-generation power semiconductors including gallium nitride (“GaN”) power integrated circuits (“ICs”), silicon carbide (“SiC”) and associated high-speed silicon system controllers, and digital isolators used in power conversion and charging.

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

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

In the years ended December 31, 2024 and 2023, research and development expenses represented approximately 91% and 87%, respectively, of our revenue.

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

Equity Method Investment

In October 2024, the Company began applying the equity method of accounting for its related party investment, in accordance with Accounting Standards Codification (“ASC”) 323, Investments—Equity Method and Joint Ventures.

Under ASC 323, an investor must use the equity method when it has significant influence over the investee, typically indicated by ownership of 20% to 50 % of the voting stock or other qualitative factors (e.g.

board representation).

The Company holds a 13.5% ownership stake in the investment and as part of the October 2024 transaction, received the option to appoint a representative to the investee’s board of directors.

As a result, the Company remeasured its investment to its fair value of $5.55 per share as of the change in accounting and recognized its proportionate share of the investee’s earnings and losses for the period from November through December 2024, resulting in a net gain of $3.9 million for the year ended December 31, 2024.

This amount is included in “Equity method investment gain” on the Statements of Operations.

May 2023 Public Offering

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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.

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respectively.

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

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Based in Mont-Saint-Guibert, Belgium, VDDTech creates advanced digital-isolators for next-generation power conversion.

VDDTech’s net assets and operating results since the acquisition date are included in the Company’s Consolidated Balance Sheet and Consolidated Statement of Operations for the year ended December 31, 2023.

VDDTech’s net assets and operating results since the acquisition date are included in the Company’s Consolidated Balance Sheets and Consolidated Statement of Operations for the year ended December 31, 2024.

Results of Operations

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• the effects of competition and competitive pricing strategies;

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• availability of specialized field application engineering resources supporting demand creation and end customer adoption of new products;

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• the global and regional economic cycles;

• declines in average selling prices due product advances and market competition;

• changes in customer and distributor relationships including the impact of the Q4 2024 disengagement with a significant distributor and the ability to replace the associated volumes with a combination existing and new distributors;

• seasonal demand patterns particularly in mobile and consumer markets.

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

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

We consider the domicile of our end customers, rather than the distributors we sell to directly to be the basis of attributing revenues from external customers to individual countries.

Revenue for the twelve months ended December 31, 2024 and 2023, excluding channel inventories, were attributable to end customers in the following countries:

Year Ended December 31,

Country 2024 2023

China 60 % 62 %

United States 16 % 13 %

Asia excluding China 15 % 8 %

Europe* 8 % 17 %

All others 1 % — %

Total 100 % 100 %

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

Cost of Revenues

Cost of revenues consists primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead (which includes depreciation and amortization) associated with such purchases, final test and wafer level yield fallout, inventory impairments, consumables, system and shipping costs.

Cost of goods sold also includes compensation related to personnel associated with manufacturing.

Cost of revenues also includes compensation related to personnel associated with manufacturing, including costs related to cash and stock-based employee compensation.

Research and Development Expense

Costs related to research, design and development of our products are expensed as incurred.

Research and development expense consists primarily of pre-production costs related to the design and development of our products and technologies, including costs related to cash and share-based employee compensation, benefits and related costs of sustaining our engineering teams, project material costs, third-party fees paid to consultants, prototype development expenses, and other costs incurred in the product design and development process.

Research and development expense consists primarily of pre-production costs related to the design and development of our products and technologies, including costs related to cash and stock-based employee compensation, benefits and related costs of sustaining our engineering teams, project material costs, third-party fees paid to consultants, prototype development expenses, write-offs of material to be utilized in research and development, and other costs incurred in the product design and development process.

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Selling, General and Administrative Expense

Selling, general and administrative costs include employee compensation, including cash and share-based compensation and benefits for executive, finance, business operations, sales, field application engineers and other administrative personnel.

Selling, general and administrative costs include employee compensation, including cash and stock-based compensation and benefits for executive, finance, business operations, sales, field application engineers and other administrative personnel.

In addition, it includes marketing and advertising, IT, outside legal, tax and accounting services, insurance, and occupancy costs and related overhead based on headcount.

Selling, general and administrative costs are expensed as incurred.

Interest Income

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

Interest Expense

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

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

Interest Income (Expense), net

Interest income (expense), net primarily consists of interest associated with our royalty agreement .

Dividend Income

Dividend income consist of income earned on money market treasury funds that are recorded as cash equivalents.

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

federal income tax purposes.

