NETLIST INC 10-Q

Item 1. Financial Statements NETLIST, INC. AND SUBSIDIARIES ​ Condensed Consolidated Balance Sheets (In thousands, except par value) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 1, ​ December 31, ​ 2023 2022 ​ ​ (unaudited) ​ ​ ASSETS ​ ​ ​ ​ ​ ​ Current Assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 34,470 ​ $ 25,011 Restricted cash ​ ​ 2,100 ​ ​ 18,600 Accounts receivable, net of allowances of $ 95 (2023) and $ 137 (2022) ​ ​ 5,942 ​ ​ 8,242 Inventories ​ ​ 8,959 ​ ​ 10,686 Prepaid expenses and other current assets ​ ​ 1,045 ​ ​ 1,308 Total current assets ​ ​ 52,516 ​ ​ 63,847 Property and equipment, net ​ ​ 1,039 ​ ​ 1,138 Operating lease right-of-use assets ​ ​ 1,877 ​ ​ 2,043 Other assets ​ ​ 297 ​ ​ 295 Total assets ​ $ 55,729 ​ $ 67,323 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Current Liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 26,370 ​ $ 28,468 Revolving line of credit ​ ​ — ​ ​ 4,935 Accrued payroll and related liabilities ​ ​ 1,272 ​ ​ 1,588 Accrued expenses and other current liabilities ​ ​ 2,623 ​ ​ 2,635 Long-term debt due within one year ​ ​ 301 ​ ​ 447 Total current liabilities ​ ​ 30,566 ​ ​ 38,073 Operating lease liabilities ​ ​ 1,615 ​ ​ 1,744 Other liabilities ​ ​ 217 ​ ​ 270 Total liabilities ​ ​ 32,398 ​ ​ 40,087 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.001 par value— 10,000 shares authorized: Series A preferred stock, $ 0.001 par value; 1,000 shares authorized; none issued and outstanding ​ ​ — ​ ​ — Common stock, $ 0.001 par value— 450,000 shares authorized; 238,570 (2023) and 232,557 (2022) shares issued and outstanding ​ ​ 239 ​ ​ 233 Additional paid-in capital ​ ​ 262,305 ​ ​ 250,428 Accumulated deficit ​ ​ ( 239,213 ) ​ ​ ( 223,425 ) Total stockholders' equity ​ ​ 23,331 ​ ​ 27,236 Total liabilities and stockholders' equity ​ $ 55,729 ​ $ 67,323 ​ See accompanying Notes to Condensed Consolidated Financial Statements. ​ ​ 3 Table of Contents NETLIST, INC. AND SUBSIDIARIES ​ Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ April 1, ​ April 2, ​ ​ 2023 2022 Net product sales ​ ​ $ 9,021 ​ $ 50,200 Cost of sales ​ ​ ​ 8,461 ​ ​ 46,837 Gross profit ​ ​ ​ 560 ​ ​ 3,363 Operating expenses: ​ ​ ​ ​ ​ ​ ​ Research and development ​ ​ ​ 2,301 ​ ​ 2,457 Intellectual property legal fees ​ ​ ​ 11,070 ​ ​ 2,826 Selling, general and administrative ​ ​ ​ 3,030 ​ ​ 3,938 Total operating expenses ​ ​ ​ 16,401 ​ ​ 9,221 Operating loss ​ ​ ​ ( 15,841 ) ​ ​ ( 5,858 ) Other income (expense), net: ​ ​ ​ ​ ​ ​ ​ Interest income (expense), net ​ ​ ​ 56 ​ ​ ( 11 ) Other expense, net ​ ​ ​ ( 3 ) ​ ​ ( 2 ) Total other income (expense), net ​ ​ ​ 53 ​ ​ ( 13 ) Loss before provision for income taxes ​ ​ ​ ( 15,788 ) ​ ​ ( 5,871 ) Provision for income taxes ​ ​ ​ — ​ ​ 1 Net loss ​ ​ $ ( 15,788 ) ​ $ ( 5,872 ) ​ ​ ​ ​ ​ ​ ​ ​ Loss per share: ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ ​ $ ( 0.07 ) ​ $ ( 0.03 ) Weighted-average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ ​ ​ 235,121 ​ ​ 230,546 ​ ​ ​ See accompanying Notes to the Condensed Consolidated Statements. ​ 4 Table of Contents B NETLIST, INC. AND SUBSIDIARIES ​ Condensed Consolidated Statements of Stockholders Equity (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders' ​ Shares Amount Capital Deficit Equity Balance, December 31, 2022 ​ 232,557 ​ $ 233 ​ $ 250,428 ​ $ ( 223,425 ) ​ $ 27,236 Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 15,788 ) ​ ​ ( 15,788 ) Issuance of common stock, net ​ 4,920 ​ ​ 5 ​ ​ 10,537 ​ ​ — ​ ​ 10,542 Exercise of stock options ​ 381 ​ ​ — ​ ​ 264 ​ ​ — ​ ​ 264 Stock-based compensation ​ — ​ ​ — ​ ​ 1,077 ​ ​ — ​ ​ 1,077 Restricted stock units vested and distributed ​ 712 ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — Balance, April 1, 2023 ​ 238,570 ​ $ 239 ​ $ 262,305 ​ $ ( 239,213 ) ​ $ 23,331 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders' ​ Shares Amount Capital Deficit Equity Balance, January 1, 2022 ​ 230,113 ​ $ 231 ​ $ 243,866 ​ $ ( 190,055 ) ​ $ 54,042 Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 5,872 ) ​ ​ ( 5,872 ) Issuance of common stock, net ​ 303 ​ ​ — ​ ​ 1,767 ​ ​ — ​ ​ 1,767 Exercise of stock options ​ 197 ​ ​ — ​ ​ 138 ​ ​ — ​ ​ 138 Stock-based compensation ​ — ​ ​ — ​ ​ 682 ​ ​ — ​ ​ 682 Restricted stock units vested and distributed ​ 533 ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — Tax withholdings related to net share settlements of equity awards ​ ( 117 ) ​ ​ — ​ ​ ( 591 ) ​ ​ — ​ ​ ( 591 ) Balance, April 2, 2022 ​ 231,029 ​ $ 232 ​ $ 245,861 ​ $ ( 195,927 ) ​ $ 50,166 ​ ​ ​ ​ ​ ​ ​ ​ See accompanying Notes to the Condensed Consolidated Statements. 5 Table of Contents ​ NETLIST, INC. AND SUBSIDIARIES ​ Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ April 1, ​ April 2, ​ 2023 2022 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 15,788 ) ​ $ ( 5,872 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ 99 ​ ​ 81 Non-cash lease expense ​ ​ 166 ​ ​ 167 Stock-based compensation ​ ​ 1,077 ​ ​ 682 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ 2,300 ​ ​ 6,950 Inventories ​ ​ 1,727 ​ ​ ( 3,833 ) Prepaid expenses and other assets ​ ​ 261 ​ ​ ( 34 ) Accounts payable ​ ​ ( 2,098 ) ​ ​ 3,076 Accrued payroll and related liabilities ​ ​ ( 316 ) ​ ​ 37 Accrued expenses and other liabilities ​ ​ ( 142 ) ​ ​ ( 37 ) Net cash provided by (used in) operating activities ​ ​ ( 12,714 ) ​ ​ 1,217 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ​ — ​ ​ ( 221 ) Net cash used in investing activities ​ ​ — ​ ​ ( 221 ) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Net repayments under line of credit ​ ​ ( 4,935 ) ​ ​ ( 2,268 ) Principal repayments under finance lease ​ ​ ( 52 ) ​ ​ ( 5 ) Payments on notes payable ​ ​ ( 146 ) ​ ​ ( 186 ) Proceeds from issuance of common stock, net ​ ​ 10,542 ​ ​ 1,767 Proceeds from exercise of stock options ​ ​ 264 ​ ​ 138 Payments for taxes related to net share settlement of equity awards ​ ​ — ​ ​ ( 591 ) Net cash provided by (used in) financing activities ​ ​ 5,673 ​ ​ ( 1,145 ) Net change in cash, cash equivalents and restricted cash ​ ​ ( 7,041 ) ​ ​ ( 149 ) Cash, cash equivalents and restricted cash at beginning of period ​ ​ 43,611 ​ ​ 58,479 Cash, cash equivalents and restricted cash at end of period ​ $ 36,570 ​ $ 58,330 ​ ​ ​ ​ ​ ​ ​ Reconciliation of cash, cash equivalents and restricted cash at end of period: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 34,470 ​ $ 37,530 Restricted cash ​ ​ 2,100 ​ ​ 20,800 Cash, cash equivalents and restricted cash at end of period ​ $ 36,570 ​ $ 58,330 ​ ​ See accompanying Notes to the Condensed Consolidated Statements. ​ ​ 6 Table of Contents NETLIST, INC. AND SUBSIDIARIES ​ Notes to Condensed Consolidated Financial Statements (Unaudited) ​ Note 1—Description of Business ​ Netlist, Inc. and its wholly owned subsidiaries (collectively the “Company”, “Netlist”, “we”, “us”, or “our”) provides high-performance computer storage and memory solutions to enterprise customers in diverse industries. Our non-volatile memory express solid-state drives (“NVMe SSDs”) in various capacities and form factors, and our line of custom and specialty memory products bring industry-leading performance to server and storage appliance customers and cloud service providers. We license our portfolio of intellectual property, including patents relating to storage memory systems and subsystems, to companies that implement our technology. ​ Note 2—Summary of Significant Accounting Policies ​ Basis of Presentation ​ The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2023 (the “2022 Annual Report”). ​ In the opinion of management, all adjustments for the fair presentation of the Company’s condensed consolidated financial statements have been made. The adjustments are of a normal recurring nature except as otherwise noted. The results of operations for the interim periods are not necessarily indicative of the results to be expected for other periods or the full fiscal year. The Company has evaluated events occurring subsequent to April 1, 2023 through the filing date of this Quarterly Report on Form 10-Q and concluded that there were no events that required recognition and disclosures other than those discussed elsewhere in the notes hereto. ​ Principles of Consolidation ​ The accompanying condensed consolidated financial statements include the accounts of Netlist, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. ​ Fiscal Year ​ The Company’s fiscal year is the 52 - or 53 -week period that ends on the Saturday nearest to December 31. The Company’s fiscal year 2023 will include 52 weeks and ends on December 30, 2023. Each quarter of fiscal year 2023 will be comprised of 13 weeks. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in January and the associated quarters, months and periods of those fiscal years. ​ Use of Estimates ​ The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results may differ materially from those estimates. ​ 7 Table of Contents Recently Adopted Accounting Guidance ​ Currently, there are no Accounting Standards Updates that the Company is required to adopt that are likely to have a material effect on its financial statements that have not been previously discussed in the Company's 2022 Annual Report. ​ Note 3—Supplemental Financial Information ​ Inventories ​ Inventories consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 1, ​ December 31, ​ 2023 2022 Raw materials ​ $ 7,574 ​ $ 8,223 Work in process ​ ​ 48 ​ ​ 185 Finished goods ​ ​ 1,337 ​ ​ 2,278 ​ ​ $ 8,959 ​ $ 10,686 ​ Loss Per Share ​ The following table shows the computation of basic and diluted loss per share of common stock (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ April 1, ​ April 2, ​ ​ 2023 2022 Numerator: Net loss ​ $ ( 15,788 ) ​ $ ( 5,872 ) Denominator: Weighted-average basic shares outstanding - basic and diluted ​ ​ 235,121 ​ ​ 230,546 Net loss per share - basic and diluted ​ $ ( 0.07 ) ​ $ ( 0.03 ) ​ The table below shows potentially dilutive weighted average common share equivalents, consisting of shares issuable upon the exercise of outstanding stock options and warrants using the treasury stock method, shares issuable upon conversion feature of a convertible note using the “if-converted” method, and the shares vesting of issuable upon the restricted stock units (“RSUs”). These potential weighted average common share equivalents have been excluded from the diluted net loss per share calculations above as their effect would be anti-dilutive (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ April 1, ​ April 2, ​ ​ 2023 2022 Weighted average common share equivalents ​ ​ 3,193 ​ ​ 6,369 ​ Disaggregation of Net Sales ​ The following table shows disaggregated net sales by major source (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ April 1, ​ April 2, ​ 2023 ​ 2022 Resales of third-party products ​ $ 6,909 ​ $ 45,585 Sale of the Company's modular memory subsystems ​ ​ 2,112 ​ ​ 4,615 Total net sales ​ $ 9,021 ​ $ 50,200 ​ 8 Table of Contents Major Customers and Products ​ The Company’s net product sales have historically been concentrated in a small number of customers. The following table sets forth the percentage of net product sales made to customers that each comprise 10% or more of total product sales: ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ April 1, ​ April 2, ​ ​ 2023 ​ 2022 Customer A ​ 49 % ​ 53 % Customer B ​ 12 % ​ * ​ * Less than 10% of net sales during the period. ​ As of April 1, 2023, two customers represented approximately 55 % and 15 % of aggregated gross accounts receivables, respectively. As of December 31, 2022, one customer represented approximately 69 % of aggregate gross accounts receivables. The loss of a major customer or a reduction in sales to or difficulties collecting payments from these customers could significantly reduce the Company’s net sales and adversely affect its operating results. The Company mitigates risks associated with foreign and domestic receivables by purchasing comprehensive credit insurance. ​ The Company resells certain component products to end-customers that are not reached in the distribution models of the component manufacturers, including storage customers, appliance customers, system builders and cloud and datacenter customers. For the three months ended April 1, 2023 and April 2, 2022, resales of these products represented approximately 77 % and 91 % of net product sales, respectively. ​ Note 4—Credit Agreement ​ On October 31, 2009, the Company and Silicon Valley Bank (“SVB”) entered into a credit agreement, as the same may from time to time be amended, modified , supplemented or restated, (the “SVB Credit Agreement”), which provided for a revolving line of credit up to $ 10.0 million, as amended. The SVB Credit Agreement was most recently amended on April 29, 2022 to add 50 % of eligible inventory to the previous borrowing base limited to 85 % of eligible accounts receivable, subject to certain adjustments. Borrowings accrued interest on advance at a per annum rate equal to the greater of 0.75 % above the Wall Street Journal prime rate (“Prime Rate”) or 4.25 %. The maturity date was April 28, 2023, as amended. ​ The SVB Credit Agreement required letters of credit to be secured by cash, which was classified as restricted cash in the accompanying condensed consolidated balance sheets. As of April 1, 2023 and December 31, 2022, (i) outstanding letters of credit were $ 2.1 million and $ 18.6 million, respectively, (ii) outstanding borrowings were $0 and $ 4.9 million, respectively, and (iii) availability under the revolving line of credit was $ 3.3 million and $ 0 , respectively. ​ On April 28, 2023, the SVB Credit Agreement terminated in accordance with its terms. In connection with the termination of the SVB Credit Agreement, on April 28, 2023, all outstanding obligations for principal, interest, and fees under the SVB Credit Agreement were paid off in full and all liens securing such obligations were released. ​ 9 Table of Contents Note 5—Debt ​ The Company’s debt consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 1, ​ December 31, ​ 2023 2022 Notes payable ​ $ 301 ​ $ 447 Less: amounts due within one year ​ ​ ( 301 ) ​ ​ ( 447 ) Long-term debt ​ $ — ​ $ — ​ ​ ​ Insurance Policy Finance Agreement ​ As of April 1, 2023 and December 31, 2022, we had $ 0.3 million and $ 0.4 million, respectively, in short-term notes payable for the financing of insurance policies. On January 4, 2023, we entered into a short-term note payable for $ 0.4 million bearing interest at 7.2 % to finance insurance policies. Principal and interest payments on this note began January 15, 2023 and are made evenly based on a straight line amortization over a 9-month period. ​ Note 6—Leases ​ The Company has operating and finance leases primarily associated with office and manufacturing facilities and certain equipment. The determination of which discount rate to use when measuring the lease obligation was deemed a significant judgment. ​ Lease cost and supplemental condensed consolidated cash flow information related to operating and finance leases were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ April 1, ​ April 2, ​ 2023 ​ 2022 Lease cost: ​ ​ ​ ​ ​ ​ Operating lease cost ​ $ 195 ​ $ 198 Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases ​ $ 169 ​ $ 149 Right-of-use assets obtained in exchange for lease obligations: ​ ​ ​ ​ ​ ​ Operating leases ​ $ — ​ $ 555 ​ For the three months ended April 1, 2023, and April 2, 2022, finance lease costs and cash flows from finance leases were immaterial. ​ 10 Table of Contents Supplemental condensed consolidated balance sheet information related to leases was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 1, ​ December 31, ​ ​ 2023 ​ 2022 Operating Leases ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ $ 1,877 ​ $ 2,043 Accrued expenses and other current liabilities ​ $ 440 ​ $ 451 Operating lease liabilities ​ ​ 1,615 ​ ​ 1,744 Total operating lease liabilities ​ $ 2,055 ​ $ 2,195 ​ ​ ​ ​ ​ ​ ​ Finance Leases ​ ​ ​ ​ ​ ​ Property and equipment, at cost ​ $ 488 ​ $ 488 Accumulated depreciation ​ ​ ( 146 ) ​ ​ ( 121 ) Property and equipment, net ​ $ 342 ​ $ 367 Accrued expenses and other current liabilities ​ $ 214 ​ $ 211 Other liabilities ​ ​ 42 ​ ​ 96 Total finance lease liabilities ​ $ 256 ​ $ 307 ​ The following table includes supplemental information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 1, ​ December 31, ​ ​ 2023 ​ 2022 Weighted Average Remaining Lease Term (in years) ​ ​ ​ ​ ​ ​ Operating leases ​ ​ 3.7 ​ ​ 3.9 Finance leases ​ ​ 1.3 ​ ​ 1.5 ​ ​ ​ ​ ​ ​ ​ Weighted Average Discount Rate ​ ​ ​ ​ ​ ​ Operating leases ​ ​ 5.5 % ​ ​ 5.5 % Finance leases ​ ​ 4.4 % ​ ​ 4.4 % ​ Maturities of lease liabilities as of April 1, 2023, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating ​ Finance Fiscal Year ​ Leases ​ Leases 2023 (remainder of the year) ​ $ 390 ​ $ 165 2024 ​ ​ 613 ​ ​ 91 2025 ​ ​ 624 ​ ​ 5 2026 ​ ​ 639 ​ ​ 3 2027 ​ ​ 23 ​ ​ — Total lease payments ​ ​ 2,289 ​ ​ 264 Less: imputed interest ​ ​ ( 234 ) ​ ​ ( 8 ) Total ​ $ 2,055 ​ $ 256 ​ ​ Note 7 — Commitments and Contingencies ​ Contingent Legal Expenses ​ We may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with our licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid on a scaled percentage of any negotiated fee, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained. ​ 11 Table of Contents Litigation and Patent Reexaminations ​ We own numerous patents and continue to seek to grow and strengthen our patent portfolio, which covers various aspects of our innovations and includes various claim scopes. We plan to pursue avenues to monetize our intellectual property portfolio, in which we would generate revenue by selling or licensing our technology, and we intend to vigorously enforce our patent rights against alleged infringers of such rights. We dedicate substantial resources to protecting and enforcing our intellectual property rights, including with patent infringement proceedings we file against third parties and defense of our patents against challenges made by way of reexamination and review proceedings at the U.S. Patent and Trademark Office (“USPTO”) and Patent Trial and Appeal Board (“PTAB” or the “Board”). We expect these activities to continue for the foreseeable future, with no guarantee that any ongoing or future patent protection or litigation activities will be successful, or that we will be able to monetize our intellectual property portfolio. ​ Any litigation, regardless of its outcome, is inherently uncertain, involves a significant dedication of resources, including time and capital, and diverts management’s attention from our other activities. As a result, any current or future claims, allegations, or challenges by or against third parties, whether eventually decided in our favor or settled, could materially adversely affect our business, financial condition and results of operations. Additionally, the outcome of pending or future litigation and/or related patent reviews and reexaminations, as well as any delay in their resolution, could affect our ability to continue to sell our products, protect against competition in the current and expected markets for our products or license or otherwise monetize our intellectual property rights in the future. ​ Google Litigations ​ On December 4, 2009, Netlist filed a patent infringement lawsuit against Google, Inc. (“Google”) in the U.S. District Court for the Northern District of California (the “NDCA”), seeking damages and injunctive relief based on Google’s alleged infringement of our U.S. Patent No. 7,619,912 (the “‘912 Patent”). The current judge assigned to the case, Chief Judge Seeborg, entered an order via stipulation on October 17, 2022 staying the NDCA Google case until the resolution of a pending case filed by Netlist, Inc. against Samsung Electronics Co., Ltd. in the United States District Court for the Eastern District of Texas (“EDTX”) ( Netlist, Inc. v. Samsung Elecs. Co., Ltd. et al. , Case No. 2:22-cv-00293-JRG). ​ On July 26, 2022, Netlist filed patent infringement claims against Google Cloud EMEA Limited, Google Germany GmbH, Redtec Computing GmbH, and Google, seeking damages based on those defendants’ infringement of European Patents EP 2,454,735 (“EP735”) and EP 3,404,660 (“EP660”), which both generally relate to load reduced dual in line memory modules (“LRDIMM”) technologies. As of the reporting date, Google has submitted its statements of defense. The date for oral hearings are currently scheduled for November 2023. ​ On October 15, 2021, Samsung initiated a declaratory judgement action against Netlist in the U.S. District Court for the District of Delaware (“DDE”) ( Samsung Elecs. Co., Ltd., et. al. v. Netlist, Inc. , Case No. 1:21-cv-01453-RGA). On September 12, 2022, Netlist amended its Counterclaims to include counterclaims against Google, LLC and Alphabet, Inc. On November 15, 2022, Google, LLC and Alphabet, Inc. responded to Netlist’s Counterclaims by filing a Motion to Dismiss or alternatively to sever and stay the counterclaims. As of the reporting date, the Court has set the oral argument date for Google’s Motion to Dismiss or alternatively, Sever and Stay and Dismiss Willfulness and Indirect Infringement Allegations as May 22, 2023 at 2:00 P.M. ET before Judge Jennifer L. Hall. Further, the Court set the Claim Construction hearing for October 20, 2023, and the beginning of the Jury Trial on February 3, 2025. ​ Micron Litigations ​ On April 28, 2021, Netlist filed a complaint for patent infringement against Micron Technology, Inc. (“Micron”) in the U.S. District Court for the Western District of Texas, Waco Division (“WDTX”) (Case No. 6:21-cv00431 & Case No. 6:21-cv-00430). These proceedings are based on the alleged infringement by Micron’s LRDIMM and Micron’s non-volatile dual in line memory modules (“NVDIMM”) enterprise memory modules under four U.S. patents – U.S. Patent Nos. 10,489,314 (the “‘314 Patent”), 9,824,035 (the “‘035 Patent”), 10,268,608 (the “‘608 Patent”), and 8,301,833 (the “‘833 Patent”). The case has been assigned to Hon. Judge Lee Yeakel, and the parties completed briefing on their claim construction arguments. On May 11, 2022, Judge Yeakel entered a stay of the case pending the 12 Table of Contents resolution of Micron’s requested Inter Partes Review (“IPR”) proceedings against the four patents asserted by Netlist in this case (the ‘833, ‘035, ‘608, and ‘314 Patents). As of the reporting date, the matter remains stayed pending the outcome of the related IPR proceedings. ​ As noted above, Micron filed requests to bring IPR proceedings against Netlist’s ‘314, ‘035, ‘608, and ‘833 Patents. As of the reporting date, the PTAB granted Micron’s request for the ‘035, ‘833, and ‘314 Patents, but denied its request for the ‘608 Patent. The PTAB further denied Micron’s request for rehearing on the ‘608 Patent’s institution denial. As of the reporting date, the IPR trials under the ‘035, ‘833, and ‘314 Patents are proceeding following Netlist’s timely submissions of its related Patent Owner Responses. Oral arguments were presented for the ‘035 Patent IPR on April 19, 2023. Oral arguments for the ‘833 and ‘314 Patents are set for June and August 2023, respectively. ​ On March 31, 2022, Netlist filed patent infringement claims against Micron in Germany (“Micron Dusseldorf Case”), seeking damages based on their infringement of EP735 and EP660. On June 24, 2022, Netlist requested injunctive relief. Micron initiated a nullity proceeding against the asserted EP patents in this action, making Netlist’s response to the same as November 19, 2022. As of the reporting date, primary briefing in the Micron Dusseldorf Case has concluded, while the German Federal Patent Court has entered a preliminary opinion on the EP735 and EP660 invalidity proceedings. Given the entry of the preliminary opinions, the Judge in the Micron Dusseldorf infringement actions has reset the oral hearing in those cases to 2024. ​ On June 10, 2022, Netlist filed a complaint for patent infringement against Micron in the EDTX, Marshall Division (Case No. 2:22-cv-00203-JRG-RSP). These proceedings are based on the alleged infringement by Micron for the sale of its LRDIMMs, its memory modules utilizing on-board power management modules (“PMIC”), and its high bandwidth memory (“HBM”) components, under six U.S. Netlist patents: the ‘060, ‘160, ‘506, ‘339, ‘918, and ‘054 Patents. As of the reporting date, the case stands ready to proceed with a claim construction hearing set for July 19, 2023, and trial beginning on January 22, 2024. ​ On August 1, 2022, Netlist filed a complaint for patent infringement against Micron in the EDTX (Case No. 2:22-cv-00294) under the ‘912 Patent, for Micron’s alleged infringement by the sale of its LRDIMMs and RDIMMs. On August 15, 2022, Netlist filed its first amended complaint, further addressing Micron’s infringement of the ‘215 and ‘417 Patents. On October 21, 2022, Chief Judge Gilstrap ordered that this Micron action and a parallel action by Netlist against Samsung on the same patents (Case No. 2:22-cv-00293-JRG) be consolidated and set for a joint scheduling conference on November 17, 2022, further instructing that the Samsung action be considered the “LEAD CASE” and that any further filings from either action be submitted in that case for all pretrial matters. As of the reporting date, the consolidated case stands ready to proceed with a claim construction hearing set for October 5, 2023, and trial beginning on April 15, 2024. ​ On November 18, 2022, Micron filed IPR requests contesting the validity of the ‘912, ‘339, and ‘506 Patents, along with motions requesting joinder to the pending Samsung IPRs related to the same patents (see below). As of the reporting date, the ‘912 and ‘339 matters have not been joined with the corresponding Samsung IPRs, while the ‘506 proceeding has been joined with the analogous prior-filed Samsung IPR proceeding on the same patent. The Board’s deadline to institute trials on the ‘912 and ‘339 Micron IPRs is June 9, 2023. ​ On January 6, 2023, Micron filed IPR requests contesting the validity of the ‘918 and ‘054 Patents, along with motions requesting joinder to the pending Samsung IPRs related to the same patents (see below). As of the reporting date, the matters have not been joined with the corresponding Samsung IPRs. The Board’s deadline to institute trials on these Micron IPRs is July 20, 2023. ​ Samsung Litigations ​ On May 28, 2020, Netlist filed a complaint against Samsung in the U.S. District Court for the Central District of California for Samsung’s breach of the parties’ Joint Development and License Agreement (“JDLA”). On July 22, 2020, Netlist amended its complaint to seek a declaratory judgment that it properly terminated the JDLA in light of Samsung’s material breaches. On October 14, 2021, the Court entered summary judgment in Netlist’s favor and confirmed Netlist properly terminated the JDLA as of July 15, 2020. On February 15, 2022, the Court entered a final judgment in favor of 13 Table of Contents Netlist on each of its three claims and confirmed conclusively that the licenses granted by Netlist under the JDLA were terminated. On February 25, 2022, Samsung filed a Notice of Appeal, and the Federal Court of Appeals for the Ninth Circuit Court of Appeals issued a Time Schedule Order on February 28, 2022. On August 4, 2022, Netlist filed a cross-appeal seeking the Appeal Court’s reconsideration of the District Court’s finding that the fees Netlist paid to PwC were consequential damages, rather than recoverable general damages. The parties have completed briefing on the appeal and cross-appeal. As of the reporting date, the Ninth Circuit Court of Appeals set a date for oral argument on June 9, 2023 at 9:30 A.M. PT, in Courtroom 1 of the Court’s Pasadena, CA Courthouse. ​ On October 15, 2021, Samsung initiated a declaratory judgement action against Netlist in the DDE ( Samsung Elecs. Co., Ltd., et. al. v. Netlist, Inc. , Case No. 1:21-cv-01453-RGA), where it requested in relevant part that the DDE declare that Samsung does not infringe Netlist’s U.S. Patent Nos. 9,858,218 (the “‘218 Patent”), 10,217,523 (the “‘523 Patent”), 10,474,595 (the “‘595 Patent”), and the ‘506, ‘339, ‘912 and ‘918 Patents, while later seeking leave to add the ‘054 Patent (issued Jan. 25, 2022) to its action. On August 1, 2022, Hon. Judge Andrews dismissed all of Samsung’s counts related to Netlist’s ‘912, ‘506, ‘339, and ‘918 Patents, and denied Samsung’s request to bring its ‘054 claims in Delaware. On September 12, 2022, Netlist amended its Counterclaims to include counterclaims tying Google, LLC and Alphabet, Inc. to the action. On November 15, 2022, Google, LLC and Alphabet, Inc. responded to Netlist’s Counterclaims by filing a Motion to Dismiss or alternatively to Sever and Stay the counterclaims. As of the reporting date, the Court has set the oral argument date for Google’s Motion to Dismiss or alternatively, Sever and Stay and Dismiss Willfulness and Indirect Infringement Allegations as May 22, 2023 at 2:00 P.M. ET before Judge Jennifer L. Hall. Further, the Court set the Claim Construction hearing for October 20, 2023, and the beginning of the Jury Trial on February 3, 2025. ​ On November 19, 2021, Samsung filed IPR requests contesting the validity of U.S. Patent Nos. 9,858,218 (the “‘218 Patent”), 10,474,595 (the “‘595 Patent”), and 10,217,523 (the “‘523 Patent”). Netlist filed its initial responses to Samsung’s petitions on February 18, 2022, contesting the institution of any IPR on the grounds propounded. As of the reporting date, oral arguments were heard for the ‘523 IPR (February 1, 2023), and the ‘218 Patent and ‘595 Patent IPRs (February 15, 2023). As of the reporting date, the PTAB has issued a final written decision finding all of the claims of the ‘523 Patent valid and patentable, while finding all of the claims of the ‘218 Patent unpatentable. The PTAB has not yet entered its final written decision regarding the ‘595 Patent, which is due May 15, 2023. ​ On December 20, 2021, Netlist filed a complaint for patent infringement against Samsung, Samsung Semiconductor, Inc., and Samsung Electronics America, Inc. in the EDTX (Case No. 2:21-cv-00463-JRG) under the ‘506, ‘339, and ‘918 Patents. Samsung responded to Netlist’s complaint on April 12, 2022, and Chief Judge Gilstrap ordered a scheduling conference be set. On May 3, 2022, Netlist entered a First Amended Complaint pursuant to the Federal Rules of Civil Procedure (“FRCP”) Rule 15, adding claims for infringement under three additional patents: the ‘060, ‘160, and ‘054 Patents. On April 14, 2023, the trial began with jury selection and opening statements, and concluded on April 21, 2023 with the entry of the jury’s verdict into the public record. The jury unanimously found that Samsung had willfully infringed Netlist’s ‘339, ‘918, ‘054, ‘060, and ‘160 patents through the sale of their DDR4 LRDIMMs, DDR5 DIMMS, and HBM components, and that none of the patent claims assessed at trial were invalid. Given the infringement, the jury awarded Netlist, Inc. a total of $303 million for Samsung’s infringement. As of the reporting date, post-trial proceedings are being briefed and adjudicated. ​ On February 17, 2022, Samsung filed an IPR request contesting the validity of only claim 16 within the ‘912 Patent. Samsung then filed two additional IPR requests contesting the validity of the ‘506 and ‘339 Patents. Netlist filed its Patent Owner’s Preliminary Response for the ‘912 and ‘339 Patent IPRs on July 21, 2022, and for the ‘506 Patent IPR on July 28, 2022. On January 19, 2023, the PTAB instituted IPR trials on both the ‘912 and ‘339 Patents. The following day, the PTAB instituted an IPR trial on the ‘506 Patent. On October 19, 2022, the PTAB instituted IPR trials on the ‘912 Patent and ‘339 Patent, while two days later it instituted an IPR trial on the ’506 Patent. On January 5, 2023, USPTO Director Katherine K. Vidal entered an Order in the ‘912 proceeding mandating a sua sponte Director review of the Board’s decision granting institution of the ‘912 Patent, and staying the underlying proceedings in lieu of a supplemental briefing schedule set by the Director herself. On February 3, 2023, Director Vidal entered a decision requiring the assigned Board to reevaluate Netlist’s request for discovery on the admitted relationship between Samsung and Google and ordered that if the Board determines Google is a “Real Party in Interest,” the Board must vacate its institution decision and deny Samsung’s Petition. The Board has collected the mandated follow-on discovery from 14 Table of Contents Samsung and set a supplemental briefing schedule that terminates on May 3, 2023. As of the reporting date, Netlist has timely filed its Patent Owner Responses for the ‘339 and ‘506 Patent IPR proceedings. Substantive briefing is ongoing in these IPRs. ​ On May 17, 2022, Samsung filed two IPR petitions contesting the validity of Netlist’s ‘918 and ‘054 Patents. On December 6, 2022, the Board instituted an IPR trial for the ‘054 Patent, and then instituted an IPR trial for the ‘918 Patent the next day. On December 9, 2022, the Board set a joint schedule for both IPRs. As of the reporting date, Netlist filed its Patent Owner Response. Substantive briefing is ongoing in these IPRs. ​ On June 3, 2022, Netlist filed patent infringement lawsuits against Samsung in Dusseldorf, Germany, seeking damages for Samsung’s infringement of Netlist’s Patents EP735 and EP660. The Dusseldorf Court set an Oral Hearing date for September 5, 2023. ​ On August 1, 2022, Netlist filed a complaint for patent infringement against Samsung, Samsung Semiconductor, Inc., and Samsung Electronics America, Inc. in the EDTX (Case No. 2:22-cv-00293) under the ‘912 Patent, which relates generally to technologies to implement rank multiplication. On August 15, 2022, Netlist filed its first amended complaint here, further addressing Samsung’s infringement of the ‘215 Patent and ‘417 Patent. On October 21, 2022, Chief Judge Gilstrap ordered that this action and a parallel action by Netlist against Micron on the same patents (22-cv-00294-JRG) be consolidated and set for a joint scheduling conference on November 17, 2022, further instructing that this Samsung action be considered the “LEAD CASE” and that any further filings from either action be submitted in therefore all pretrial matters. As of the reporting date, the consolidated case stands ready to proceed with a claim construction hearing set for October 5, 2023, and trial beginning on April 15, 2024. ​ On August 26, 2022, Samsung filed two IPR petitions contesting the validity of Netlist’s U.S. Patent Nos. 8,787,060 (the “‘060 Patent”) and 9,318,160 (the “‘106 Patent”). On January 19, 2023, Netlist filed its Patent Owner Preliminary Responses in those proceedings. As of the reporting date, the Board instituted trials for both IPRs, setting Netlist’s deadline to files its Patent Owner’s Response on July 5, 2023. ​ On January 10, 2023, Samsung filed two IPR petitions contesting the validity of the ‘215 and ‘417 Patents. As of the reporting date, the Board has accorded these IPR a filing date of January 10, 2023. As of the reporting date, Netlist filed its Patent Owner Preliminary Responses by the May 9, 2023 deadline. ​ On April 27, 2023, Samsung filed an IPR petition contesting the validity of the ‘608 Patent. As of the reporting date, the Board has not yet accorded this IPR a filing date. ​ Other Contingent Obligations ​ In the ordinary course of our business, we have made certain indemnities, commitments and guarantees pursuant to which we may be required to make payments in relation to certain transactions. These may include, among others: (i) intellectual property indemnities to our customers and licensees in connection with the use, sale and/or license of our products; (ii) indemnities to vendors and service providers pertaining to claims based on our negligence or willful misconduct; (iii) indemnities involving the accuracy of representations and warranties in certain contracts; (iv) indemnities to our directors and officers to the maximum extent permitted under the laws of the State of Delaware; (v) indemnities pertaining to all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with transactions contemplated by applicable investment or loan documents, as applicable; and (vi) indemnities or other claims related to certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities or may face other claims arising from our use of the applicable premises. The duration of these indemnities, commitments and guarantees varies and, in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments we could be obligated to make. Historically, we have not been obligated to make significant payments as a result of these obligations, and no liabilities have been recorded for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets. 15 Table of Contents ​ Note 8—Stockholders’ Equity ​ Serial Preferred Stock ​ The Company’s authorized capital stock includes 10,000,000 shares of serial preferred stock, with a par value of $ 0.001 per share. No shares of preferred stock were outstanding as of April 1, 2023 or December 31, 2022. ​ On April 17, 2017, the Company entered into a rights agreement (as amended from time to time, the “Rights Agreement”) with Computershare Trust Company, N.A., as rights agent. In connection with the adoption of the Rights Agreement and pursuant to its terms, the Company’s board of directors authorized and declared a dividend of one right (each, a “Right”) for each outstanding share of the Company’s common stock to stockholders of record at the close of business on May 18, 2017 (the “Record Date”), and authorized the issuance of one Right for each share of the Company’s common stock issued by the Company (except as otherwise provided in the Rights Agreement) between the Record Date and the Distribution Date (as defined below). ​ Each Right entitles the registered holder, subject to the terms of the Rights Agreement, to purchase from the Company, when exercisable and subject to adjustment, one unit consisting of one one -thousandth of a share (a “Unit”) of Series A Preferred Stock of the Company (the “Preferred Stock”), at a purchase price of $ 6.56 per Unit, subject to adjustment. Subject to the provisions of the Rights Agreement, including certain exceptions specified therein, a distribution date for the Rights (the “Distribution Date”) will occur upon the earlier of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired or otherwise obtained beneficial ownership of 15 % or more of the then-outstanding shares of the Company’s common stock, and (ii) 10 business days (or such later date as may be determined by the Company’s board of directors) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. The Rights are not exercisable until the Distribution Date and, unless earlier redeemed or exchanged by the Company pursuant to the terms of the Rights Agreement (as amended on April 16, 2018, April 16, 2019 and August 14, 2020) will expire on the close of business on April 17, 2024. ​ In connection with the adoption of the Rights Agreement, the Company’s board of directors approved a Certificate of Designation of the Series A Preferred Stock (the “Certificate of Designation”) designating 1,000,000 shares of its serial preferred stock as Series A Preferred Stock and setting forth the rights, preferences and limitations of the Preferred Stock. The Company filed the Certificate of Designation with the Secretary of State of the State of Delaware on April 17, 2017. ​ Common Stock ​ September 2021 Lincoln Park Purchase Agreement ​ On September 28, 2021, the Company entered into a purchase agreement (the “September 2021 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company has the right to sell to Lincoln Park up to an aggregate of $ 75 million in shares of its common stock subject to the conditions and limitations set forth in the September 2021 Purchase Agreement. Concurrent with the execution of the September 2021 Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park relating to the Company’s common stock to be sold to Lincoln Park. As consideration for entering into the September 2021 Purchase Agreement, the Company issued to Lincoln Park 218,750 shares of its common stock as initial commitment shares in a noncash transaction on September 28, 2021 and will issue up to 143,750 additional shares of its common stock as additional commitment shares on a pro rata basis in connection with any additional purchases. The Company will not receive any cash proceeds from the issuance of these additional commitment shares. ​ Pursuant to the September 2021 Purchase Agreement, on any business day and as often as every other business day over the 36-month term of the September 2021 Purchase Agreement, the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 750,000 shares of its common stock, provided Lincoln Park’s obligation under any single such purchase will not exceed $ 4.0 million, unless 16 Table of Contents the Company and Lincoln Park mutually agree to increase the maximum amount of such single regular purchase. If the Company directs Lincoln Park to purchase the maximum number of shares of common stock, it then may sell in a regular purchase, then in addition to such regular purchase, and subject to certain conditions and limitations in the September 2021 Purchase Agreement, the Company may direct Lincoln Park to purchase an additional amount of common stock that may not exceed the lesser of (i) 300 % of the number of shares purchased pursuant to the corresponding regular purchase or (ii) 30 % of the total number of shares of its common stock traded during a specified period on the applicable purchase date as set forth in the September 2021 Purchase Agreement. Under certain circumstances and in accordance with the September 2021 Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day. ​ The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for the Company’s common stock under the September 2021 Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the September 2021 Purchase Agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the September 2021 Purchase Agreement if that would result in Lincoln Park beneficially owning more than 9.99 % of its common stock. ​ The September 2021 Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that, subject to certain exceptions, the Company may not enter into any Variable Rate Transaction (as defined in the September 2021 Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the September 2021 Purchase Agreement. The Company has the right to terminate the September 2021 Purchase Agreement at any time, at no cost to the Company. ​ During 2022, Lincoln Park purchased an aggregate of 1,050,000 shares of our common stock for a net purchase price of $ 4.4 million under the September 2021 Purchase Agreement. In connection with the purchases, we issued to Lincoln Park an aggregate of 8,502 shares of our common stock as additional commitment shares in noncash transactions. During the three months ended April 1, 2023, Lincoln Park purchased an aggregate of 4,900,000 shares of our common stock for a net purchase price of $ 10.5 million under the September 2021 Purchase Agreement. In connection with the purchases, we issued to Lincoln Park an aggregate of 20,209 shares of our common stock as additional commitment shares in noncash transactions. ​ Subsequently, from April 2, 2023 through May 4, 2023, Lincoln Park purchased an aggregate of 1,950,000 shares of our common stock for a net purchase price of $ 9.2 million under the September 2021 Purchase Agreement. In connection with the purchase, we issued to Lincoln Park an aggregate of 17,562 shares of our common stock as additional commitment shares in noncash transactions. ​ Note 9—Stock-Based Awards ​ As of April 1, 2023, the Company had 960,086 shares of common stock reserved for future issuance under its Amended and Restated 2006 Incentive Plan (“Amended 2006 Plan”). Stock options granted under the Amended 2006 Plan generally vest at a rate of at least 25 % per year over four years and expire 10 years from the grant date. RSUs granted for employees and consultants generally vest in equal installments annually and fully vest over a four-year term from the grant date. ​ 17 Table of Contents Stock Options ​ The following table summarizes the activity related to stock options during the three months ended April 1, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ Number of ​ Average ​ ​ Shares ​ Exercise ​ ​ (in thousands) Price Outstanding as of December 31, 2022 ​ ​ 4,866 ​ $ 0.93 Granted ​ ​ — ​ ​ — Exercised ​ ​ ( 381 ) ​ ​ 0.69 Expired or forfeited ​ ​ ( 119 ) ​ ​ 1.84 Outstanding as of April 1, 2023 ​ ​ 4,366 ​ $ 0.92 ​ Restricted Stock Units ​ The following table summarizes the activity related to RSUs during the three months ended April 1, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ Average ​ ​ Number of ​ Grant-Date ​ ​ Shares ​ Fair Value ​ ​ (in thousands) ​ per Share Balance nonvested as of December 31, 2022 ​ ​ 3,442 ​ $ 3.36 Granted ​ ​ 649 ​ ​ 2.93 Vested ​ ​ ( 712 ) ​ ​ 1.94 Forfeited ​ ​ ( 149 ) ​ ​ 4.01 Balance nonvested as of April 1, 2023 ​ ​ 3,230 ​ $ 3.55 ​ Stock-Based Compensation ​ The following table summarizes the stock-based compensation expense by line item in the condensed consolidated statements of operations (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ April 1, ​ April 2, ​ ​ ​ 2023 ​ 2022 Cost of sales ​ ​ $ 18 ​ $ 3 Research and development ​ ​ ​ 274 ​ ​ 176 Selling, general and administrative ​ ​ ​ 785 ​ ​ 503 Total ​ ​ $ 1,077 ​ $ 682 ​ As of April 1, 2023, the Company had approximately $ 9.9 million, net of estimated forfeitures, of unearned stock-based compensation, which it expects to recognize over a weighted-average period of approximately 2.9 years. ​ 18 Table of Contents