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What changed in Navitas Semiconductor Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Navitas Semiconductor Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+192 added−438 removedSource: 10-K (2024-03-06) vs 10-K (2023-04-03)

Top changes in Navitas Semiconductor Corp's 2023 10-K

192 paragraphs added · 438 removed · 137 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

79 edited+33 added−286 removed192 unchanged
Biggest changeThe loss of these licenses or the inability to maintain any of them on commercially acceptable terms could delay development of future products or the enhancement of existing 44 Table of Contents products. If the third-party intellectual property that we use becomes unavailable or fails to produce designs that meet consumer demands, our business could be harmed.
Biggest changeIf the third-party intellectual property that we use becomes unavailable or fails to produce designs that meet consumer demands, our business could be harmed. 30 Table of Contents Risks Related to Regulatory Compliance Investments in or by us may be subject to foreign investment regulation and review in the United States and elsewhere, which may result in material restrictions, conditions, prohibitions or penalties on us or our investors related to any such investments.
Among other things, these provisions include those establishing: • a classified board of directors with three-year staggered terms, which may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board to elect a director to fill a vacancy created by, among other things, the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board; • the ability of our board to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of our board to alter the bylaws without obtaining stockholder approval; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders; • the requirement that a special meeting of stockholders may be called only by a majority vote of our board, which may delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board or to propose matters to be acted upon at an annual meeting or special meeting of stockholders, which may discourage or delay a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us until the next stockholder meeting or at all.
Among other things, these provisions include those establishing: • a classified board of directors with three-year staggered terms, which may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board to elect a director to fill a vacancy created by, among other things, the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board; 33 Table of Contents • the ability of our board to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of our board to alter the bylaws without obtaining stockholder approval; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders; • the requirement that a special meeting of stockholders may be called only by a majority vote of our board, which may delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board or to propose matters to be acted upon at an annual meeting or special meeting of stockholders, which may discourage or delay a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us until the next stockholder meeting or at all.
From time to time, we have experienced problems achieving acceptable yields at our third-party wafer fabrication partner, resulting in delays in the availability of components. Moreover, an increase in the rejection rate of products during the 25 Table of Contents quality control process before, during or after manufacture and/or shipping of such products, results in lower yields and margins.
From time to time, we have experienced problems achieving acceptable yields at our third-party wafer fabrication partner, resulting in delays in the availability of components. Moreover, an increase in the rejection rate of products during the 21 Table of Contents quality control process before, during or after manufacture and/or shipping of such products, results in lower yields and margins.
The reasons for this delay include, among other things, the following: • changing end customer requirements, resulting in an extended development cycle for the product; • delay in the ramp-up of volume production of the customer’s products into which our solutions are designed; • delay or cancellation of the customer’s product development plans; • competitive pressures to reduce our selling price for the product; • the discovery of design flaws, defects, errors or bugs in the products; • lower than expected end customer acceptance of the solutions designed for the customer’s products; • lower than expected acceptance of our end customers’ products; and • higher manufacturing costs than anticipated.
The reasons for this delay include, among other things, the following: • changing end customer requirements, resulting in an extended development cycle for the product; • delay in the ramp-up of volume production of the customer’s products into which our solutions are designed; • delay or cancellation of the customer’s product development plans; • competitive pressures to reduce our selling price for the product; 17 Table of Contents • the discovery of design flaws, defects, errors or bugs in the products; • lower than expected end customer acceptance of the solutions designed for the customer’s products; • lower than expected acceptance of our end customers’ products; and • higher manufacturing costs than anticipated.
Moreover, the global nature of our business subjects us to a number of additional risks and uncertainties, which could harm our business, financial condition and results of operations, including: • international economic and political conditions and other political tensions between countries in which we do business; • actual or threatened military conflicts in countries or regions where we do not do business or have manufacturing partners, such as the military conflict between Russia and Ukraine, may increase the likelihood of supply interruptions or disruptions in countries or regions where we do business or in which our manufacturing partners have facilities.
Moreover, the global nature of our business subjects us to a number of additional risks and uncertainties, which could harm our business, financial condition and results of operations, including: • international economic and political conditions and other political tensions between countries in which we do business; 19 Table of Contents • actual or threatened military conflicts in countries or regions where we do not do business or have manufacturing partners, such as the military conflict between Russia and Ukraine, may increase the likelihood of supply interruptions or disruptions in countries or regions where we do business or in which our manufacturing partners have facilities.
If we have experienced an ownership change at any time since our inception, utilization of the U.S. federal net operating loss carryforwards or other U.S. federal tax attributes would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our common stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.
If we have experienced an ownership change at any time since our inception, utilization of the U.S. federal net operating loss carryforwards or other U.S. federal tax attributes would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our common stock at the time of the ownership change by the applicable long-term tax- 28 Table of Contents exempt rate, and then could be subject to additional adjustments, as required.
Because of our extended sales cycle, our revenue in future years is highly dependent on design wins we are awarded in prior years. It is typical that a design win will not result in meaningful revenue until one year or more or later, if at all.
Because of our extended sales cycle, our revenue in future years is highly dependent on design wins we are awarded in prior years. It is typical that a design win will not result in meaningful revenue for one year or more or later, if at all.
If we are unable to adapt rapidly to these new and additional conditions, we may not be able to successfully penetrate new markets, although we strives to respond to end customer preferences and industry expectations in the development of our products.
If we are unable to adapt rapidly to these new and additional conditions, we may not be able to successfully penetrate new markets, although we strive to respond to end customer preferences and industry expectations in the development of our products.
Among other risks that arise from these challenges, we may not be successful in our efforts to: (1) integrate new employees with our existing teams; (2) integrate and align numerous business 16 Table of Contents and work processes, including information technology and cyber security systems; (3) demonstrate that the GeneSiC acquisition will not adversely affect our ability to address the needs of existing customers, or result in the loss of attention or focus on our existing businesses; (4) coordinate and integrate research and development and engineering teams across technologies and product platforms; (5) consolidate and integrate corporate, information technology, finance and administrative processes; (6) coordinate sales and marketing efforts to effectively position our capabilities and the direction of product development; and (7) minimize diversion of management attention from important business objectives.
Among other risks that arise from these challenges, we may not be successful in our efforts to: (1) integrate new employees with our existing teams; (2) integrate and align numerous business and work processes, including information technology and cybersecurity systems; (3) demonstrate that the GeneSiC acquisition will not adversely affect our ability to address the needs of existing customers, or result in the loss of attention or focus on our existing businesses; (4) coordinate and integrate research and development and engineering teams across technologies and product platforms; (5) consolidate and integrate corporate, information technology, finance and administrative processes; (6) coordinate sales and marketing efforts to effectively position our capabilities and the direction of product development; and (7) minimize diversion of management attention from important business objectives.
An ownership change pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5 percent of a corporation’s stock increase their ownership by more than 50 42 Table of Contents percentage points over their lowest ownership percentage within a rolling three-year period.
An ownership change pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5 percent of a corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
In addition, there may be circumstances where we may have to incur premium freight charges to expedite the delivery of our products to end customers or as a result of being required to ship to alternative ports due to local Chinese government regulations or delays at the ports that we typically utilize.
In addition, there may be circumstances where we may have to incur premium freight charges to expedite the delivery of our products to end customers or as a result of being required to ship to alternative ports due to local Chinese government 32 Table of Contents regulations or delays at the ports that we typically utilize.
Such incentives include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to our manufacturing partners in China. Any of these incentives could be reduced or eliminated by governmental authorities at any time.
Such incentives include tax rebates, reduced tax rates, 20 Table of Contents favorable lending policies and other measures, some or all of which may be available to our manufacturing partners in China. Any of these incentives could be reduced or eliminated by governmental authorities at any time.
Because our products are complex, it is frequently difficult or impossible to substitute one type of material with another. Further, a failure by suppliers to deliver requirements could result in disruptions to our third party manufacturing operations.
Because our products are complex, it is frequently difficult or impossible to substitute one type of material with another. 24 Table of Contents Further, a failure by suppliers to deliver requirements could result in disruptions to our third party manufacturing operations.
Because Legacy Navitas is registered as a Delaware limited liability company and because it is treated as a U.S. corporation under Section 7874 of the Code and the Treasury Regulations promulgated thereunder, it is treated as a U.S. corporation for U.S. federal income tax purposes.
Because Legacy Navitas is registered as a Delaware limited liability company and because it is treated as a U.S. corporation under Section 7874 of the Code and the Treasury Regulations promulgated thereunder, it is treated as a U.S. 26 Table of Contents corporation for U.S. federal income tax purposes.
There can be no assurance that any development problems we experience in the future related to our products will not cause significant delays or unanticipated costs, or that such development problems can be solved. In addition, we compete in a dynamic environment 20 Table of Contents characterized by rapid technology and product evolution.
There can be no assurance that any development problems we experience in the future related to our products will not cause significant delays or unanticipated costs, or that such development problems can be solved. In addition, we compete in a dynamic environment characterized by rapid technology and product evolution.
Due to the interdependence of various components in the systems within which our products and the products of our competitors operate, end customers are unlikely to change to another design, once adopted, until the next generation 23 Table of Contents of a technology.
Due to the interdependence of various components in the systems within which our products and the products of our competitors operate, end customers are unlikely to change to another design, once adopted, until the next generation of a technology.
We allocate revenue among individual countries based on the location to which the products are initially billed even if our end customers’ revenue is attributable to end customers that are located in a different location. As of December 31, 2022, approximately 66% of our workforce was located outside of the United States.
We allocate revenue among individual countries based on the location to which the products are initially billed even if our end customers’ revenue is attributable to end customers that are located in a different location. As of December 31, 2023, approximately 60% of our workforce was located outside of the United States.
As the company offers more products to new and existing customers, potentially expands its supply relationships, and enters new markets, the company may encounter yield, bugs and reliability 24 Table of Contents issues with specific products, and any such issues could cause customer problems or adversely affect financial results.
As the company offers more products to new and existing customers, potentially expands its supply relationships, and enters new markets, the company may encounter yield, bugs and reliability issues with specific products, and any such issues could cause customer problems or adversely affect financial results.
In the fiscal years ended December 31, 2022 and December 31, 2021, 38% and 74%, respectively, of our net revenues were from sales to end customers in China. We expect that our end customers in China will continue to account for a high percentage of our revenue for the foreseeable future.
In the fiscal years ended December 31, 2023 and December 31, 2022, 62% and 38%, respectively, of our net revenues were from sales to end customers in China. We expect that our end customers in China will continue to account for a high percentage of our revenue for the foreseeable future.
If we are unable to remedy these material weaknesses, or if we fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.
If we identify such material weaknesses in the future and are unable to remedy these material weaknesses, or if we fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.
Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under our contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to our end customer relationships.
Our inability to fill our supply needs would jeopardize our ability to 25 Table of Contents fulfill obligations under our contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to our end customer relationships.
Although we believe this warranty represents a differentiating feature of our GaN IC products and is justified by the reliability our products have demonstrated, our product warranties expose us to significant risks of claims for defects and failures.
We recently announced a warranty period of 20 years for our GaN IC products. Although we believe this warranty represents a differentiating feature of our GaN IC products and is justified by the reliability our products have demonstrated, our product warranties expose us to significant risks of claims for defects and failures.
We have begun implementing and are continuing to implement measures designed to improve our internal control over financial reporting to remediate these material weaknesses, specifically by hiring additional accounting personnel to augment existing technical expertise as well as to provide the staffing necessary to maintain effective segregation of duties.
In 2022 and into 2023, we began implementing and are continuing to implement measures designed to improve our internal control over financial reporting to remediate these material weaknesses, specifically by hiring additional accounting personnel to augment existing technical expertise as well as to provide the staffing necessary to maintain effective segregation of duties.
You should not rely upon our revenue growth, gross margins or operating results for any prior quarterly or annual periods as an indication of Navitas’ future operating performance. If we are unable to maintain adequate revenue growth, our financial results could suffer and our stock price could decline. Our margins are dependent on us achieving continued yield improvement.
You should not rely upon our revenue growth, gross margins or operating results for any prior quarterly or annual periods as an indication of Navitas’ future operating performance. If we are unable to maintain adequate revenue growth, our financial results could suffer and our stock price could decline.
Our success is dependent upon our ability to successfully partner with our suppliers and our ability to produce wafers with competitive performance attributes and prices, including smaller process geometries.
Our success is dependent upon our ability to successfully partner with our suppliers and our ability to produce wafers with competitive performance attributes and 23 Table of Contents prices, including smaller process geometries.
As a result, these stockholders will be able to exercise a significant level of control over matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions.
As a result, these stockholders are able to exercise a significant level of influence over matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions.
In addition, our certificate of incorporation authorizes us to issue up to 1,000,000 shares of preferred stock with such rights and preferences as may be determined by our board.
In addition, our certificate of incorporation authorizes us to issue up to 10,000,000 shares of Class B Common Stock and 1,000,000 shares of preferred stock. The preferred stock can be issued with such rights and preferences as may be determined by our board.
The issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise by us could dilute the ownership and voting power of our stockholders. At March 28, 2023, we had 561,636,238 shares of Class A Common Stock authorized but unissued.
The issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise by us could dilute the ownership and voting power of our stockholders. At December 31, 2023, we had 540,991,421 shares of Class A Common Stock authorized but unissued.
These impacts may adversely impact the cost, production and financial performance of our operations. Risks Related to Ownership of Our Common Stock Concentration of ownership among existing executive officers, directors and their affiliates, including the investment funds they represent, may prevent new investors from influencing significant corporate decisions.
Risks Related to Ownership of Our Common Stock Concentration of ownership among existing executive officers, directors and their affiliates, including the investment funds they represent, may prevent new investors from influencing significant corporate decisions.
If these new technologies are not available in the future or if we encounter any problems with the delivery, quality, cost or performance of these new technologies, our business could be materially impacted and our financial condition and results of operation could be harmed. 28 Table of Contents Increased costs of wafers and materials, or shortages in wafers and materials, could increase our costs of operations and our business could be harmed.
If these new technologies are not available in the future or if we encounter any problems with the delivery, quality, cost or performance of these new technologies, our business could be materially impacted and our financial condition and results of operation could be harmed.
In addition, as we are a fabless company, global market trends such as a shortage of capacity to fulfill our fabrication needs also may increase our raw material costs and thus decrease our gross margin.
In addition, as we are a fabless company, global market trends such as a shortage of capacity to fulfill our fabrication needs also may increase our raw material costs and thus decrease our gross margin. We have in the past identified material weaknesses in our internal control over financial reporting.
Many major components, product equipment items, and raw materials, are procured or subcontracted on a single or sole-source basis. Although we maintain a qualification and performance surveillance process and believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future.
Although we maintain a qualification and performance surveillance process and believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future.
At September 19, 2022, our executive officers, directors and their affiliates, including the investment funds they represent, as a group beneficially owned approximately 36% of our outstanding Class A Common Stock.
At December 31, 2023, executive officers, directors and their affiliates, including the investment funds they represent, as a group beneficially owned approximately 32.5% of our outstanding Class A Common Stock.
We sell our power chips to end customers who select our solutions for inclusion in their product offerings. This selection process is typically lengthy and may require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single design win with no assurance that our solutions will be selected.
This selection process is typically lengthy and may require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single design win, with no assurance that our solutions will be selected.
While we intend to pursue relief from double taxation under the double tax treaty between the United States and Ireland, there can be no 40 Table of Contents assurance that such efforts will be successful.
Legacy Navitas is a tax resident of, and is subject to tax in, both the United States and Ireland. While we intend to pursue relief from double taxation under the double tax treaty between the United States and Ireland, there can be no assurance that such efforts will be successful.
As of December 31, 2021, Navitas had U.S. federal net operating loss carryforwards of approximately $100.1 million.
As of December 31, 2023, Navitas had U.S. federal net operating loss carryforwards of approximately $165.0 million.
If our new product development efforts fail to align with the needs of our end customers, including due to circumstances outside of our control like a fundamental shift in the product markets of our end customers and end users or regulatory changes, our business, financial condition and results of operations could be materially and adversely affected. 21 Table of Contents If we fail to accurately anticipate and respond to rapid technological change in the industries in which we operate, our ability to attract and retain end customers could be impaired and our competitive position could be harmed.
If our new product development efforts fail to align with the needs of our end customers, including due to circumstances outside of our control like a fundamental shift in the product markets of our end customers and end 16 Table of Contents users or regulatory changes, our business, financial condition and results of operations could be materially and adversely affected.
GAAP, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws. Additionally, we may be subject to tax on more than one-hundred percent of our income as a result of such income being subject to tax in multiple state, local or non-U.S. jurisdictions.
Additionally, we may be subject to tax on more than one-hundred percent of our income as a result of such income being subject to tax in multiple state, local or non-U.S. jurisdictions.
Furthermore, some of the software licensed from third parties may not be available in the future on terms acceptable to us or allow our products to remain competitive.
Furthermore, some of the software licensed from third parties may not be available in the future on terms acceptable to us or allow our products to remain competitive. The loss of these licenses or the inability to maintain any of them on commercially acceptable terms could delay development of future products or the enhancement of existing products.
This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders. We do not intend to pay cash dividends for the foreseeable future.
Such influence could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
If we fail to adequately manage our growth, improve our operational, financial and management information systems, or effectively motivate and manage our new and future employees, it could adversely affect our business, financial condition and results of operations. 31 Table of Contents We have an accumulated deficit and have incurred net losses in the past, and we may continue to incur net losses in the future.
If we fail to adequately manage our growth, improve our operational, financial and management information systems, or effectively motivate and manage our new and future employees, it could adversely affect our business, financial condition and results of operations.
Reliability is especially critical in the power semiconductor industry, and any adverse reliability result by us with any of our end customers could negatively affect our business, financial condition, and results of operations. Our end customers generally establish demanding specifications for quality, performance, and reliability that our products must meet.
Any of the foregoing events could materially and adversely affect our business, financial condition, and results of operations. Reliability is especially critical in the power semiconductor industry, and any adverse reliability result by us with any of our end customers could negatively affect our business, financial condition, and results of operations .
We have experienced significant growth in a short period of time. Our net revenue increased from zero in fiscal year 2017, to $11.8 million in fiscal year 2020, to $23.7 million in fiscal year 2021, to $37.9 million in fiscal year 2022. We may not achieve similar growth rates in future periods.
Our net revenue increased from zero in fiscal year 2017, to $23.7 million in fiscal year 2021, to $37.9 million in fiscal year 2022, and to $79.5 million in fiscal year 2023. We may not achieve similar growth rates in future periods.
Our ability to compete in the future will depend on our ability to identify and ensure compliance with evolving industry standards in our target markets. The emergence of new industry standards could render our products incompatible with products developed by third-party suppliers or make it difficult for our products to meet the requirements of certain original equipment manufacturers.
The emergence of new industry standards could render our products incompatible with products developed by third-party suppliers or make it difficult for our products to meet the requirements of certain original 18 Table of Contents equipment manufacturers.
As a result, we periodically evaluate the benefits of migrating our solutions to smaller geometry process technologies in order to improve performance and reduce costs. We believe this strategy will help us to remain 26 Table of Contents competitive.
We aim to use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundry. As a result, we periodically evaluate the benefits of migrating our solutions to smaller geometry process technologies in order to improve performance and reduce costs. We believe this strategy will help us to remain competitive.
From time to time, we may receive communications from third parties that allege that our products or technologies infringe their patent or other intellectual property rights. Lawsuits or other proceedings resulting from allegations of infringement could subject us to significant liability for damages, invalidate our proprietary rights and adversely affect our business.
Lawsuits or other proceedings resulting from allegations of infringement could subject us to significant liability for damages, invalidate our proprietary rights and adversely affect our business.
We may have difficulties integrating the operations and business of GeneSiC with our own. Our acquisition of GeneSiC is the first significant acquisition we have ever undertaken.
We may have difficulties integrating the operations and business of GeneSiC with our own. Our acquisition of GeneSiC is the first significant acquisition we have ever undertaken. The complexities involved in the integration and expansion of GeneSiC as part of our Company are not yet fully understood.
Given our relatively small size and relative inexperience with acquisitions, we expect the challenges involved in this integration to be complex and time consuming.
We have devoted and expect to continue to devote a significant amount of time and attention to integrating GeneSiC into our existing operations teams. Given our relatively small size and relative inexperience with acquisitions, we expect the challenges involved in this integration to be complex and time consuming.
Under its current leadership, China’s government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that China’s government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
There is no assurance, however, that China’s government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
However, there can be no assurance that the relevant taxing authorities will agree with the purchase price ascribed to the transferred assets, and an adjustment to the purchase price could adversely impact Legacy Navitas’ tax position. 41 Table of Contents As a result of the plans to expand our business operations, including to jurisdictions in which tax laws may not be favorable, our obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect our after-tax profitability and financial results.
As a result of the plans to expand our business operations, including to jurisdictions in which tax laws may not be favorable, our obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect our after-tax profitability and financial results. 27 Table of Contents In the event our business expands domestically or internationally, our effective tax rates may fluctuate widely in the future.
Our ability to ship products to China may be 45 Table of Contents adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters.
Our ability to ship products to China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under its current leadership, China’s government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization.
If we infringe or misappropriate, or are accused of infringing or misappropriating, the intellectual property rights of third parties, we may incur substantial costs or prevent us from being able to commercialize new products. The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights.
Even if patents are issued regarding our products and processes, our competitors may challenge the validity of those patents. 29 Table of Contents If we infringe or misappropriate, or are accused of infringing or misappropriating, the intellectual property rights of third parties, we may incur substantial costs or prevent us from being able to commercialize new products.
As a result, we may not be able to meet our end customers’ needs during such a transition, which would negatively impact our net sales, potentially damage our end customer relationships and our reputation and may have a material adverse effect on our business, financial condition and results of operations. 27 Table of Contents Further, public health crises such as an outbreak of contagious diseases like Covid-19 have negatively affected the supply chain for silicon wafers, resulting in shortages, and may affect the operations of our supplier and other foundries.
As a result, we may not be able to meet our end customers’ needs during such a transition, which would negatively impact our net sales, potentially damage our end customer relationships and our reputation and may have a material adverse effect on our business, financial condition and results of operations.
Further, existing U.S., Irish or other foreign tax laws, statutes, rules, regulations, ordinances or treaties could be interpreted, changed, modified or applied adversely to us, possibly with retroactive effect. For example, several tax proposals in the U.S. would, if enacted, make significant changes to U.S. tax laws.
Further, existing U.S., Irish or other foreign tax laws, statutes, rules, regulations, ordinances or treaties could be interpreted, changed, modified or applied adversely to us, possibly with retroactive effect. The passage of any legislation resulting in changes in U.S. federal income tax laws could adversely affect our business and future profitability.
From time to time, suppliers may extend lead times, limit the amounts supplied or increase prices due to capacity constraints or other factors. Supply disruptions may also occur due to shortages in critical materials or components. We have encountered shortages and delays in obtaining components and materials and may encounter additional shortages and delays in the future.
Our manufacturing operations depend on deliveries of materials in a timely manner and, in some cases, on a just-in-time basis. From time to time, suppliers may extend lead times, limit the amounts supplied or increase prices due to capacity constraints or other factors. Supply disruptions may also occur due to shortages in critical materials or components.
Worldwide manufacturing capacity for wafers is relatively inelastic. If the demand for wafers or assembly material exceeds market supply, our supply of wafers or assembly material could quickly become limited or prohibitively expensive. A shortage in manufacturing capacity could also hinder our ability to meet product demand and therefore reduce our revenue.
Increased costs of wafers and materials, or shortages in wafers and materials, could increase our costs of operations and our business could be harmed. Worldwide manufacturing capacity for wafers is relatively inelastic. If the demand for wafers or assembly material exceeds market supply, our supply of wafers or assembly material could quickly become limited or prohibitively expensive.
Our success and future revenue depends on our ability to achieve design wins and to convince our current and prospective end customers to design our products into their product offerings. If we do not continue to win designs or our products are not designed into our end customers’ product offerings, our results of operations and business will be harmed.
If we do not continue to win designs or our products are not designed into our end customers’ product offerings, our results of operations and business will be harmed. We sell our power chips to end customers who select our solutions for inclusion in their product offerings.
We rely on our relationships with industry and technology leaders to enhance our product offerings and our inability to continue to develop or maintain such relationships in the future would harm our ability to remain competitive. 29 Table of Contents We develop many of our products for applications in systems that are driven by industry and technology leaders in mobile consumer electronics, enterprise, eMobility and new energy markets.
We rely on our relationships with industry and technology leaders to enhance our product offerings and our inability to continue to develop or maintain such relationships in the future would harm our ability to remain competitive.
Changes in either patent laws or interpretations of patent laws in the 43 Table of Contents United States or elsewhere may diminish the value of our intellectual property or narrow the scope of our patent protection. Even if patents are issued regarding our products and processes, our competitors may challenge the validity of those patents.
Changes in either patent laws or interpretations of patent laws in the United States or elsewhere may diminish the value of our intellectual property or narrow the scope of our patent protection.
Even if we succeed in securing design wins for our products, we may not generate timely or sufficient net sales or margins from those wins and our financial results could suffer.
Furthermore, developing industry trends, including end customers’ use of outsourcing and new and revised supply chain models, may affect our revenue, costs and working capital requirements. Even if we succeed in securing design wins for our products, we may not generate timely or sufficient net sales or margins from those wins and our financial results could suffer.
Such changes could materially and adversely affect the effective tax rate of our business and require us to take further action, at potentially significant expense, to seek to preserve our effective tax rate. Legacy Navitas is a tax resident of, and is subject to tax in, both the United States and Ireland.
Further, we could be adversely impacted by changes in tax treaties or the interpretation or enforcement thereof by any tax authority. Such changes could materially and adversely affect the effective tax rate of our business and require us to take further action, at potentially significant expense, to seek to preserve our effective tax rate.
Furthermore, developing industry trends, including end customers’ use of outsourcing and new and revised supply chain models, may affect our revenue, costs and working capital requirements. If our products do not conform to, or are not compatible with, existing or emerging industry standards, demand for our products may decrease, which in turn would harm our business and operating results.
If our products do not conform to, or are not compatible with, existing or emerging industry standards, demand for our products may decrease, which in turn would harm our business and operating results. We design certain of our products to conform to current industry standards.
The cost of raw materials is a key element in the cost of our products. Our inability to offset material price inflation through increased prices to end customers, suppliers, productivity actions, or through commodity hedges could adversely affect our results of operations.
Our inability to offset material price inflation through increased prices to end customers, suppliers, productivity actions, or through commodity hedges could adversely affect our results of operations. Many major components, product equipment items, and raw materials, are procured or subcontracted on a single or sole-source basis.
We have from time to time in the past experienced product quality, performance or reliability problems. Our standard warranty period is generally one to two years. We recently announced a warranty period of 20 years for our GaN IC products.
Further, our third-party manufacturing processes or changes thereof, or raw material used in the manufacturing processes may cause our products to fail. We have from time to time in the past experienced product quality, performance or reliability problems. Our standard warranty period is generally one to two years.
If we are unable to continue to develop or maintain these relationships, our solutions could become less desirable to our end customers, our sales could suffer and our competitive position could be harmed. We are subject to risks and uncertainties associated with international operations, which may harm our business.
We believe that these relationships enhance our ability to achieve market acceptance and widespread adoption of our products. If we are unable to continue to develop or maintain these relationships, our solutions could become less desirable to our end customers, our sales could suffer and our competitive position could be harmed.
If we are unable to purchase wafers at favorable prices or at all, or we face supply shortages, our financial condition and results of operations will be harmed. Raw material price fluctuations can increase the cost of our products, impact our ability to meet end customer commitments, and may adversely affect our results of operations.
If we are unable to purchase wafers at favorable prices or at all, or we face supply shortages, our financial condition and results of operations will be harmed. Our working capital needs are difficult to predict. Our working capital needs are difficult to predict and may fluctuate.
ICs as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments, which might require product replacement or recall. Further, our third-party manufacturing processes or changes thereof, or raw material used in the manufacturing processes may cause our products to fail.
Our end customers generally establish demanding specifications for quality, performance, and reliability that our products must meet. ICs as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments, which might require product replacement or recall.
We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs. We aim to use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundry.
Our failure to achieve 22 Table of Contents acceptable quality levels for products intended for such applications, or generally, could adversely affect our business results. We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.
Any such reduction or elimination of incentives currently provided to our manufacturing partners could adversely affect our business and operating results. If we fail in a timely and cost-effective manner to develop new product features or new products that address end customer preferences and achieve market acceptance, our operating results could be adversely affected.
If we fail in a timely and cost-effective manner to develop new product features or new products that address end customer preferences and achieve market acceptance, our operating results could be adversely affected. 15 Table of Contents Our products are based on novel design technology and our future success depends on the successful development of high-voltage power switching components and systems based on design technology.
We design certain of our products to conform to current industry standards. Some industry standards may not be widely adopted or implemented uniformly and competing standards may emerge that may be preferred by our distributors or our end customers.
Some industry standards may not be widely adopted or implemented uniformly and competing standards may emerge that may be preferred by our distributors or our end customers. Our ability to compete in the future will depend on our ability to identify and ensure compliance with evolving industry standards in our target markets.
In the event our business expands domestically or internationally, our effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S.
Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.
We maintain our operations around the world, including the United States, Ireland, Hong Kong, China, Taiwan and the Philippines. For the years ended December 31, 2022, December 31, 2021, December 31, 2020 and December 31, 2019, approximately 43%, 82%, 92% and 85%, respectively, of our net sales were to end customers in Asia.
For the years ended December 31, 2023 and December 31, 2022, approximately 70% and 43%, respectively, of our net sales were to end customers in Asia.
A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend. We rely on the timely supply of materials and new technologies and could suffer if suppliers fail to meet their delivery obligations or raise prices.
We rely on the timely supply of materials and new technologies and could suffer if suppliers fail to meet their delivery obligations or raise prices. Certain new technologies and materials needed in our manufacturing operations are only available from a limited number of suppliers.
If our doubtful accounts, however, were to exceed our current or future allowance for doubtful accounts, our business, financial condition, and results of operations would be adversely affected. If we do not sustain our growth rate, we may not be able to execute our business plan and our operating results could suffer.
If we do not sustain our growth rate, we may not be able to execute our business plan and our operating results could suffer. We have experienced significant growth in a short period of time.
Any issuance of such securities could result in substantial dilution to our then existing stockholders and cause the market price of shares of Class A Common Stock to decline. The obligations associated with being a public company involves significant expenses and requires significant resources and management attention, which may divert from our business operations.
Any issuance of such securities could result in substantial dilution to our then existing stockholders and cause the market price of shares of Class A Common Stock to decline. Provisions in our certificate of incorporation and our bylaws and under the DGCL contain antitakeover provisions that could prevent or discourage a takeover.
In connection with the audit of our consolidated financial statements for the year ended December 31, 2021, we identified material weaknesses in our internal control over financial reporting. These material weaknesses related to the design of internal controls as follows: (1) the lack of a sufficient number of trained professionals with the appropriate U.S.
As previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021 and 2022, in connection with the audit of our consolidated financial statements for the years then ended, we identified material weaknesses in our internal control over financial reporting, as described in Part II, Item 9A, Controls and Procedures.
We work with distributors, resellers, ODMs, and OEMs to define industry conventions and standards within our target markets. We believe that these relationships enhance our ability to achieve market acceptance and widespread adoption of our products.
We develop many of our products for applications in systems that are driven by industry and technology leaders in mobile consumer electronics, enterprise, eMobility and new energy markets. We work with distributors, resellers, ODMs, and OEMs to define industry conventions and standards within our target markets.
In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations. We may issue a substantial number of additional shares under an employee incentive plan.
We may issue a substantial number of additional shares under an employee incentive plan.
We operate in industries characterized by rapidly changing technologies as well as technological obsolescence.
If we fail to accurately anticipate and respond to rapid technological change in the industries in which we operate, our ability to attract and retain end customers could be impaired and our competitive position could be harmed. We operate in industries characterized by rapidly changing technologies as well as technological obsolescence.
Removed
Item 1A. Risk Factors. Risk Related to Our Business and Operations The cyclical nature of the semiconductor industry may limit our ability to maintain or improve our net sales and profitability. The semiconductor industry is highly cyclical and is prone to significant downturns from time to time.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We do not own any real property. We lease corporate office and research and development space in Torrance, California and Dulles, Virginia. We also lease office, research and development, and design center space in Shanghai, Shenzhen and Hangzhou, China. We believe our present facilities are suitable and adequate for our current operating needs.
Biggest changeItem 2. Properties. We do not own any real property. We lease approximately 100,000 square feet of corporate office and research and development space in Torrance, California. We also lease office, research and development, and design center space in Shanghai, Shenzhen and Hangzhou, China; Hsinchu and Taipei, Taiwan; Dublin, Ireland; Mont-Saint-Guibert, Belgium; Campbell, California and Dulles, Virginia; and Seoul, Korea.
We intend to procure additional space as we add employees and expand geographically.
We believe our present facilities are suitable and adequate for our current operating needs. We intend to procure additional space as we add employees and expand geographically.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. The information required by this item is incorporated by reference to the inform ation set forth in Item 15 of Part IV, “Exhibits, Financial Statement Schedules” Note 15 – Commitments and Contingencies, in the accompanying notes to the consolidated financial statements included in this report. Item 4. Mine Safety Disclosures.
Biggest changeItem 3. Legal Proceedings. The information required by this item is incorporated by reference to the inform ation set forth in Item 15 of Part IV, “Exhibits, Financial Statement Schedules” Note 14 – Commitments and Contingencies, in the accompanying notes to the consolidated financial statements included in this report. Item 4. Mine Safety Disclosures.
Not applicable. 53 Table of Contents Part II
Not applicable. 35 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe actual number of holders of our common stock is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees. The number of holders of record presented here also does not include stockholders whose shares may be held in trust by other entities.
Biggest changeThe actual number of beneficial owners of our common stock is much greater than the number of record holders and includes stockholders whose shares are held in brokerage accounts or by other nominees. The number of holders of record presented here also does not include stockholders whose shares may be held in trust by other entities. Dividends.
Dividends. We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business.
We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information. Our common stock has been listed on the Nasdaq Global Market under the ticker symbol “NVTS” since October 20, 2021. Holders. As of March 28, 2023, there were approximately 229 h olders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information. Our common stock has been listed on the Nasdaq Global Market under the ticker symbol “NVTS” since October 20, 2021. Holders. As of February 26, 2024, there were 27 holders of re cord of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRefer to Note 14, Provision for I ncome Taxes, in our accompanying consolidated financial statements elsewhere in this annual report. 57 Table of Contents Results of Operations The table and discussion below summarizes operating data for our consolidated operations (in thousands): Year Ended December 31, Change $ Change % (dollars in thousands) 2022 2021 Net revenues (including $1,528 and $435 of related party revenues) $ 37,943 $ 23,736 $ 14,207 60 % Cost of revenues (exclusive of amortization of intangibles included below) 25,996 13,050 12,946 99 % Operating expenses: Research and development 50,318 27,475 22,843 83 % Selling, general and administrative 78,353 51,374 26,979 53 % Amortization of intangible assets 6,913 345 6,568 1904 % Total operating expenses 135,584 79,194 56,390 Loss from operations (123,637) (68,508) Other income (expense), net: Interest income (expense), net 1,387 (257) 1,644 (640) % Gain (loss) from change in fair value of warrants 51,763 (45,625) 97,388 (213) % Gain (loss) from change in fair value of earnout liabilities 121,709 (38,105) 159,814 (419) % Other income (expense) (1,147) (143) (1,004) 702 % Total other income (expense), net 173,712 (84,130) Income (loss) before income taxes 50,075 (152,638) Income tax (benefit) provision (22,812) 47 (22,859) (48636) % Net income (loss) $ 72,887 $ (152,685) $ 225,572 (148) % LESS: net income (loss) attributable to noncontrolling interests (1,026) — $ (1,026) Net income (loss) attributable to controlling interests $ 73,913 $ (152,685) $ 226,598 (148) % Comparison of the Years ended December 31, 2022 and 2021 Net Revenues Net revenues for the twelve months ended December 31, 2022 were $37.9 million compared to $23.7 million for the twelve months ended December 31, 2021, an increase of $14.2 million, or 60%.
Biggest changeRefer to Note 13, Provision for I ncome Taxes, in our accompanying consolidated financial statements elsewhere in this annual report. 39 Table of Contents Results of Operations The tables and discussion below present our results for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, Change $ Change % (dollars in thousands) 2023 2022 Net revenues (including $0 and $1,528 of related party revenues) $ 79,456 $ 37,943 $ 41,513 109 % Cost of revenues (exclusive of amortization of intangibles included below) 48,392 25,996 22,396 86 % Operating expenses: Research and development 68,825 50,318 18,507 37 % Selling, general and administrative 61,551 78,353 (16,802) (21) % Amortization of intangible assets 18,820 6,913 11,907 172 % Total operating expenses 149,196 135,584 13,612 10 % Loss from operations (118,132) (123,637) 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) % Gain (loss) from change in fair value of earnout liabilities (33,788) 121,709 (155,497) (128) % Other income (expense) 84 (1,147) 1,231 (107) % Total other income (expense), net (28,336) 173,712 (202,048) (116) % Income (loss) before income taxes (146,468) 50,075 Income tax benefit (517) (22,812) 22,295 (98) % Net income (loss) $ (145,951) $ 72,887 $ (218,838) (300) % LESS: net loss attributable to noncontrolling interest (518) (1,026) 508 (50) % Net income (loss) attributable to controlling interest $ (145,433) $ 73,913 $ (219,346) (297) % Comparison of the Years ended December 31, 2023 and 2022 Revenue Net revenues for the twelve months ended December 31, 2023 were $79.5 million compared to $37.9 million for the twelve months ended December 31, 2022, an increase of $41.6 million, or 109%.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and that involve risks and uncertainties.
Acquisition of VDDTech On June 10, 2022, the Company’s wholly owned subsidiary, Navitas Semiconductor Limited, acquired all of the stock of VDDTECH srl, a private Belgian company (“VDDTech”), for approximately $1.9 million in cash and stock. Based in Mont-saint-Guibert, Belgium, VDDTech creates advanced digital-isolators for next-generation power conversion.
Acquisition of VDDTech On June 10, 2022, the Company’s wholly owned subsidiary, Navitas Semiconductor Limited, acquired all of the capital stock of VDDTECH srl, a private Belgian company (“VDDTech”), for approximately $1.9 million in cash and stock. Based in Mont-Saint-Guibert, Belgium, VDDTech creates advanced digital-isolators for next-generation power conversion.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 of $5.8 million was primarily the result of $6.9 million repayment of debt, partially offset by $1.7 million of issuance of common stock in connection with option exercises.
Net cash 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.
Our revenues fluctuate in response to a combination of factors, including the following: • our overall product mix and sales volumes; • gains and losses in market share and design win traction; • pace at which technology is adopted in our end markets; • the stage of our products in their respective life cycles; • the effects of competition and competitive pricing strategies; • availability of specialized field application engineering resources supporting demand creation and end customer adoption of new products; • achieving acceptable yields and obtaining adequate production capacity from our wafer foundries and assembly and test subcontractors; • market acceptance of our end customers’ products; governmental regulations influencing our markets; and • the global and regional economic cycles.
Our revenues fluctuate in response to a combination of factors, including the following: • our overall product mix and sales volumes; • gains and losses in market share and design win traction; • pace at which technology is adopted in our end markets; • the stage of our products in their respective life cycles; • the effects of competition and competitive pricing strategies; • availability of specialized field application engineering resources supporting demand creation and end customer adoption of new products; 38 Table of Contents • achieving acceptable yields and obtaining adequate production capacity from our wafer foundries and assembly and test subcontractors; • market acceptance of our end customers’ products; governmental regulations influencing our markets; and • the global and regional economic cycles.
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 7 - Share-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.
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). 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us, or “our” refer to the business of Navitas and its subsidiaries. Throughout this section, unless otherwise noted, “Navitas” refers to Navitas Semiconductor Corporation and its consolidated subsidiaries.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us” or “our” refer to the business of Navitas and its subsidiaries. Throughout this section, unless otherwise noted, “Navitas” refers to Navitas Semiconductor Corporation and its consolidated subsidiaries.
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; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy performance obligations.
To determine revenue recognition for arrangements within the scope of ASC 606, “Revenue from Contracts with Customers” , we perform the following five 43 Table of Contents steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy performance obligations.
As of December 31, 2022, 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.
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.
Acquisition of GeneSiC On August 15, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire 100% of the outstanding shares of GeneSiC Semiconductor Inc. (“GeneSiC”) for $146.3 million of equity, $99.3 million of cash consideration, and potential future earn-out payments of up to an aggregate of $25.0 million in cash.
Acquisition of GeneSiC On August 15, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire 100% of the outstanding shares of GeneSiC Semiconductor Inc. (“GeneSiC”) for $146.3 million of equity, $97.1 million of cash consideration, and potential future earn-out payments of up to an aggregate of $25.0 million in cash.
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.
The most significant assumptions and judgments include the expected volatility, risk-free interest rate, expected dividend rate and expected term of the award, in 44 Table of Contents 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.
Investing Activities N et cash used in investing activities for the year ended December 31, 2022 of $107.6 million was primarily due to $96.4 million in business acquisitions, $5.2 million cash funding of a joint venture and $4.6 million for purchases of fixed assets.
Net cash used in investing activities for the year ended December 31, 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.
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 62 Table of Contents make assumptions and to apply judgment in determining fair value of the awards.
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 release was primarily attributable to the $23.1 million of net federal deferred tax liability recorded on 59 Table of Contents GeneSiC’s opening balance sheet that is available to offset most of the U.S. federal deferred tax assets of Navitas.
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.
In addition to our comprehensive patent portfolio, our biggest proprietary advantage is our process design kit (PDK), the ‘how-to’ guide for Navitas designers to create new GaN based device and circuits. Our GaN power IC inventions and intellectual property translate across all of our target markets f rom mobile, consumer, EV, enterprise, and renewables.
In addition to our comprehensive patent portfolio, our biggest proprietary advantage is our process design kit (PDK), the ‘how-to’ guide for Navitas designers to create new GaN based devices and circuits. Our GaN power IC inventions and intellectual property translate across all of our target markets from mobile, consumer, EV, enterprise, and renewables.
Actual results may differ from these estimates under different assumptions or conditions. 61 Table of Contents The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements.
Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements.
Other Income (Expense), net Net interest income for the twelve months ended December 31, 2022 o f $1.4 million compared to expense of $0.3 million for the twelve mo nths ended December 31, 2021, primarily due to higher interest earned on cash equivalents.
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.
GeneSiC is a silicon carbide (SiC) pioneer with deep expertise in SiC power device design and process, based in Dulles, Virgnia. The future earn-out payments were fair valued at $0.6 million, for a total merger consideration of $246.2 million.
GeneSiC was a silicon carbide (“SiC”) pioneer with deep expertise in SiC power device design and process, based in Dulles, Virginia. The future earn-out payments were fair valued at $0.6 million, for a total merger consideration of $244.0 million.
Our product revenue is recognized when the customer obtains control of the product and the timing of recognition is based on the contractual shipping terms of a contract. We provide a non-conformity warranty which is not sold separately 56 Table of Contents and does not represent a separate performance obligation.
Our product revenue is recognized when the customer obtains control of the product and the timing of recognition is based on the contractual shipping terms of a contract. We provide a non-conformity warranty which is not sold separately and does not represent a separate performance obligation. Our product revenue is diversified across the United States, Europe, and Asia.
Income Tax (Benefit) Provision Income tax benefit for the twelve months ended December 31, 2022 was $22.8 million while for the twelve months ended December 31, 2021, income tax expense was not significant. As a result of the GeneSiC Semiconductor Inc. acquisition, (see Note 18, Business Combinations), the Company released $20.5 million of its U.S. federal valuation allowance .
Income Tax Benefit Income tax benefit for the twelve months ended December 31, 2023 was $0.5 million while for the twelve months ended December 31, 2022, income tax benefit was $22.8 million. As a result of the GeneSiC Semiconductor Inc. acquisition in 2022, (see Note 17, Business Combinations), the Company released $20.5 million of its U.S. federal valuation allowance .
Cash Flows The following table summarizes our consolidated cash flows for the periods presented (in thousands): Year Ended December 31, 2022 2021 Consolidated Statements of Cash Flows Data: Net cash used in operating activities $ (44,497) $ (41,700) Net cash used in investing activities (107,608) (3,466) Net cash provided by (used in) financing activities (5,810) 274,549 We derive liquidity primarily from cash on hand, debt, and equity financing activities.
Cash Flows The following table summarizes our consolidated cash flows for the periods presented (in thousands): Year Ended December 31, 2023 2022 Consolidated Statements of Cash Flows Data: Net cash used in operating activities $ (40,098) $ (44,497) Net cash used in investing activities (5,782) (107,608) 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 December 31, 2022, we had cash and cash equival ents of $110.3 million. We currently expect to fund our cash requirements through the use of cash and cash equivalents on hand. 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 currently expect to fund our cash requirements through the use of cash and cash equivalents on hand. 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.
As of December 31, 2022 we had no debt outstanding while we had $6.9 million of total debt outstanding at December 31, 2021. 60 Table of Contents Operating Activities For the year ended Dec ember 31, 2022, net cash used in operating activities was $44.5 million, which primarily reflects a net income of $72.9 million, adjusted for non-cash share-based compensation of $63.3 million, non-cash gains of $173.5 million in earnout and warrant liabilities due to changes in fair value and an aggregate cash provided by operating assets and liabilities of $2.7 million.
For the year ended December 31, 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.
Selling, general and administrative costs are expensed as incurred. Interest Income Interest income primarily consists of interest income earned from our cash on hand due to the increase of interest rates. Interest Expense Interest expense primarily consists of interest under our term loan facility held during the year.
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.
We expect research and development expense to continue to increase as we grow our headcount to continue our diversification into new applications. Sellin g, General and Administrative Expense Selling, general and administrative expense for the twelve months ended December 31, 2022 of $78.4 million increased by $27.0 million, or 53%, when compared to the twelve months ended December 31, 2021.
We expect research and development expense to continue to increase as we grow our headcount to continue our diversification into new applications. 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.
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.
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 evaluate various complementary technologies and look to improve our PDK, in order to keep introducing newer generations of GaN technology. In 2021 and 2022, we spent approximate ly 103% and 141%, respectively, o f our revenue on research and development. Navitas’ research and development activities are located primarily in the US and China.
We evaluate various complementary technologies and look to improve our PDK, in order to keep introducing newer genera tions of GaN technology. In the years ended December 31, 2023 and 2022, we spent approximately 87% and 133%, respectively, of our revenue on research and development. Navitas’ research and development activities are located primarily in the US and China.
Cost of Revenues Cost of revenues for the twelve months ended December 31, 2022 was $26.0 million, an increase of $12.9 million or 99% compared to the twelve months ended December 31, 2021.
Cost of Revenues Cost of revenues for the twelve months ended December 31, 2023 was $48.4 million, an increase of $22.4 million or 86% compared to the twelve months ended December 31, 2022.
The increase is primarily due to business acquisitions that occurred during the fiscal year ended December 31, 2022.
The increase is primarily due to having a full year of amortization expense in 2023 compared to 2022, as a result of business acquisitions that occurred during the fiscal year ended December 31, 2022.
Our management bases its estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances.
GAAP requires our management to make judgments, assumptions and estimates that affect the amounts reported in our accompanying consolidated financial statements and the accompanying notes included elsewhere in this annual report. Our management bases its estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances.
Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting estimates include revenue recognition and the assumptions used in the valuation of intangible assets, determination of accounting for earnout shares, and share-based compensation.
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.
For the year ended December 31, 2021, net cash used in operating activities was $41.7 million, which primarily reflects a net loss of $152.7 million, adjusted for non-cash share-based compensation of $41.4 million and non-cash, non-operating losses of $83.7 million and includes an aggregate decrease of $15.2 million due to higher operating assets.
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.
The decrease in fair value of our earn-out liability of $121.7 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq, resulting in the decline in the estimated fair value of the earnout shares from $16.09 as of December 31, 2021 to $1.47 as of December 31, 2022 . iii) Other expense primarily reflects our minority interest in the net loss of a joint venture through August 18, 2022.
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 .
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.
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- 36 Table of Contents density power electronics to electrify our world for a cleaner tomorrow.
We maintain operations around the world, including the United States, Ireland, Germany, Italy, Belgium, China, Taiwan, Thailand, and the Philippines, with principal executive offices in Torrance, California. 54 Table of Contents 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.
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.
Contractual Obligations, Commitments and Contingencies In the ordinary course of business, we enter into contractual arrangements that may require future cash payments. As of December 31, 2022, our non-cancellable contractual arrangements consisted entirely of a contract to guarantee future production capacity, of which $1.6 million remains outstanding as of year end.
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. Refer to Note 7 - Leases for further information on our minimum future payments related to lease obligations.
Earnout Shares Certain of the Company’s stockholders are entitled to receive up to 10,000,000 Earnout Shares of the Company’s Class A common stock if the Earnout Milestones are met. The Earnout Milestones represents three independent criteria, which each entitles the eligible stockholders to 3,333,333 earn-out shares per milestone met.
Earnout Shares Certain shareholders of the Company are eligible to receive up to 10,000,000 Earnout Shares of the Company's Class A common stock, contingent upon the fulfillment of Earnout Milestones. These milestones consist of three distinct criteria, with each criterion granting eligible stockholders 3,333,333 earn-out shares upon meeting the specified conditions.
Net cash provided by financing activities for the year ended December 31, 2021 of $274.5 million was primarily the result of $298.1 million in proceeds from the reverse recapitalization an d $0.9 million in net proceeds from the issuance and repayment of debt, offset by $25.0 million of stock issuance costs.
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.
Overview Founded in 2013, Navitas is a U.S.-based developer of gallium nitride power integrated circuits that provide superior efficiency, performance, size and sustainability relative to existing silicon technology. Our solutions offer faster charging, higher power density and greater energy savings compared to silicon-based power systems with the same output power.
Further details about the Business Combination and the acquisition of GeneSiC Semiconductor can be found in our SEC filings. Founded in 2014, Navitas is a U.S.-based developer of gallium nitride power integrated circuits that provide superior efficiency, performance, size and sustainability relative to existing silicon technology.
Results of Operations Revenue We design, develop and manufacture GaN ICs, SiC MOSFETs and Schottky MPS diodes that deliver best-in-class performance, ruggedness, and quality. Our revenue represents the sale of semiconductors through specialized distributors to original equipment manufacturers (“OEMs”), their suppliers and other end customers.
Our revenue represents the sale of semiconductors through specialized distributors to original equipment manufacturers (“OEMs”), their suppliers and other end customers.
The increase was primarily driven by significant revenue growth, including the acquisition of GeneSiC, inventory charges of $2.8 million and higher wafer prices from TSMC. 58 Table of Contents Research and Development Expense Research and development expense for the twelve months ended December 31, 2022 of $50.3 million increased by $22.8 million, or 83%, when compared to the twelve months ended December 31, 2021, primarily driven by increases in stock based compensation of $13.2 million and $8.2 million in higher compensation costs related to growth in headcount as the Company developed products in the home appliances, solar, data center, industrial, and EV markets.
The increase was primarily driven by revenue growth and the acquisition of GeneSiC. 40 Table of Contents 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.
Refer to Note 7 - Leases for further information on our minimum future payments related to lease obligations. Off-Balance Sheet Commitments and Arrangements As of December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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 The preparation of our financial statements and related disclosures in accordance with U.S.
Each Earnout Milestone is 63 Table of Contents considered met if at anytime 150 days following the Business Combination and prior to October 19, 2026, the volume weighted average price of the Company’s Class A common stock is greater than or equal to $12.50, $17.00 or $20.00 for any twenty trading days within any thirty trading day period, respectively 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.
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 significant increase was driven by revenues derived from the GeneSiC acquisition and increased unit sales in the home appliance market, partially offset by declines in the China mobile market.
The increase was driven primarily by revenues derived from a full year of operations from the GeneSiC acquisition that closed on August 15, 2022, partially offset by decreased unit sales in the home appliance market.
Net cash used in investing activities for the year ended December 31, 2021 of $3.5 million was primarily due to $0.7 million cash co nsideration paid for an asset acquisition, $0.7 million cash funding of a joint venture and $2.1 million for purchases of fixed assets.
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. 42 Table of Contents 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.
As of December 31, 2022, our balance of cash and cash equivalents was $110.3 million, which is a decrease of $157.9 million or 59% co mpared to December 31, 2021.
As of December 31, 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.
Navitas GaN is now in mass production with 9 of the top world-wide 10 mobile OEMs across smartphone and laptops in development with 10 out of 10. In addition, our supply chain partners have committed manufacturing capacity in excess of what we consider to be necessary to support our continued growth and expansion.
In addition, our supply chain partners have committed manufacturing capacity in excess of what we consider to be necessary to support our continued growth and expansion. A core strength of our business lies in our industry leading IP position.
GeneSiC’s net assets and operating results since the merger date are included in the Company’s Consolidated Balance Sheet and Consolidated Statements of Operations as of and for the year ended December 31, 2022.
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. Results of Operations Revenue We design, develop and manufacture GaN ICs, SiC MOSFETs and Schottky MPS diodes that deliver best-in-class performance, ruggedness and quality.
We expect selling, general and administrative costs to increase to support our revenue growth. Amortization of Definite-Lived Intangible Assets Amortization of definite-lived intangible assets for the twelve months ended December 31, 2022 of $6.9 million increased by $6.6 million, or 1,810%, when compared to the twelve months ended December 31, 2021.
The decrease is primarily driven by decreases of $16.2 million in stock based compensation. Amortization of Definite-Lived Intangible Assets Amortization of definite-lived intangible assets for the twelve months ended December 31, 2023 of $18.8 million increased by $11.9 million, or 172%, when compared to the twelve months ended December 31, 2022.
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.
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.
Removed
A core strength of our business lies in our industry leading IP position in GaN Power ICs. Navitas invented the first commercial GaN Power ICs. Today, we ha ve over 185 patents that are issued or pending.
Added
Overview Navitas Semiconductor Corporation, a Delaware holding company, operates through its wholly owned subsidiaries, including Navitas Semiconductor Limited and GeneSiC Semiconductor LLC (“GeneSiC”). Originally founded in 2014 as the legacy Navitas Semiconductor business, we were previously an SEC registrant named Live Oak Acquisition Corp. II (“Live Oak”).
Removed
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, 2022. 55 Table of Contents Business Combination and Reverse Recapitalization On May 6, 2021, Navitas Semiconductor Limited (“Navitas Ireland”), a private company limited by shares organized under the Laws of Ireland and domesticated in the State of Delaware as Navitas Semiconductor Ireland, LLC, (“Navitas Delaware”, and together with Navitas Ireland, “Legacy Navitas”) a Delaware limited liability company, entered into a business combination agreement and plan of reorganization (the “Business Combination Agreement” or “BCA”) with Live Oak Acquisition Corp.
Added
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.
Removed
II, (“Live Oak”). Pursuant to the BCA, Live Oak acquired all of the capital stock of Navitas Ireland by means of a tender offer, and a wholly owned subsidiary of Live Oak merged with and into Navitas, Delaware, with Navitas Delaware surviving the merger.
Added
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.
Removed
As a result, Legacy Navitas became a wholly owned subsidiary of Live Oak effective October 19, 2021. At the closing of the Business Combination, Live Oak changed its name to Navitas Semiconductor Corporation. The Business Combination was accounted for as a reverse recapitalization in accordance with US GAAP.
Added
Navitas GaN has entered mass production and is being utilized by 9 out of the top 10 global mobile OEMs for the development of smartphones and laptops, with all 10 out of 10 currently in progress .
Removed
Under the guidance in Accounting Standards Codification (“ASC”) 805, “ Business Combinations” , Live Oak was treated as the “acquired” company for financial reporting purposes.
Added
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.
Removed
We were deemed the accounting predecessor and the post-combination company is the successor SEC registrant, meaning that our financial statements for previous periods were disclosed in our annual report Form 10-K filed with the SEC on March 31, 2022. The Business Combination had a significant impact on our reported financial position and results as a consequence of the reverse recapitalization.
Added
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.
Removed
The most significant change in our reported financial position and results of operations was net cash proceeds of $298,054 from the merger transaction, which includes $173,000 in gross proceeds from the PIPE financing that was consummated in conjunction with the Business Combination.
Added
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.
Removed
The increase in cash was offset by transaction costs incurred in connection with the Business Combination of approximately $25 million. Navitas expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
Added
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.
Removed
Our product revenue is well diversified across the United States, Europe, and Asia.
Added
The Company intends to use the net proceeds for working capital and other general corporate purposes, including potential acquisitions or strategic manufacturing investments. 37 Table of Contents Buyout of Elevation Semiconductor On January 19, 2023, the Company announced an agreement to acquire the remaining minority interest in its silicon control IC joint venture from Halo Microelectronics International Corporation (“Halo”).
Removed
The increase is primarily due to a $8.8 million increase in stock-based compensation, along with an increase of $3.0 million in compensation costs related to growth in headcount. In addition, the Company incurred $5.9 million of transaction expenses related to the acquisition of GeneSiC and a $3.7 million increase in costs associated with the operating of a public company.
Added
Total consideration for the joint venture interests and certain intellectual property rights purchased from Halo, and certain other interests and agreements of Halo and joint venture employees, was approximately $22.4 million in Navitas stock. As Navitas was already the majority shareholder, financial results from the joint venture have already been reflected in Navitas’ historical financial statements.
Removed
During the twelve months ended December 31, 2022, we recognized a $51.8 million gain from the change in fair value of our warrant liabilities, a $121.7 million decrease in fair value of our earn out liabilities and a $1.1 million loss from equity method investment, as follows: i) Warrants: The change in fair value of our warrant liability is due to the Company issuing a notice of redemption on February 4, 2022 and the Company revaluing the liability just before the exercise and redemptions which resulted in a valuation change of $51.8 million. ii) Earnout liability: Subsequent to the recognition of the earnout liability upon the consummation of the Business Combination on October 19, 2021, we remeasure the fair value of this liability at each reporting date.
Added
The transaction was completed on February 13, 2023. In connection with the purchase of intellectual property, the Company recognized an intangible asset at its estimated fair value of $4.4 million related to acquired intellectual property.
Removed
Critical Accounting Policies and Estimates The preparation of our financial statements and related disclosures in accordance with U.S. GAAP requires our management to make judgments, assumptions and estimates that affect the amounts reported in our accompanying consolidated financial statements and the accompanying notes included elsewhere in this annual report.
Added
During the Company’s second quarter of 2023, the Company received information regarding products shipped by GeneSiC to a distributor prior to the Company’s acquisition of GeneSiC. GeneSiC had the option, but not the obligation, to accept returns sold to the distributor.
Removed
JOBS Act Accounting Election We are an emerging growth company, as defined in the JOBS Act.
Added
The Company determined that a $1.7 million return liability should have been recorded as of the close of the acquisition on August 15, 2022. The Company recorded the return liability as a purchase price adjustment as of June 30, 2023, resulting in an increase to goodwill and accounts payable and other accrued expenses of $1.7 million.
Removed
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies, allowing them to delay the adoption of those standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period under the JOBS Act.
Added
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.
Removed
As a result, following the Business Combination, our consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make common stock less attractive to investors.
Added
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. 41 Table of Contents As December 31, 2023 , we had cash and cash equival ents of $152.8 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item. 64 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Although we are no longer a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period, we are not required to provide the information required under this item.
Added
According to the SEC Manual Topic 5, we may continue utilizing scaled disclosures through our annual report on the Form 10-K and larger company disclosures will be incorporated in the first Form 10-Q of the subsequent fiscal year. 46 Table of Contents

Other NVTS 10-K year-over-year comparisons