Refer to Note 13, Provision for I ncome Taxes, in our accompanying consolidated financial statements elsewhere in this annual report.

Refer to Note 14 - “Provision for Income Taxes”, in our accompanying consolidated fina ncial statements elsewhere in this annual report.

Results of Operations

The tables and discussion below present our results for the years ended December 31, 2024 and 2023 (in thousands):

December 31, Change

Year Ended December 31, Change

(dollars in thousands) 2024 2023

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

$ 83,302 $ 79,456 $ 3,846 5 %

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Amortization of intangible assets 18,926 18,820 106 1 %

Restructuring expense 1,223 — 1,223 — %

Total operating expenses 159,014 149,196 9,818 7 %

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Other income (expense), net:

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

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

Interest (expense) income, net (150) 1,314 (1,464) (111) %

Dividend income 5,233 4,054 1,179 29 %

Gain (loss) from change in fair value of earnout liabilities 36,644 (33,788) 70,432 (208) %

Other income (expense) 84 (1,147) 1,231 (107) %

Other income 102 84 18 21 %

Total other income (expense), net 41,829 (28,336) 70,165 (248) %

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

Loss before income taxes (88,846) (146,468) 57,622 (39) %

Income tax benefit (342) (517) 175 (34) %

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

Equity method investment gain 3,905 — 3,905 — %

Net loss $ (84,599) $ (145,951) $ 61,352 (42) %

net loss attributable to noncontrolling interest — (518) 518 (100) %

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

Net loss attributable to controlling interest $ (84,599) $ (145,433) $ 60,834 (42) %

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Comparison of the Years ended December 31, 2024 and 2023

Net revenues for the twelve months ended December 31, 2024 were $83.3 million compared to $79.5 million for the twelve months ended December 31, 2023, an increase of $3.8 million, or 5%.

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

The increase was driven primarily by the growth in mobile markets.

Cost of Revenues

Cost of revenues for the twelve months ended December 31, 2024 was $55.0 million, an increase of $6.6 million or 14% compared to the twelve months ended December 31, 2023.

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

The increase was primarily driven by a $5.0 million inventory reserve related to a distributor disengagement and an increase in revenue from the mobile market.

Research and Development Expense

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

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

Research and development expense for the twelve months ended December 31, 2024 of $76.0 million increased by $7.2 million, or 10%, when compared to the twelve months ended December 31, 2023, primarily driven by an increase in product and package development as it relates to EV, enterprise and solar, coupled with a one-time $1.7 million project expense, a $2.0 million other asset impairment, as well as other R&D material purchases.

Selling, General and Administrative Expense

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

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

Selling, general and administrative expense for the twelve months ended December 31, 2024 of $62.9 million increased by $1.3 million, or 2%, when compared to the twelve months ended December 31, 2023.

The increase is primarily driven by a $7.5 million bad debt expense due to a distributor disengagement.

These expenses were largely offset by a decrease in stock-based compensation of approximately $8.0 million.

Amortization of Definite-Lived Intangible Assets

Amortization of definite-lived intangible assets for the twelve months ended December 31, 2024 of $18.9 million increased by $0.1 million, or 1%, when compared to the twelve months ended December 31, 2023.

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

Amortization of intangible assets remained fairly consistent as we did not acquire new intangible assets.

Restructuring Expenses

We announced a cost-reduction plan (“2024 Restructuring Plan”).

The 2024 Restructuring Plan includes a reduction in headcount with the majority of the costs consisting of employee severance and benefits.

We incurred $1.2 million related to this plan for the twelve months ended December 31, 2024.

Other Income (Expense), net

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

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

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

Net interest income (expense), net for the twelve months ended December 31, 2024 o f $(0.2) million compared to income of $1.3 million for the twelve months ended December 31, 2023.

The $0.2 million expense as of December 31, 2024 is primarily due to interest associated with our royalty agreement.

The $1.3 million interest income in 2023 was due the interest rate received on money markets funds.

Dividend income consists of income earned on our money market treasury funds that are recorded as cash equivalents in our Consolidated Balance Sheets.

Increase of $1.2 million in dividend income from December 31, 2023 to December 31, 2024 is primarily due to the timing of when we transferred money into our money market treasury funds.

As a result, the prior-year figure reflects only nine months of activity compared to twelve months in the current year.

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During the twelve months ended December 31, 2024, we recognized a $36.6 million gain from a decrease in fair value of our earnout liabilities.

The gain of $36.6 million in our earn-out liability was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq, resulting in a decrease in the estimated fair value of the earnout shares from $5.50 as of December 31, 2023 to $1.18 as of December 31, 2024 .

Income Tax Benefit

Income tax benefit for the twelve months ended December 31, 2024 was $0.3 million while for the twelve months ended December 31, 2023, income tax benefit was $0.5 million.

As a result of the GeneSiC Semiconductor Inc.

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

federal valuation allowance .

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

federal deferred tax assets of Navitas.

As of December 31, 2023, the Company continues to maintain a valuation allowance on the remaining deferred tax assets as the Company believes that it is not more likely than not that the deferred tax assets will be fully realized.

We expect our tax rate to remain close to zero in the near term due to full valuation allowances against deferred tax assets.

Equity method investment gain

In October 2024, we began applying the equity method to account for our joint venture investment.

We adjusted the investment to its fair value of $5.55 per share as of the accounting change and recognized our proportionate share of the joint venture’s loss from the period November through December 2024, resulting in a net gain of $3.9 million for the year ended December 31, 2024.

Liquidity and Capital Resources

Our primary use of cash is to fund our operating expenses, working capital requirements, and outlays for strategic investments and acquisitions.

In addition, we use cash to conduct research and development, incur capital expenditures, and fund our debt service obligations.

We expect to continue to incur net operating losses and negative cash flows from operations and we expect our research and development expenses, general and administrative expenses and capital expenditures will continue to increase.

We expect our expenses and capital requirements to increase in connection with our ongoing initiatives to expand our operations, product offerings and end customer base.

In addition, we use cash to conduct research and development, incur capital expenditures.

As December 31, 2024 , we had cash and cash equival ents of $86.7 million.

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We believe that our current levels of cash and cash equivalents are sufficient to finance our operations, working capital requirements and capital expenditures for the foreseeable future.

We expect our operating and capital expenditures to increase as we increase headcount, expand our operations and grow our end customer base.

We expect our operating and capital expenditures to remain relatively flat.

If additional funds are required to support our working capital requirements, acquisitions or other purposes, we may seek to raise funds through additional equity or debt financing or from other sources.

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We can provide no assurance that additional financing will be available at all or, if available, that we would be able to obtain additional financing on terms favorable to us.

The following table summarizes our consolidated cash flows for the periods presented (in thousands):

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The followin g table summarizes our consolidated cash flows for the periods presented (in thousands):

Year Ended December 31,

Consolidated Statements of Cash Flows Data:

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Net cash used in investing activities $ (9,271) $ (5,782)

Net cash provided by (used in) financing activities 88,382 (5,810)

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

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

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

Net cash provided by financing activities $ 3,495 $ 89,663

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

As of December 31, 2024, our balance of cash and cash equivalents was $86.7 million, which is a decrease of $65.2 million or 43% co mpared to December 31, 2023.

Operating Activities

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

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

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

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

For the year ended December 31, 2024, net cash used in operating activities was $58.8 million, which primarily reflects a net loss of $84.6 million, adjusted for non-cash stock-based compensation of $43.0 million, non-cash gains of $40.5 million in earnout and our equity investment due to changes in fair value, $7.9 million of non-cash bonus accruals, $7.7 million for our allowance for credit losses, a $2.0 million impairment of other asset, and an aggregate cash used in operating assets and liabilities of $1.9 million.

Specifically, the changes reflect a $2.8 million decrease in accounts payable, accrued compensation and other accrued expenses, $11.0 million decrease in customer deposit and deferred revenue, $1.7 million decrease in operating lease liability, partially offset by a $4.2 million decrease in accounts receivable, $6.8 million decrease in inventories, a decrease of $0.6 million in other assets, and a $2.1 million decrease in prepaid expenses and other current assets.

For the year ended December 31, 2023, net cash used in operating activities was $41.4 million, which primarily reflects a net loss of $146.0 million, adjusted for non-cash stock-based compensation of $54.0 million, non-cash losses of $33.8 million in earnout due to changes in fair value, $2.8 million of non-cash bonus accruals, and an aggregate cash provided in operating assets and liabilities of $2.8 million.

Specifically, the changes reflect $16.7 million increase in accounts receivable and $3.2 million increase inventory, both as a result of higher revenues, $2.6 million increase in prepaids and other current assets, and a $2.5 million increase in other assets, partially offset by an increase of $13.7 million in accounts payable primarily due to timing of disbursements and higher inventory, and an increase of $10.5 million in deferred revenue.

Investing Activities

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

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

Net cash used in investing activities for the year ended December 31, 2024 of $9.3 million was primarily due to purchases of fixed assets of $6.8 million and $2.5 million cash funding of a joint venture.

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

Financing Activities

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

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

Net cash provided by financing activities for the year ended December 31, 2024 of $3.5 million was primarily the result of proceeds from stock option exercises of $0.8 million and proceeds from our employee stock purchase plan of $2.7 million.

Net cash provided by financing activities for the year ended December 31, 2023 of $89.7 million was primarily the result of proceeds from the issuance of common stock in our May 2023 public offering, net of issuance costs, of $86.5

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million, proceeds from the issuance of common stock in connection with stock option exercises of $1.9 million and proceeds from our employee stock purchase plan of $1.3 million.

Contractual Obligations, Commitments and Contingencies

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

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

As of December 31, 2024 , our non-cancellable contractual arrangements consisted of lease obligations and an agreement for the purchase of equipment.

Refer to Note 9 - “Leases” for further information on our minimum future payments related to lease obligations.

In December 2024, we entered into an agreement with a vendor for the purchase of equipment, requiring quarterly installment payments.

Refer to Note 15 - “Commitments and Contingencies” for additional details on purchase obligations.

Off-Balance Sheet Commitments and Arrangements

As of December 31, 2023 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Critical Accounting Policies and Estimates

As of December 31, 2024 , we did not have any off-balance sheet arrangements as discussed in Instruction 8 to Item 303(b) of Regulation S-K.

Critical Accounting Policies

The preparation of our financial statements and related disclosures in accordance with U.S.

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

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

We utilize the following critical accounting policies in the preparation of our financial statements.

In addition to our critical accounting policies below, see Note 2 - “Significant Accounting Policies” in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.

Revenue Recognition

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

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

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

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

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Revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which is defined by the commercial terms of each purchase but typically occurs at shipment.

In determining whether control has transferred, we consider if there is a present right to payment and legal title, and whether risks and rewards of ownership have transferred to the customer.

Refer to Note 2 to our consolidated financial statements included elsewhere in this annual report for additional discussion of our revenue recognition policy.

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determining whether control has transferred, we consider if there is a present right to payment and legal title, and whether risks and rewards of ownership have transferred to the customer.

Refer to Note 2 - “Significant Accounting Policies” to our consolidated financial statements included elsewhere in this annual report for additional discussion of our revenue recognition policy.

Business Combinations

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Valuation of Inventory

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

We assess inventory to address potential obsolescence and declining values through periodic assessments, considering factors including estimates for future demand and net realizable value.

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

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

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

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

Share-Based Compensation

The fair value of stock option awards to employees and, prior to the Business Combination, restricted stock awards to non-employees with service based vesting conditions is estimated using the Black-Scholes option pricing model and for awards with market conditions, incorporate Monte Carlo simulations.

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

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

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

addition to the fair value of the underlying common stock.

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

These options vest in increments subject to certain market and performance conditions over the duration of the defined service period.

We have utilized the services of a professional valuation firm to develop the Black-Scholes option pricing model incorporating Monte Carlo simulations for these option awards.

Prior to the Business Combination, there was no public market for our common stock and the estimated fair value of our common stock was historically determined by our board of directors, with input from management, and considering our most recently available third-party valuation of our common stock.

The board of directors determined fair value at the time of grant of the option by considering a number of objective and subjective factors, including financing investment rounds, operating and financial performance, the lack of liquidity of share capital and general and industry specific economic outlook, among other factors.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation .

The fair value of our common stock was derived by first determining the equity value of our company.

The equity value of our company was historically determined using the market approach by reference to the closest round of equity financing, if any, preceding the date of valuation and analysis of the trading values of publicly traded companies deemed comparable to us.

In allocating the equity value of our company among various classes of stock, we used an option pricing model (“OPM”).

The OPM takes into account our classes of equity, dividend policy and conversion rights to determine how proceeds from a liquidity event shall be distributed among the various ownership classes at a future date.

The OPM arrives at a final estimated fair value per share of the common stock before a discount for lack of marketability is applied.

Beginning with the common stock valuation as of February 2021 and for all subsequent valuations prior to the Business Combination, the equity value of our company was determined using the probability weighted expected return method (“PWERM”) approach, which assigns a probability or weighting to valuations determined under distinct scenarios.

The February 12, 2021 valuation incorporated two scenarios under the PWERM method.

The first scenario is a stay-private scenario in which the estimated current enterprise value was allocated to the various securities using an OPM, reflecting the rights and preferences for each security (i.e., convertible notes, preferred equity, common equity, options and warrants).

The second scenario was a form of PWERM in which a single future exit event, a near-term IPO, was assumed.

Under this scenario the future total enterprise value at the near-term IPO date was allocated to various equity and equity-linked securities using a common stock equivalent method reflecting as-converted common stock equivalents for each security class, since, upon an IPO, these outstanding equity-linked securities will convert into common stock.

The future value of each security is then discounted to the valuation date.

In addition to considering the results of these third-party valuations, we considered various objective and subjective factors to determine the fair value of our common stock as of each grant date.

The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment, including the probability and timing of liquidity events.

As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could be materially different.

The fair value of the Company’s common stock ranged from $1.16 per share in the second half of 2020 to $1 0.53 pe r share as of August 25, 2021, the date of the most recent contemporaneous valuation report prior to the Business Combination.

Changes in assumptions of product demand, the future salability of inventory, and the net realizable value of obsolete and unmarketable inventory could have a significant impact on the amount of the reserve recorded.

These assumptions include the assessment of market conditions and trends, expected demand inclusive of sales forecasts, anticipated sales and market prices, and product obsolescence.

Stock-Based Compensation

We account for awards of stock-based compensation under our employee stock-based compensation plan using the fair value method.

Accordingly, we estimate fair value of our stock-based awards and amortized this fair value to stock-based compensation expense over the requisite service period or vesting terms.

RSUs - The fair value per unit of each RSU grant award is determined on the grant date based on the Company’s stock price.

Stock-based compensation is recognized on a straight-line basis over the requisite service period of the award.

Forfeitures are recognized as they occur.

ESPP - We currently use the Black-Scholes option-pricing model to estimate the fair value of our Employee Stock Purchase Plan (ESPP) awards and amortize the expense over the requisite service period.

The ESPP awards require management to make assumptions and to apply judgment in determining the fair value of the awards.

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

LTIPs - The fair value for each tranche of the Long-term Incentive Plan Stock Option (“LTIP”) awards was determined using Black-Scholes model and a Monte Carlo simulation estimated at the initial grant date.

We utilized the services of a professional valuation firm to develop the grant date fair value.

The LTIP awards vest based on the achievement of certain market (stock price hurdles) and performance conditions (revenue and/or EBITDA targets).

During the years ended December 31, 2024 and 2023, the LTIP awards require management to make assumptions and to apply judgment in determining the timing and amount of the recognition of the awards.

The most significant assumptions and judgments include management’s forecasts related to award performance conditions, including whether certain

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performance conditions are probable.

Awards are not recognized until they are deemed to be probable to vest, and awards may be derecognized if they are determined to be no longer probable.

Earnout Shares

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

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

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

Each Earnout Milestone is deemed achieved if, at any time within 150 days following the Business Combination and before October 19, 2026, the volume-weighted average price of the Company's Class A common stock reaches or exceeds $12.50, $17.00, or $20.00 for any twenty trading days within a thirty trading day period, respectively.

These earnout shares have been categorized into two components:

(i) the “Vested Shares” - those associated with stockholders with vested equity at the closing of the Business Combination that will be earned upon achievement of the Earnout Milestones and (ii) the “Unvested Shares” - those associated with stockholders with unvested equity at the closing of the Business Combination that will be earned over the remaining service period with the Company on their unvested equity shares and upon achievement of the Earnout Milestones.

The Vested Shares are classified as liabilities in the consolidated balance sheet and the Unvested Shares are equity-classified share-based compensation to be recognized over time (see Note 8 - Share-based Compensation).

(i) the “Vested Shares” - those associated with stockholders with vested equity at the closing of the Business Combination that will be earned upon achievement of the Earnout Milestones.

Any forfeited shares from unvested holders will be reallocated among the remaining earnout holders and (ii) the “Unvested Shares” - those associated with stockholders with unvested equity at the closing of the Business Combination which are subject to forfeiture if the employee leaves prior to the achievement of the Earnout Milestones.

As the implicit service period has passed, these shares now remain contingent solely on meeting the earnout performance condition.

The Vested Shares are classified as liabilities in the Consolidated Balance Sheets and the Unvested Shares are equity-classified stock-based compensation to be recognized over time (see Note 10 - “Stock-based Compensation”).

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

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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.

Recent Developments

We are pursuing key strategic initiatives, including bringing to market multiple generations of GaN technology that enhance our margin profile and continually evaluating acquisition opportunities that are complementary to our existing portfolio and increase power semiconductor content in our targeted applications.

See “ Information about Navitas — Company Strategy .”

Recently Issued and Adopted Accounting Standards

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

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

Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined in Item 10 of Regulation S-K, we are exempt from the disclosure requirements of this item in our Form 10-K.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis