What changed in this filing

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Item 1A. Risk Factors

2022-05-09 compared with 2021-11-10 · 56 added, 90 removed, 559 unchanged (21% of the section changed)

Summary of Risk Factors

The risk factors summarized and detailed below could materially harm our business, operating results, financial condition, impair our future growth prospects and/or cause the price of our common stock to decline.

These are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur.

In assessing these risks, you should also review the other information contained in this report, including our consolidated financial statements and accompanying notes, and the other filings we make with the SEC.

Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to the following:

Risks Related to Our Business, Operations and Industry

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If we are unable to remediate the material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business;

● We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, that place significant demands on our resources, and the transition to the higher reporting and control standards that will apply to us as a “large accelerated filer” may cause management distraction and increased costs.

● We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, that place significant demands on our resources, and the transition to the higher reporting and control standards that applies to us as a “large accelerated filer” may cause management distraction and increased costs.

Risks Related to Intellectual Property and Litigation

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In addition, the continued spread of COVID-19 variants, or the occurrence of other epidemics could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and further adversely impact our results of operations.

There are numerous uncertainties associated with the coronavirus outbreak, including the number of individuals who will become infected, whether vaccination level will increase sufficiently to stop the spread of COVID-19 and its variants, and the extent of the protective and preventative measures that have been put in place by both governmental entities and other businesses and those that may be put in place in the future.

There are numerous uncertainties associated with the COVID-19 outbreak, including the number of individuals who will become infected, whether vaccination level will increase sufficiently to stop the spread of COVID-19 and its variants, and the extent of the protective and preventative measures that have been put in place by both governmental entities and other businesses and those that may be put in place in the future.

Any or all of the foregoing uncertainties could have a material adverse effect on our results of operations, financial position and/or cash flows.

We have historically incurred losses and may continue to incur losses.

Since the inception of our business in 2000, we have only experienced one fiscal year (2006) with profitable results.

In order to regain profitability, or to achieve and sustain positive cash flows from operations, we must reduce operating expenses and/or increase our revenues and gross margin.

Since the inception of our business in 2000, we have only experienced two fiscal years (2006 and 2021) with profitable results.

In order to sustain profitability, or to achieve and sustain positive cash flows from operations, we must reduce operating expenses and/or increase our revenues and gross margin.

Although we have in the past engaged in a series of cost reduction actions, such expense reductions alone will not make us profitable or allow us to sustain profitability if it is achieved, and eliminating or reducing strategic initiatives could limit our opportunities and prospects.

Our ability to achieve profitability will depend on increased revenue growth from, among other things, increased demand for our

product offerings and our ability to monetize our intellectual property.

We may not be successful in any of these pursuits, and we may never achieve profitability or sustain profitability if achieved.

Our ability to sustain profitability will depend on increased revenue growth from, among other things, increased demand for our product offerings and our ability to monetize our intellectual property.

We may not be successful in any of these pursuits, and we may not be able to sustain profitability if achieved.

The vast majority of our net product sales in recent periods have been generated from resales of component products and any decline in these product resales could significantly harm our performance.

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As a result, any decrease in demand for these products from us would reduce our sale levels and could materially adversely impact our revenues.

Additionally, opportunistic purchases of products for resale, when coupled a decrease in demand, may cause us to write off excess inventory which would adversely affect our operating performance.

Additionally, opportunistic purchases of products for resale, when coupled with a decrease in demand, may cause us to write off excess inventory which would adversely affect our operating performance.

We may experience supply shortages at any time and for a variety of reasons, including, among others, spikes in customer demand that cannot be satisfied, any problems that arise with Samsung’s or SK hynix’s manufacturing operations or facilities that cause disruptions or delays, including from the recent COVID-19 pandemic, or any failure to comply with the terms of the agreements regarding the supply of these products.

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Although we expect these memory subsystems to continue to account for a portion of our revenues, we have experienced declines in sales of these products in recent periods, and these declines could continue or intensify in the future.

We believe market acceptance of these products or derivative products that incorporate our core memory subsystem

technology is critical to our success, and any continued decline in sales of these products could have a material adverse impact on our performance and long-term prospects.

We believe market acceptance of these products or derivative products that incorporate our core memory subsystem technology is critical to our success, and any continued decline in sales of these products could have a material adverse impact on our performance and long-term prospects.

We have invested significant research and development time and capital in the design of application-specific integrated circuits (“ASIC”) and hybrid devices, including our NVvault family of products and our next-generation HybriDIMM memory subsystem.

These products are subject to significant risks, including:

● we are dependent on a limited number of suppliers for the SSDs, DRAM ICs, NAND flash and ASIC devices that are essential to the functionality of these products, and in the past, we have experienced supply chain disruptions and shortages of SSDs, DRAM and NAND flash required to create these products as a result of issues that are specific to our suppliers or the industry as a whole;

chain disruptions and shortages of SSDs, DRAM and NAND flash required to create these products as a result of issues that are specific to our suppliers or the industry as a whole;

● HybriDIMM and some of our other next-generation products may require additional time including the services and attention of key employees who have competing demands on their available time and may require capital investment to bring the products to market;

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Further, we may not be able to sell some of our products developed for one customer to a different customer because our products are often customized to address specific customer requirements, and even if we are able to sell these products to another customer, our margin on these products may be reduced.

Additionally, although customers are generally allowed only limited rights of return after

purchasing our products or the component products we resell, we may determine that it is in our best interest to accept returns from certain large or key customers even if we are not contractually obligated to accept them in order to maintain good relations with these customers.

Additionally, although customers are generally allowed only limited rights of return after purchasing our products or the component products we resell, we may determine that it is in our best interest to accept returns from certain large or key customers even if we are not contractually obligated to accept them in order to maintain good relations with these customers.

Any returns beyond our expectations could negatively impact our operating results.

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Our ability to fulfill customer orders for or produce qualification samples of our memory subsystem products, as well as orders for the component products we resell, is dependent on a sufficient supply of SSDs, FPGAs, ASICs, DRAM ICs and NAND flash, which are essential components of our memory subsystems.

We have no long-term supply contracts for any of these component products.

Further, there are a relatively small number of suppliers of these components, and we typically purchase from only a subset of these suppliers.

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Moreover, if we are not able to obtain these components in the amounts needed on a timely basis and at commercially reasonable prices, we may not be able to develop or introduce new products, we may experience significant increases in our cost of sales if we are forced to procure components from alternative suppliers and are not able to negotiate favorable terms with these suppliers, or we may be forced to cease our sales of products dependent on the components or resales of the components we sell to customers directly.

Our dependence on a small number of suppliers and the lack of any guaranteed sources for the essential components of our products and the components we resell expose us to several risks, including the inability to obtain an

adequate supply of these components, increases in their costs, delivery delays and poor quality.

Our dependence on a small number of suppliers and the components we resell expose us to several risks, including the inability to obtain an adequate supply of these components, increases in their costs, delivery delays and poor quality.

Additionally, our customers qualify certain of the components provided by our suppliers for use in their systems.

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These markets are intensely competitive, as numerous companies vie for business opportunities at a limited number of large OEMs and other customers.

We face competition from DRAM suppliers, memory module providers and logic suppliers for many of our products, including NVvault and HybriDIMM.

We face competition from DRAM suppliers, memory module providers and logic suppliers for many of our products.

We also face competition from the manufacturers and distributors of the component products we resell to customers, as these manufacturers and distributors could decide at any time to sell these component products to these customers directly.

Additionally, if and to the extent we enter new markets or pursue licensing arrangements to monetize our technologies and intellectual property portfolio, we may face competition from a large number of competitors that produce solutions utilizing similar or competing technologies.

Some of our customers and suppliers may have proprietary products or technologies that are competitive with our products or the components we resell to them or could develop internal solutions or enter into strategic relationships

with, or acquire, other high-density memory module or component providers.

Any of these actions could reduce our customers’ demand for our products or the component products we resell.

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These facts, combined with the short turnaround times that apply to most orders, makes it difficult to predict our production and inventory needs and allocate production capacity and capital for inventory purchases effectively.

As a result, we attempt to forecast the demand for the components needed to manufacture our products and to resell to customers directly, but any such forecasts could turn out to be wrong.

result, we attempt to forecast the demand for the components needed to manufacture our products and to resell to customers directly, but any such forecasts could turn out to be wrong.

Further, lead times for components vary significantly and depend on various factors, such as the specific supplier and the demand and supply for a component at any given time.

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Additionally, even if an alternative manufacturer is available, we may not be able to engage the manufacturer on acceptable terms, which could result in increased costs, timing requirements or other adverse changes.

Further, we may not be able to redesign the customized components used in our products to be manufactured by a new manufacturer, in which case we could infringe on the

intellectual property of our current design or manufacturing partner when we manufacture the products with a new design or manufacturing partner.

Further, we may not be able to redesign the customized components used in our products to be manufactured by a new manufacturer, in which case we could infringe on the intellectual property of our current design or manufacturing partner when we manufacture the products with a new design or manufacturing partner.

Such an occurrence could force us to stop selling certain of our products or could expose us to lawsuits, license payments or other liabilities.

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and potential infringement or misappropriation of our intellectual property or the intellectual property of others.

We are dependent on our manufacturing partners to manufacture components with acceptable quality and manufacturing yields, to deliver these components to us on a timely basis and at an acceptable cost and to allocate a portion of their manufacturing capacity sufficient to meet our needs.

We are dependent on our manufacturing partners to

manufacture components with acceptable quality and manufacturing yields, to deliver these components to us on a timely basis and at an acceptable cost and to allocate a portion of their manufacturing capacity sufficient to meet our needs.

However, these component manufacturers may not be able to achieve these tasks.

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The scope of these indemnities varies, the duration of these indemnities is generally perpetual after execution of an agreement, and the maximum potential amount of future payments we could be required to make under these indemnities is often unlimited.

Any indemnification claims by customers could require us to incur significant legal fees and could potentially result in our payment of substantial damages, and our insurance generally would not cover these fees or damages.

Any indemnification claims by customers could require us to incur significant legal fees and could potentially result in our payment of substantial

damages, and our insurance generally would not cover these fees or damages.

As a result, the occurrence of any of these risks could have a material adverse effect on our business and results of operations.

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Hong, our President, Chief Executive Officer and sole member of our board of directors, and as a result most of our employees may terminate their employment with us at any time.

We maintain “Key Man” life insurance on Mr.

Hong, but we do not carry “Key Man” life insurance on any of our other employees.

Our future success also depends on our ability to attract, retain and motivate highly skilled engineering, manufacturing and other technical and sales personnel.

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Our sales representatives generally may terminate their relationships with us at any time.

As a result, our performance depends in part on our ability to retain existing and attract additional sales representatives that will be able to effectively market and support our products or the component products we resell, especially in markets in which we have not previously distributed these products.

have not previously distributed these products.

Our efforts to attract, train and retain these sales representatives to be knowledgeable about our industry, products and technologies are costly and time-consuming.

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or foreign data protection laws that are applicable to us, including the California Consumer Privacy Act which went into effect in January 2020.

These laws and their interpretation and application are constantly evolving, and they could be interpreted and applied in a manner that is inconsistent with our current practices or they could become more stringent over time.

These laws and their interpretation and application are

constantly evolving, and they could be interpreted and applied in a manner that is inconsistent with our current practices or they could become more stringent over time.

Efforts to comply with applicable data protection laws or any new interpretations of their application could involve significant time and substantial costs or require us to change our business practices and compliance procedures, and any failures to so comply could subject us to substantial civil or criminal fines or sanctions.

Any of these outcomes could have a material negative impact on our business, performance and prospects.

Our independent registered public accounting firm conducted an audited of our internal control over financial reporting as of January 1, 2022 and determined that we have ineffective design and maintenance of controls over user access and program change management related to certain information technology (IT) systems that support our financial reporting processes.

User and privileged access were not appropriately provisioned, and program changes were not adequately reviewed prior to being placed in production.

As a result, process level automated controls and manual controls that are dependent on the completeness and accuracy of information derived from the affected IT systems were also ineffective because they could have been adversely impacted.

This material weakness was due to us having an insufficient number of IT personnel to identify and assess risks associated with changes in the IT environment resulting in inappropriate assignment of user and privileged access as well as insufficient documentation for control operations.

This weakness has the potential to increase the likelihood and severity of the risks we face with respect to our global information technology systems.

If we do not effectively manage any future growth we may experience, our resources, systems and controls may be strained and our results of operations may suffer.

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lack of a significant local sales presence in a number of markets;

difficulties obtaining government approvals;

difficulties obtaining government

compliance with anti-bribery, data protection and other applicable U.S.

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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 described in Part I, Item 4, Controls and Procedures, we have concluded that our internal control over financial reporting was ineffective as of October 2, 2021 due to a material weakness.

The identified material weakness, at October 2, 2021, relates to the lack of an independent audit committee.

While the control deficiency 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.

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 condensed consolidated financial statements will not be prevented or detected on a timely basis.

As described in Part I, Item 4, Controls and Procedures, we have concluded that our internal control over financial reporting was ineffective as of April 2, 2022 due to two material weaknesses.

The identified material weaknesses, at April 2, 2022, relates to the lack of an independent audit committee and ineffective design and maintenance of controls over user access and program change management related to certain information technology (IT) systems that support the Company’s financial reporting processes.

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

In an effort to remediate the identified material weakness and 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.

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Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, which we collectively refer to as Section 404, require us to evaluate our internal control over financial reporting and require management to report on the effectiveness of this internal control as of the end of each fiscal year.

In addition, due to the increase in the value of our worldwide non-affiliate public float, we will lose our status as a “smaller reporting company” under applicable SEC rules at the end of this fiscal year ending January 2, 2022.

As a result, Section 404 will require us

to obtain an attestation report from our independent registered public accounting firm as to our internal control over financial reporting.

We expect that our Section 404 evaluations will lead us to conclude that enhancements, modifications and changes to our internal control over financial reporting are necessary and desirable.

Implementing any such changes would divert the attention of management, involve significant time and costs and negatively impact our financial reporting functions during the transition, any of which could have a material negative effect on our results of operations and financial condition.

In addition, due to the increase in the value of our worldwide non-affiliate public float, we lost our status as a “smaller reporting company”

under applicable SEC rules at the end of last fiscal year ending January 1, 2022.

As a result, Section 404 requires us to obtain an attestation report from our independent registered public accounting firm as to our internal control over financial reporting.

Our Section 404 evaluations confirmed that enhancements, modifications and changes to our internal control over financial reporting are necessary and desirable.

Implementing changes related to ineffective design and maintenance of controls over user access and program change management related to IT systems may divert the attention of management, involve significant time and costs and could negatively impact our financial reporting functions during the transition, any of which could have a material negative effect on our results of operations and financial condition.

Risks Related to Intellectual Property and Litigation

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Our business strategy includes litigating claims against others, such as our competitors and customers, to enforce our intellectual property, contractual and commercial rights, including, in particular, our patent portfolio and our trade secrets, as well as to challenge the validity and scope of the proprietary rights of others.

This or other similar proceedings could also subject us to counterclaims or countersuits against us, or the parties we sue could seek to

invalidate our patents or other intellectual property rights through reexamination or similar processes at the USPTO or similar bodies.

This or other similar

proceedings could also subject us to counterclaims or countersuits against us, or the parties we sue could seek to invalidate our patents or other intellectual property rights through reexamination or similar processes at the USPTO or similar bodies.

Further, any legal disputes with customers could cause them to cease buying or using our products or the component products we resell or delay their purchase of these products and could substantially damage our relationship with them.

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We rely on a combination of patent protection, trade secret laws and restrictions on disclosure to protect our intellectual property and other proprietary rights.

We have submitted a number of patent applications regarding our proprietary processes and technology, many of which have resulted in issued patents.

For our pending patent

applications, it is uncertain when or if any of the claims in these applications will be allowed or result in issued patents, in which case the technologies or processes sought to be patented would remain unprotected from use by third parties.

We have submitted a number of patent applications regarding our

proprietary processes and technology, many of which have resulted in issued patents.

For our pending patent applications, it is uncertain when or if any of the claims in these applications will be allowed or result in issued patents, in which case the technologies or processes sought to be patented would remain unprotected from use by third parties.

In addition, although we intend to continue filing patent applications with respect to new processes and technologies we develop, patent protection may not be available for some of these processes or technologies.

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However, our estimates of our operating revenues and expenses and working capital requirements could be incorrect, and we may use our cash resources faster than we anticipate.

Moreover, our SVIC Note will mature in December 2021, and if it is not converted into equity, the repayment will significantly deplete our cash

Further, some or all of our ongoing or planned investments may not be successful and could further deplete our capital without immediate, or any, cash returns.

Further, some or all of our

ongoing or planned investments may not be successful and could further deplete our capital without immediate, or any, cash returns.

Our capital requirements will depend on many factors, including, among others:

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These fluctuations may adversely affect the market price of our common stock.

Further, following periods of volatility in the overall market and the market price of a particular company’s securities, securities litigation can sometimes be instituted against the company.

Further, following periods of volatility in the overall market and the market price of a particular company’s securities, securities litigation can sometimes be instituted against us.

Securities litigation, like other types of litigation, is expensive and time-consuming, and if such litigation is instituted against us in the future, we may incur substantial costs, management’s attention and resources may be diverted, and we could be subject to damages in the event of unfavorable results.

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Our level of indebtedness and the terms of such indebtedness could adversely affect our operations and liquidity.

We have incurred the SVIC Note, our credit facility with SVB, and our funding arrangement with TR Global Funding V, LLC, an affiliate of TRGP Capital Management (“TRGP”).

In connection with these debt and other arrangements, we have granted security interests to SVIC, SVB and TRGP in our various assets, such that all of our tangible and intangible assets, including our complete patent portfolio, are subject to one or more outstanding liens held by one or more of these parties.

The SVIC and SVB debt instruments and the TRGP investment agreement contain customary representations, warranties and indemnification provisions, as well as affirmative and negative covenants that, among other things, restrict our ability to:

The SVB debt instrument contains customary representations, warranties and indemnification provisions, as well as affirmative and negative covenants that, among other things, restrict our ability to:

● incur additional indebtedness or guarantees;

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● pay dividends or make distributions.

The SVIC and SVB debt instruments and the TRGP investment agreement also include events of default, including, among other things, payment defaults, any breach by us of representations, warranties or covenants, certain bankruptcy events and certain material adverse changes.

If an event of default were to occur under any of these instruments or agreements and we were unable to obtain a waiver for the default, the counterparties could, among other remedies, accelerate our obligations under the debt instrument or other agreement and exercise their rights to foreclose on their security interests, which would cause substantial harm to our business and prospects.

The SVB debt instrument also includes events of default, including, among other things, payment defaults, any breach by us of representations, warranties or covenants, certain bankruptcy events and certain material adverse changes.

If an event of default were to occur under this agreement and we were unable to obtain a waiver for the default, the counterparties could, among other remedies, accelerate our obligations under the debt instrument or other agreement and exercise their rights to foreclose on their security interests, which would cause substantial harm to our business and prospects.

In the past we had incurred a funding arrangement with TR Global Funding V, LLC, an affiliate of TRGP Capital Management (“TRGP”).

We believe that the SK hynix License Agreement falls outside the scope of the TRGP Agreement and the First Amendment to the TRGP Agreement, and we do not anticipate that we will be obligated to make payments to TRGP under the TRGP Agreement or the First Amendment to the TRGP Agreement.

Additionally, incurrence and maintenance of this or other debt could have material adverse consequences on our business and financial condition, such as:

Additionally, incurrence and maintenance of debt could have material adverse consequences on our business and financial condition, such as:

● requiring us to dedicate a portion of our cash flows from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures and other cash requirements;

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We have historically funded our operations in large part with proceeds from equity and convertible debt financings, and we expect to continue to do so in the future.

In addition to capital-raising purposes, we may also issue securities from time to time at prices and on other terms as we determine for acquiring other businesses or assets in exchange for shares of our common stock or other securities, issuing securities to collaborators in connection with

strategic partnerships, attracting and retaining employees with equity compensation, or other purposes.

If we sell common stock or other equity or convertible debt securities in the future, our then-existing stockholders could be materially diluted by such issuances and new investors could gain rights, preferences and privileges senior to the holders of our common stock, which could cause the price of our common stock to decline.

Sales of our common stock, or the perception that such sales could occur, could cause the market price of our stock to drop significantly, regardless of the state of our business.

As of October 2, 2021, there were 225,969,636 shares of our common stock outstanding.

In addition, 6,044,151 shares of our common stock are subject to outstanding stock options, 2,169,469 shares of our common stock are subject to outstanding unvested restricted stock units, 2,000,000 shares of our common stock are subject to outstanding warrants, and 13,409,753 shares of our common stock subject to an outstanding convertible note.

As of April 2, 2022, there were 231,028,600 shares of our common stock outstanding.

In addition, 5,330,240 shares of our common stock are subject to outstanding stock options and 3,138,701 shares of our common stock are subject to outstanding unvested restricted stock units.

All outstanding shares of our common stock are eligible for sale in the public market under applicable federal securities laws, subject in certain cases to the requirements of Rule 144 under the Securities Act of 1933, as amended, and shares issued upon the exercise or conversion of outstanding stock options, warrants or convertible notes may also be eligible for sale in the public market, to the extent permitted by Rule 144 or other applicable securities laws and the provisions of the applicable stock option, warrant and convertible note agreements.

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These and other provisions in our certificate of incorporation and bylaws and of Delaware law, as well as the existence of our rights agreement, could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our board of directors, including a merger, tender offer, proxy contest or other change of control transaction involving our Company.

Any delay or prevention of a change of control transaction or changes in our board of directors could prevent the consummation of a transaction in which our

stockholders could receive a substantial premium over the then-current market price for our common stock.

Any delay or prevention of a change of control transaction or changes in our board of directors could prevent the consummation of a transaction in which our stockholders could receive a substantial premium over the then-current market price for our common stock.

In addition, these anti-takeover provisions could reduce the price that investors are willing to pay for shares of our common stock.

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As a result, any return to investors is expected to result, if at all, only from potential increases in the price of our common stock.

Incorporated by Reference

Exhibit Description

Purchase Agreement dated as of September 28, 2021, between Netlist, Inc.

and Lincoln Park Capital Fund, LLC

September 28, 2021

Registration Rights Agreement, dated as of September 28, 2021, between Netlist, Inc.

and Lincoln Park Capital Fund, LLC

September 28, 2021

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer

Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Furnished herewith.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

November 10, 2021

Netlist, Inc.

President, Chief Executive Officer and Sole Director

(Principal Executive Officer)

/s/ Gail Sasaki

Vice President and Chief Financial Officer

(Principal Financial Officer)

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-Q

Item 1A. Risk Factors