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Item 7. Management’s Discussion and Analysis

2026-03-19 compared with 2025-03-28 · 94 added, 82 removed, 99 unchanged (64% of the section changed)

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Unless otherwise stated, all information presented herein is based on our fiscal calendar, and references to particular years, quarters, months or periods refer to our fiscal years ended in January or December and the associated quarters, months and periods of those fiscal years.

We are a leading innovator in advanced memory and storage solutions, pushing the boundaries of technology to deliver unparalleled performance and reliability.

With a rich portfolio of patented technologies, we have consistently driven innovation in the field of cutting-edge enterprise memory and storage, advancing AI and empowering businesses and industries to thrive in the digital age.

We are a leading innovator in advanced memory and storage solutions.

With a rich portfolio of patented technologies, our inventions are foundational to the advancement of AI computing.

Economic Conditions, Challenges and Risks

Our performance, financial condition and prospects are affected by a number of factors and are exposed to a number of risks and uncertainties.

Our performance improved in the second half of 2025, driven by increased demand for our memory products and disciplined commercial execution.

In our view, accelerated AI adoption has tightened industry supply relative to demand, contributing to broad - based price increases.

We currently expect these dynamics to continue until incremental third - party fabrication capacity becomes available, potentially beginning in late 2026 or 2027;

however, capacity timing and end - market demand may differ from our expectations due to factors beyond our control.

In addition, the vast majority of our net product sales in recent periods have been generated from resales of products sourced from SK hynix pursuant to the Supply Agreement.

The term of the supply provisions of this Supply Agreement officially expires in April 2026.

We presently intend to continue to purchase products from SK hynix following expiration of the term, but SK hynix may not continue to supply us with products for resale on similar terms to our existing arrangements or at all.

In such circumstances, our revenue in future periods may be adversely affected.

Our performance, financial condition and prospects are also affected by a number of factors and are exposed to a number of risks and uncertainties.

We operate in a competitive and rapidly evolving industry in which new risks emerge from time to time, and it is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations.

See the discussion of certain risks that we face under “Risk Factors” in Item 1A of this report.

Recent Development

Fiscal Year Highlights

Amendment to 2023 SVB Credit Agreement

On November 7, 2025, we entered into a first amendment to the 2023 SVB Credit Agreement (the “2023 SVB Credit Agreement Amendment”) to, among other things, extend the maturity date from November 7, 2025 to November 7, 2027.

October 2025 Offering

On October 6, 2025, we entered into a Securities Purchase Agreement (the “October 2025 Purchase Agreement”) with certain investors (collectively, the “October 2025 Purchasers”), pursuant to which we issued and sold to the October 2025 Purchasers in a registered offering (the “October 2025 Offering”) an aggregate of (i) 14,285,716 shares of our common stock and (ii) Common Stock Purchase Warrants (the “October 2025 Warrants”) to purchase up to an aggregate of 28,571,432 shares (the “October 2025 Warrant Shares”) of our common stock at a combined purchase price of $0.70 per share and accompanying October 2025 Warrant.

The October 2025 Offering closed on October 7, 2025.

The net proceeds to us from the October 2025 Offering were approximately $9.3 million, after deducting placement agent fees and offering costs paid by us.

The October 2025 Warrants are exercisable at any time on or after the issuance date, have a term of five years from the issuance date, have an exercise price of $0.70 per share, contain customary 4.99%/9.99% blocker provisions and provide for the cash payment of the Black-Scholes value of the October 2025 Warrants upon the occurrence of certain fundamental transactions.

The exercise price and the number of October 2025 Warrant Shares issuable upon exercise of the October 2025 Warrants are subject to adjustment in the event of, among other things, certain transactions affecting our common stock (including without limitation stock splits and stock dividends).

In addition, the exercise price of the October 2025 Warrants is subject to reduction in the event of certain common stock and common stock equivalent issuances, other than certain agreed exempt issuances, at a price lower than the exercise price of the October 2025 Warrants then in effect.

The October 2025 Purchase Agreement also provided that we could not, subject to the exceptions described in the October 2025 Purchase Agreement (including an exception permitting us to utilize the March 2025 Purchase Agreement following the expiration of the 90-day period following the closing of the October 2025 Offering), effect or enter into any Variable Rate Transactions (as defined in the October 2025 Purchase Agreement) until the six-month anniversary of the closing date of the October 2025 Offering.

Amendment to Securities Purchase Agreements and Warrants

Some of the purchasers pursuant to the October 2025 Purchase Agreement are also holders of the June 2025 Warrants and were purchasers pursuant a securities purchase agreement dated October 11, 2024 (the “October 2024 Purchase Agreement”).

Pursuant to the terms of the October 2025 Purchase Agreement, these holders agreed to waive certain variable rate prohibitions and participation rights set forth in the October 2024 Purchase Agreement relating to the October 2025 Offering and to, among other things, revise certain anti-dilution provisions relating to the June 2025 Warrants in exchange for our reduction of the exercise price of the June 2025 Warrants to an exercise price equal to the lesser of $0.60 and the lowest VWAP of the shares of common stock on any trading day during the period commencing on October 6, 2025 and including, the fourth trading day immediately following October 7, 2025 (such waivers and amendments, collectively the “Waiver and Amendment”).

Additionally, on October 6, 2025, the remaining holders of the June 2025 Warrants who are not party to the October 2025 Purchase Agreement also entered into waiver and amendment agreements, pursuant to which they agreed to the Waiver and Amendment.

The adjusted exercise price of the June 2025 Warrants is now $0.60.

The June 2025 Warrants may be further adjusted for future dilutive issuances.

Amendment to Restated Certificate of Incorporation

On September 24, 2025, our stockholders approved the Certificate of Amendment to the Certificate of Incorporation to increase the number of authorized shares of our common stock from 450,000,000 to 675,000,000.

Netlist, Inc.

2025 Equity Incentive Plan

On September 9, 2025, our stockholders approved the Netlist, Inc.

2025 Equity Incentive Plan at our 2025 Annual Meeting of Stockholders.

June 2025 Offering

On June 24, 2025, we entered into a Securities Purchase Agreement (the “June 2025 Purchase Agreement”) with certain investors, including Chun K.

Hong, Chairperson of our board of directors, President and Chief Executive Officer (collectively, the “June 2025 Purchasers”), pursuant to which we issued and sold to the June 2025 Purchasers in a registered offering (the “June 2025 Offering”) an aggregate of (i) 17,142,860 shares of our common stock and (ii) Common Stock Purchase Warrants (the “June 2025 Warrants”) to purchase up to an aggregate of 34,285,720 shares of our common stock (the “June 2025 Warrant Shares”) at a combined purchase price of $0.70 per share and accompanying June 2025 Warrant.

Hong purchased $3.0 million of shares and accompanying June 2025 Warrants in the June 2025 Offering.

The June 2025 Offering closed on June 25, 2025.

The net proceeds to us from the June 2025 Offering were approximately $11.6 million, after deducting placement agent fees and offering costs paid by us.

The June 2025 Warrants are exercisable at any time on or after the issuance date, have a term of five years from the issuance date, have an exercise price of $0.70 per share, contain customary 4.99%/9.99% blocker provisions and provide for the cash payment of the Black-Scholes value of the June 2025 Warrants upon the occurrence of certain fundamental transactions.

The exercise price and the number of June 2025 Warrant Shares issuable upon exercise of the June 2025 Warrants are subject to adjustment in the event of, among other things, certain transactions affecting our common stock (including without limitation stock splits and stock dividends).

In addition, the exercise price of the June 2025 Warrants is subject to reduction in the event of certain common stock and common stock equivalent issuances, other than certain agreed exempt issuances, at a price lower than the exercise price of the June 2025 Warrants then in effect.

Furthermore, if at any time on or after the date of issuance there occurs any Share Combination Event and the lowest daily volume weighted average price of our common stock during the period commencing on the trading day immediately following the applicable Share Combination Event and ending on the fifth trading day immediately following the applicable Share Combination Event is less than the exercise price of the June 2025 Warrants then in effect, then the exercise price of the June 2025 Warrants will be reduced to the lowest daily volume weighted average price of our common stock during such period.

On October 6, 2025, we amended the June 2025 Warrants.

The June 2025 Purchase Agreement provided that we could not, subject to the exceptions described in the June 2025 Purchase Agreement (including an exception permitting us to utilize the March 2025 Purchase Agreement following the expiration of the 90-day period following the closing of the June 2025 Offering), effect or enter into any Variable Rate Transactions (as defined in the June 2025 Purchase Agreement) until the six-month anniversary of the closing date of the June 2025 Offering.

March 2025 Lincoln Park Purchase Agreement

On March 13, 2025, we entered into the March 2025 Purchase Agreement with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $75 million in shares of our common stock, subject to the conditions and limitations set forth in the March 2025 Purchase Agreement.

Concurrent with the execution of the March 2025 Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park relating to the common stock to be sold to Lincoln Park.

As consideration for entering into the March 2025 Purchase Agreement, we issued to Lincoln Park 1,123,023 shares of our common stock as initial commitment shares in a noncash transaction on March 13, 2025 and will issue up to 1,123,023 additional shares of our common stock as additional commitment shares on a pro rata basis in connection with any additional purchases.

As consideration for

entering into the March 2025 Purchase Agreement, we issued to Lincoln Park 1,123,023 shares of our common stock as initial commitment shares in a noncash transaction on March 13, 2025 and agreed to issue up to 1,123,023 additional shares of our common stock as additional commitment shares on a pro rata basis in connection with any additional purchases.

We will not receive any cash proceeds from the issuance of these additional commitment shares.

These issuances of our common stock were registered pursuant to a prospectus supplement to our existing Registration Statement on Form S-3 originally declared effective by the SEC on August 14, 2024.

Subsequently, from March 14, 2025 through March 21, 2025, Lincoln Park purchased an aggregate of 460,000 shares of our common stock for a net purchase price of $0.5 million under the March 2025 Purchase Agreement.

In connection with the purchase, we issued to Lincoln Park an aggregate of 866 shares of our common stock as additional commitment shares in noncash transactions.

Fiscal Year Highlights

September 2021 Lincoln Park Purchase Agreement

On September 28, 2021, we entered into the September 2021 Purchase Agreement with Lincoln Park, pursuant to which we had the right to sell to Lincoln Park up to an aggregate of $75 million in shares of our common stock over the 36-month term of the September 2021 Purchase Agreement subject to the conditions and limitations set forth in the September 2021 Purchase Agreement.

During 2024, Lincoln Park purchased an aggregate of 3,195,889 shares of our common stock for a net purchase price of $5.2 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 10,046 shares of our common stock as additional commitment shares in noncash transactions.

On October 1, 2024, the September 2021 Purchase Agreement terminated on its terms.

2024 Offering

On October 11, 2024, we entered into a Securities Purchase Agreement (the “2024 Purchase Agreement”) with certain investors, pursuant to which we issued and sold to the investors in a registered offering (the “2024 Offering”) an aggregate of (i) 13,636,364 shares of our common stock, (ii) Series A Common Stock Purchase Warrants (the “Series A Warrants”) to purchase up to an aggregate of 13,636,364 shares of our common stock at a purchase price of $1.30 per share, and (iii) Series B Common Stock Purchase Warrants (the “Series B Warrants,” collectively, the “Warrants”) to purchase up to 13,636,364 shares of our common stock, at a purchase price of $1.10 per share and accompanying warrants.

The 2024 Offering closed on October 15, 2024.

The net proceeds to us were approximately $14.2 million, after deducting placement agent fees and offering costs paid by us.

The Warrants are exercisable at any time on or after the issuance date.

The Series A Warrants have a term of five years from the issuance date, have an exercise price of $1.30 per share and provide for the cash payment of the value of the Series A Warrants based on the Black-Scholes pricing model upon the occurrence of certain fundamental transactions.

The Series B Warrants had a term of 100 days and an exercise price of $1.10 per share.

None of the Series B Warrants were exercised prior to their expiration.

On October 11, 2024, we entered into a Placement Agency Agreement (the “Placement Agreement”) with Roth Capital Partners, LLC (“Roth”), pursuant to which Roth agreed to act as our placement agent in connection with the 2024 Offering.

Pursuant to the terms of the Placement Agreement, in consideration for its placement agent services, we agreed to pay Roth a cash fee in an amount equal to 4% of the aggregate gross proceeds received by us in connection with the closing of the 2024 Offering and upon the cash exercise of the Series B Warrants.

Pursuant to the 2024 Purchase Agreement, our director and executive officers entered into lock-up agreements with us, pursuant to which they agreed not to offer for sale, contract to sell, or sell any shares of our common stock or any securities convertible into, or exercisable or exchangeable for, shares of our common stock, for a period of 100 days from the closing of the 2024 Offering, subject to certain customary exceptions.

The 2024 Purchase Agreement also provides that we may not, subject to the exceptions described in the 2024 Purchase Agreement, effect or enter into any Variable Rate Transactions (as defined in the 2024 Purchase Agreement) until the one-year anniversary of the closing date of the 2024 Offering.

Fourth Amendment to Rights Agreement

On April 17, 2024, the Company entered into a fourth amendment (the “Fourth Amendment”) to the Company’s rights agreement dated as of April 17, 2017 (as amended from time to time, the “Rights Agreement”).

The Fourth Amendment appointed Equiniti Trust Company, LLC as rights agent and amended the definition of “Expiration Date” in the Rights Agreement to extend the term for an additional three-year period which extended the final expiration of the Rights issued pursuant to the Rights Agreement from April 17, 2024 to April 17, 2027.

As a result and pursuant to the Fourth Amendment, the Rights will expire and become unexercisable on or before the close of business on April 17, 2027, in accordance with the terms of the Rights Agreement.

Second Amended and Restated Bylaws

On November 4, 2024, our board of directors adopted and approved, effective immediately, the second amended and restated bylaws (the “Second Amended and Restated Bylaws”).

The Second Amended and Restated Bylaws, among other things, (i) decreases the quorum requirement for stockholder meetings from a majority to one-third of the outstanding shares of stock entitled to vote, (ii) conforms to the SEC’s universal proxy card rules, and (iii) updates for certain other administrative and conforming changes.

The foregoing summary of the Second Amended and Restated Bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the Second Amended and Restated Bylaws, which is attached as Exhibit 3.2 and incorporated herein by reference.

Ineffective Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As of December 28, 2024, management concluded that our internal control over financial reporting was ineffective due to one material weakness.

The identified material weakness, at December 28, 2024, relates to the lack of an independent board and audit committee.

While the control weaknesses identified did not result in any identified misstatements, a reasonable possibility exists that a material misstatement to the annual or interim consolidated financial statements and disclosures will not be prevented or detected on a timely basis.

In an effort to address the identified material weakness related to the lack of an independent board and audit committee and to enhance our internal controls, our finance and accounting personnel are continuing to follow all of the same procedures that they undertook in preparation for independent audit committee meetings on a quarterly and annual basis.

Our Chief Executive Officer and sole director will oversee these processes and review materials prepared by the finance and accounting staff as well as our independent registered public accounting firm on a quarterly and annual basis.

If our measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting occur in the future, we may not be able to timely or accurately report our results of operations or maintain effective disclosure controls and procedures.

If we are unable to report financial information timely or accurately, or to maintain effective disclosure controls and procedures, we could be required to restate our financial statements and be subject to, among other things, regulatory or enforcement actions, securities litigation, limitations on our ability to access capital markets, debt rating agency downgrades or rating withdrawals, or loss in confidence of our investors, any one of which could adversely affect the valuation of our common stock and our business prospects.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.

During the fiscal year ended December 27, 2025, Lincoln Park purchased an aggregate of 1,496,009 shares of our common stock for a net purchase price of approximately $1.3 million under the March 2025 Purchase Agreement.

Results of Operations

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Net sales also include sales of Netlist’s own products.

Net sales increased by approximately $77.9 million during fiscal year 2024 compared to fiscal year 2023, primarily as a result of a $74.8 million increase in the sale of RDIMM and discrete component products, a $1.9 million increase in the sale of Netlist’s flash and SSD products, and a $1.2 million increase in sales of low-profile memory subsystem products.

Net sales increased by approximately $41.5 million during fiscal year 2025 compared to fiscal year 2024, primarily as a result of a $43.2 million increase in the sale of RDIMM and discrete component products and a $4.3 million increase in sales of low-profile memory subsystem products, partially offset by a $6.0 million decrease in sales of Netlist’s flash and SSD products.

Gross Profit and Gross Margin

Gross profit increased in fiscal year 2024 compared to fiscal year 2023 due primarily to higher sales across all product groups.

Gross margin percentage decreased in fiscal year 2024 compared to fiscal year 2023 primarily as a result of the change in our product mix.

Gross profit and gross margin percentage increased in fiscal year 2025 compared to fiscal year 2024 due primarily to higher sales across all product groups driven by the current demand environment.

Operating Expenses

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Intellectual property legal fees consist of legal fees incurred for enforcement, protection and patent filings and prosecution.

Although we expect intellectual property legal fees to generally increase over time as we continue to protect, defend and enforce and seek to expand our patent portfolio, these increases may not be linear but may occur in lump sums depending on the due dates of patent filings and their associated fees and the arrangements we may make with our legal advisors in connection with enforcement proceedings, which may include fee arrangements or contingent fee arrangements in which we would pay these legal advisors on a scaled percentage of any negotiated fees, settlements or judgments awarded to us based on if, how and

when the fees, settlements or judgments are obtained.

See Note 7 — Commitments and Contingencies of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion.

Intellectual property legal fees decreased during fiscal year 2024 compared to fiscal year 2023 due primarily to lower legal expenses incurred to defend and enforce our patent portfolio.

Intellectual property legal fees decreased in fiscal year 2025 compared to fiscal year 2024 due primarily to lower legal expenses incurred to defend and enforce our patent portfolio.

Selling, General and Administrative

Selling, general and administrative expenses decreased in fiscal year 2024 compared to fiscal year 2023 due primarily to a decrease in employee headcount.

Selling, general and administrative expenses increased in fiscal year 2025 compared to fiscal year 2024 due primarily to an increase in outside services.

Other Income, Net

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Total other income, net

Interest income, net decreased during fiscal year 2024 compared to fiscal year 2023, primarily as a result of interests earned on lower cash balances.

Other income, net increased during fiscal year 2024 compared to fiscal year 2023, primarily as a result of a reversal of the reserve to cover flood damage in our former manufacturing facility located in the PRC and full year of sublease income for our warehouse space located in Irvine, California during fiscal year 2024.

Other income, net included partial year of sublease income for our warehouse space located in Irvine, California during fiscal year 2023.

Interest income, net decreased in fiscal year 2025 compared to fiscal year 2024, primarily as a result of lower cash balances and lower interest rate.

Other income, net decreased in fiscal year 2025 compared to fiscal year 2024, primarily as a result of a one-time reversal of the reserve to cover flood damage in our former manufacturing facility located in the PRC during fiscal year 2024.

Provision for Income Taxes

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Liquidity and Capital Resources

We believe our existing balance of cash and cash equivalents (including restricted cash balances), which totaled $34.6 million as of December 28, 2024, along with cash receipts from revenues, borrowing availability under the 2023 SVB Credit Agreement (as defined below), proceeds raised from the 2024 Offering, funds raised through the March 2025 Purchase Agreement and other future debt and equity offerings and taking into account cash expected to be used in our operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months.

In addition, on April 5, 2021, we entered into a Product Purchase and Supply Agreement (the “Supply Agreement”) with SK hynix and the Strategic Agreement.

Both agreements have a term of 5 years.

Under the Strategic Agreement, (a) we have granted to SK hynix worldwide, non-exclusive, non-assignable licenses to certain of our patents covering memory technologies and (b) SK hynix has granted to us worldwide, non-exclusive, non-assignable licenses to its patent portfolio.

In addition, the Strategic Agreement provided for the settlement of all intellectual property proceedings between us and SK hynix and a settlement fee of $40 million paid to us by SK hynix.

In addition, the parties have agreed to collaborate on certain technology development activities.

We believe our existing balance of cash and cash equivalents (including restricted cash balances), which totaled $42.1 million as of December 27, 2025, along with cash receipts from revenues, borrowing availability under the 2023 SVB Credit Agreement (as defined below), proceeds raised from the June 2025 Offering and October 2025 Offering, funds raised through the March 2025 Purchase Agreement and other future debt and equity offerings and taking into account cash expected to be used in our operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months.

This belief reflects our current assessment of

known trends and uncertainties that could affect near - term liquidity, including the timing of cash effects from customer advance payments, fluctuations in borrowing - base availability and letters - of - credit usage and market conditions that affect our ability to utilize the March 2025 Purchase Agreement.

For the long term (i.e., beyond the next 12 months), based on our current plans and assumptions, we believe our sources of liquidity and access to capital will be adequate to meet our cash requirements as they come due, and we are not currently aware of material cash requirements beyond 12 months other than those described in the Notes to Consolidated Financial Statements.

In addition, on April 5, 2021, we entered into a Product Purchase and Supply Agreement (the “Supply Agreement”) with SK hynix which expires in April 2026.

If we are unable to renew this agreement, or renew on acceptable terms in a timely manner, our revenues and liquidity may be adversely affected.

For a description of contractual obligations, see Note 3 — Financing Arrangements and Note 4 — Leases of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

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Net change in cash, cash equivalents and restricted cash

Net cash used in operating activities for fiscal year 2025 was primarily a result of net loss of $24.8 million, non-cash adjustments to net loss of $3.6 million, partially offset by net cash inflows from changes in operating assets and liabilities of $6.4 million driven predominantly by an increase in deferred revenue related to advance payments received on orders shipped in January 2026, partially offset by a decrease in accounts payable and other liabilities, and an increase in accounts receivable and inventories.

The level and timing of any future customer prepayments may vary period to period based on contract terms and ordering patterns.

Net cash provided by financing activities for fiscal year 2025 primarily consisted of $1.3 million in net proceeds from issuance of common stock under the March 2025 Purchase Agreement, $11.6 million in net proceeds from the June 2025 Offering, $9.3 million in net proceeds from the October 2025 Offering, and $0.6 million in net borrowings under the 2023 SVB Credit Agreement, partially offset by $0.5 million in payments of note payable to finance insurance policies.

Net cash used in operating activities for fiscal year 2024 was primarily a result of net loss of $53.9 million, non-cash adjustments to net loss of $4.9 million, partially offset by net cash inflows from changes in operating assets and liabilities of $14.4 million driven predominantly by an increase in accounts payable, a decrease in accounts receivable, and a decrease in inventories, partially offset by a decrease in accrued payroll and related liabilities.

Net cash provided by financing activities for fiscal year 2024 primarily consisted of $5.2 million in net proceeds from issuance of common stock under the September 2021 Purchase Agreement, $14.2 million in net proceeds from the 2024 Offering, and $0.2 million in proceeds from exercise of stock options, partially offset by $2.6 million in net repayments under the 2023 SVB Credit Agreement and $0.5 million in payments of note payable to finance insurance policies.

Net cash used in operating activities for fiscal year 2023 was primarily a result of net loss of $60.4 million, non-cash adjustments to net loss of $5.3 million, partially offset by net cash inflows from changes in operating assets and liabilities of $13.5 million driven predominantly by an increase in accounts payable and a decrease in accounts receivable and prepaid expenses and other assets, partially offset by a decrease in accrued expenses and other liabilities and an increase in inventories.

Net cash provided by financing activities for fiscal year 2023 primarily consisted of $23.4 million in net proceeds from issuance of common stock under the September 2021 Purchase Agreement, $28.6 million in net proceeds from the 2023 Offering (as defined below), and $0.5 million in proceeds from exercise of stock options, $3.8 million in net borrowings under the 2023 SVB Credit Agreement partially offset by $4.9 million in net repayments under the credit agreement between the Company and SVB, dated October 31, 2009, as amended, which was terminated on April 28, 2023, and $0.4 million in payments of note payable to finance insurance policies.

Net cash provided by financing activities for fiscal year 2024 primarily consisted of $5.2 million in net proceeds from issuance of common stock under the purchase agreement entered into with Lincoln on September 28, 2021, which has been terminated, $14.2 million in net proceeds from the issuance and sale of securities under the securities purchase agreement we entered into with certain investors, dated October 11, 2024, in a registered direct offering (the “2024 Offering”), and $0.2 million in proceeds from exercise of stock options, partially offset by $2.6 million in net repayments under the 2023 SVB Credit Agreement and $0.5 million in payments of note payable to finance insurance policies.

The increase in deferred revenue produced a favorable timing effect on 2025 operating cash flows that may not repeat, and the level and timing of any future customer prepayments may vary period to period based on contract terms and ordering patterns.

Capital Resources

2024 Offering

On October 11, 2024, we entered into the 2024 Purchase Agreement with certain investors, pursuant to which we issued and sold to the investors in the 2024 Offering an aggregate of 13,636,364 shares of our common stock and Series A Warrants and Series B Warrants, each to purchase up to an aggregate of 13,636,364 shares of our common stock (totaling 27,272,728 shares of our common stock) at a per share purchase price of $1.30 per share and $1.10 per share, respectively.

The 2024 Offering closed on October 15, 2024.

The net proceeds to us from the 2024 Offering were approximately $14.2 million, after deducting placement agent fees and offering costs paid by us.

October 2025 Offering

On October 6, 2025, we entered into the October 2025 Purchase Agreement with the October 2025 Purchasers, pursuant to which we issued and sold to the October 2025 Purchasers in the October 2025 Offering an aggregate of (i) 14,285,716 shares of our common stock and (ii) 28,571,432 October 2025 Warrants to purchase the October 2025 Warrant Shares at a combined purchase price of $0.70 per share and accompanying October 2025 Warrant.

The October 2025 Offering closed on October 7, 2025.

The net proceeds to us from the October 2025 Offering were approximately $9.3 million, after deducting placement agent fees and offering costs paid by us.

June 2025 Offering

On June 24, 2025, we entered into the June 2025 Purchase Agreement with the June 2025 Purchasers, pursuant to which we issued and sold to the June 2025 Purchasers in the June 2025 Offering an aggregate of (i) 17,142,860 shares of our common stock and (ii) the June 2025 Warrants to purchase the June 2025 Warrant Shares at a combined purchase price of $0.70 per share and accompanying June 2025 Warrant.

Hong purchased $3.0 million of shares and accompanying June 2025 Warrants in the June 2025 Offering.

The June 2025 Offering closed on June 25, 2025.

The net proceeds to us from the June 2025 Offering were approximately $11.6 million, after deducting placement agent fees and offering costs paid by us.

The June 2025 Purchase Agreement also provided that we could not, subject to the exceptions described in the June 2025 Purchase Agreement (including an exception permitting us to utilize the March 2025 Purchase Agreement following the expiration of the 90-day period following the closing of the June 2025 Offering), effect or enter into any Variable Rate Transactions (as defined in the June 2025 Purchase Agreement) until the six-month anniversary of the closing date of the June 2025 Offering.

March 2025 Lincoln Park Purchase Agreement

On March 13, 2025, we entered into the March 2025 Purchase Agreement with Lincoln Park , pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $75 million in shares of our common stock over the 36-month term of the March 2025 Purchase Agreement subject to the conditions and limitations set forth in the March 2025 Purchase Agreement.

As of December 27, 2025, $ 73.7 million remains available under the March 2025 Purchase Agreement with Lincoln Park.

Sales under the March 2025 Purchase Agreement are subject to daily volume - based limits and a contractual floor price, and our ability to access the remaining capacity at any point in time depends on prevailing market prices and trading volumes.

2023 SVB Credit Agreement

On November 7, 2023, we entered into a loan and security agreement (the “2023 SVB Credit Agreement”) with SVB, which provides for a revolving line of credit up to $10.0 million.

On November 7, 2023, we entered into the 2023 SVB Credit Agreement with SVB, which provides for a revolving line of credit up to $10.0 million.

The borrowing base is limited to 85% of eligible accounts receivable, subject to certain adjustments.

Borrowings accrue interest on advance at a per annum rate equal to the greater of 8.50% and the Wall Street Journal prime rate.

The maturity date is November 7, 2025.

As of December 28, 2024, the outstanding borrowings under the 2023 SVB Credit Agreement were $1.2 million with no availability under the revolving line of credit.

During the year ended December 28, 2024, we made net repayments of $2.6 million under the 2023 SVB Credit Agreement.

2023 Offering

On August 14, 2023, we entered into a Securities Purchase Agreement (the “2023 Offering”) with certain investors, pursuant to which we issued and sold to the investors an aggregate of 11,111,112 shares of our common stock and warrants purchase up to an aggregate of 11,111,112 shares of our common stock at a per share purchase price of $2.70 per share.

The 2023 Offering closed on August 17, 2023.

The net proceeds to us from the 2023 Offering were $28.6 million, after deducting placement agent fees and offering costs paid by us.

September 2021 Lincoln Park Purchase Agreement

On September 28, 2021, we entered into the September 2021 Purchase Agreement with Lincoln Park, pursuant to which we had the right to sell to Lincoln Park up to an aggregate of $75.0 million in shares of our common stock over the 36-month term of the September 2021 Purchase Agreement subject to the conditions and limitations set forth in the September 2021 Purchase Agreement.

As of September 28, 2024, $31.0 million remained available under the September 2021 Purchase Agreement with Lincoln Park.

On October 1, 2024, the September 2021 Purchase Agreement terminated on its terms.

The maturity date was originally November 7,

On November 7, 2025, we entered into the 2023 SVB Credit Agreement Amendment to, among other things, extend the maturity date from November 7, 2025 to November 7, 2027.

As of December 27, 2025, the outstanding borrowings under the 2023 SVB Credit Agreement were $1.8 million with $0.2 million availability under the revolving line of credit.

During the year ended December 27, 2025, we had net borrowings of $0.6 million under the 2023 SVB Credit Agreement;

because borrowing capacity is driven by eligible receivables and reserve adjustments, availability may fluctuate with collections and sales mix, and letters of credit issued under the facility and with other banks are secured by cash and reduce unrestricted liquidity.

Critical Accounting Estimates

6 unchanged sentences

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available.

Returns for products sold are estimated using the expected value method and are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and is adjusted for known trends to arrive at the amount of consideration to which we expect to receive.

Returns for products sold are estimated using the expected value method and are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and are adjusted for known trends to arrive at the amount of consideration to which we expect to receive.

Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

3 unchanged sentences

We evaluate inventory balances for excess quantities and obsolescence on a regular basis by analyzing estimated demand, inventory on hand, sales levels and other information and reduce inventory balances to net realizable value for excess and obsolete inventory based on this analysis.

At the point of the write-down recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

We offer standard product warranties generally ranging from one to three years to our memory subsystem products customers, depending on the negotiated terms of any purchase agreements, and has no other post-shipment obligations or separately priced extended warranty or product maintenance contracts.

At the point of the write-down

recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

We offer standard product warranties generally ranging from one to three years to our memory subsystem products customers, depending on the negotiated terms of any purchase agreements, and have no other post-shipment obligations or separately priced extended warranty or product maintenance contracts.

These warranties require us to repair or replace defective product returned to us during the warranty period at no cost to the customer.

12 unchanged sentences

The expected dividend assumption is based on our history and management’s expectation regarding dividend payouts.

The grant-date fair value of restricted stock units (“RSUs”) equals the closing price of our common stock on the grant date.

The grant-date fair value of RSUs equals the closing price of our common stock on the grant date.

Uncertain Tax Positions

11 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis