What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 142 added, 113 removed, 343 unchanged (43% of the section changed)

41 unchanged sentences

Three Months Ended

Net product sales

Six Months Ended

Cost of sales

6 unchanged sentences

Other income (expense), net:

Interest income (expense), net

Interest income, net

Other expense, net

18 unchanged sentences

Balance, April 1, 2023

Issuance of common stock, net

Exercise of stock options

Stock-based compensation

Restricted stock units vested and distributed

Balance, July 1, 2023

Stockholders'

6 unchanged sentences

Balance, April 2, 2022

Issuance of common stock, net

Exercise of stock options

Stock-based compensation

Restricted stock units vested and distributed

Tax withholdings related to net share settlements of equity awards

Balance, July 2, 2022

See accompanying Notes to the Condensed Consolidated Statements.

3 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

7 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

2 unchanged sentences

Cash flows from financing activities:

Net repayments under line of credit

Net borrowings (repayments) under line of credit

Principal repayments under finance lease

3 unchanged sentences

Payments for taxes related to net share settlement of equity awards

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net change in cash, cash equivalents and restricted cash

11 unchanged sentences

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.

and its wholly owned subsidiaries (collectively the “Company”, “Netlist”, “we”, “us”, or “our”) provides high-performance memory solutions to enterprise customers in diverse industries.

Our products in various capacities and form factors and our line of custom and specialty memory products bring leading performance to customers in a variety of industries globally and cloud service providers.

Netlist also licenses its intellectual property.

Note 2—Summary of Significant Accounting Policies

7 unchanged sentences

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.

The Company has evaluated events occurring subsequent to July 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

20 unchanged sentences

Three Months Ended

Six Months Ended

Weighted-average basic shares outstanding - basic and diluted

Net loss per share - basic and diluted

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”).

The table below shows potentially dilutive weighted average common share equivalents, consisting of shares issuable upon the exercise of outstanding stock options using the treasury stock 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

Six Months Ended

Weighted average common share equivalents

2 unchanged sentences

Three Months Ended

Six Months Ended

Resales of third-party products

5 unchanged sentences

Three Months Ended

Six Months Ended

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 July 1, 2023, four customers represented approximately 20 %, 18 %, 13 % and 10 % of aggregated gross accounts receivables, respectively.

As of December 31, 2022, one customer represented approximately 69 % of aggregate gross accounts receivables.

2 unchanged sentences

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

For the three and six months ended July 1, 2023, resales of these products represented approximately 86 % and 81 % of net product sales, respectively.

For the three and six months ended July 2, 2022, resales of these products represented approximately 89 % and 90 % of net product sales, respectively.

Note 4—Credit Agreement and Standby Letters of Credit

SVB 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.

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”).

The SVB Credit Agreement required letters of credit to be secured by cash, which were classified as restricted cash in the accompanying condensed consolidated balance sheets.

As of December 31, 2022, (i) outstanding letters of credit were $ 18.6 million, (ii) outstanding borrowings were $ 4.9 million, and (iii) availability under the revolving line of credit was $ 0 .

On the maturity date, April 28, 2023, the SVB Credit Agreement terminated in accordance with its terms.

In connection with the termination of the SVB Credit Agreement, all outstanding obligations for principal, interest, and fees were paid in full and all liens securing such obligations were released.

Standby Letters of Credit

On May 15, 2023 and June 6, 2023, Citibank, N.A.

issued on our behalf to third parties irrevocable letters of credit in the amount of $ 5.0 million and $ 2.0 million, respectively.

The standby letters of credit are valid for a one-year term.

As of July 1, 2023, the amount of outstanding letters of credit was approximately $ 7.0 million, and no amount has

been drawn from the letters of credit.

A standby letter of credit is a guarantee of payment issued by a bank on our behalf that is used as payment of last resort should we fail to fulfill a contractual commitment with a third party.

The Company’s debt consisted of the following (in thousands):

3 unchanged sentences

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.

As of July 1, 2023 and December 31, 2022, we had $ 0.2 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.

5 unchanged sentences

Three Months Ended

Six Months Ended

Operating lease cost

1 unchanged sentence

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

For the three months ended April 1, 2023, and April 2, 2022, finance lease costs and cash flows from finance leases were immaterial.

Finance leases

Lease modification to increase operating lease assets

For the three and six months ended July 1, 2023 and July 2, 2022, finance lease costs were immaterial.

Supplemental condensed consolidated balance sheet information related to leases was as follows (in thousands):

18 unchanged sentences

Finance leases

Maturities of lease liabilities as of April 1, 2023, were as follows (in thousands):

Maturities of lease liabilities as of July 1, 2023, were as follows (in thousands):

2023 (remainder of the year)

6 unchanged sentences

Litigation and Patent Reexaminations

The Company is, from time to time, a party to litigation that arises in the normal course of its business operations.

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.

11 unchanged sentences

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.

The current judge assigned to the case, Hon.

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.

4 unchanged sentences

As of the reporting date, Google has submitted its statements of defense.

The date for oral hearings are currently scheduled for November 2023.

As of the reporting date, the date for oral hearings before the Dusseldorf Court is currently scheduled for November 9, 2023.

On October 15, 2021, Samsung initiated a declaratory judgement action against Netlist in the U.S.

6 unchanged sentences

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.

Further, the Court set the Claim Construction hearing for October 20, 2023, and the beginning of the Jury Trial on February 3, 2025.

As of the reporting date, the Court has heard oral arguments for Google’s Motion to Dismiss or alternatively, Sever and Stay and Dismiss Willfulness and Indirect Infringement Allegations.

As of the reporting date, the case remains active and set for a claim construction hearing on October 20, 2023, and the Jury Trial is scheduled to begin on February 3, 2025.

Micron Litigations

6 unchanged sentences

patents – U.S.

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.

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 was 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

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.

On May 11, 2022, Judge Yeakel entered a stay of the case pending the 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).

On May 4, 2023, the case was reassigned to Docket II in the WDTX Austin Division, given Hon.

Judge Yeakel’s retirement.

As of the reporting date, the matter remains stayed pending the outcome of the related IPR proceedings and assigned to Docket II pending reassignment to an Article III Judge.

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 has 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.

Oral arguments were presented for the ‘035 Patent IPR on April 19, 2023, with the PTAB entering a Final Written Decision finding claims 2, 6, and 22 of the ‘035 Patent patentable.

As of the reporting date, the IPR trials under the ‘833 and ‘314 Patents are proceeding.

Oral arguments for the ‘833 Patent occurred as scheduled on June 7, 2023.

The ‘314 Patent IPRs are still set for a consolidated oral argument on August 15, 2023.

On March 31, 2022, Netlist filed patent infringement claims against Micron in Dusseldorf, Germany (“Micron Dusseldorf Action”), 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.

Primary briefing in the Micron Dusseldorf Action has concluded, while the German Federal Patent Court entered a preliminary opinion on EP735 and EP660 in a related invalidity proceedings that have been consolidated as of the reporting date.

Currently, the Micron Dusseldorf Action is scheduled for oral hearings in April 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.

These proceedings are based on the alleged infringement by Micron for the sale of its LRDIMMs, its memory modules utilizing on-board power management (“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.

8,787,060 (the “‘060 Patent”), 9,318,160 (the “‘160 Patent), 10,860,506 (the “‘506 Patent”), 10,949,339 (the “‘339 Patent”), 11,016,918 (the “‘918 Patent”), and 11,232,054 (the “‘054 Patent”).

The claim construction hearing took place before Hon.

Magistrate Judge Roy Payne on July 26, 2023, and as of the reporting date, the Court has not entered an Order confirming the Claim Construction outcome.

The Jury Trial is scheduled to begin 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.

On August 15, 2022, Netlist filed its first amended complaint, further addressing Micron’s infringement of U.S.

9,858,215 (the “‘215 Patent”) and 11,093,417 (the “‘417 Patent”).

On October 21, 2022, Hon.

Chief Judge Gilstrap ordered that this Micron action and a parallel action by Netlist against defendants Samsung Electronics Co.

Ltd., Samsung Semiconductor Inc., and Samsung Electronics America Inc.

(“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.

1 unchanged sentence

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.

As of the reporting date, Micron’s ‘912, ‘339, and ‘506 Patent IPRs have been joined with the corresponding Samsung IPR proceedings for the same respective patents.

Oral hearings for the joined Samsung ‘339 and ‘506 Patents IPRs were held on July 19, 2023 and July 20, 2023, respectively.

On June 30, 2023, the PTAB resumed the trial on the Samsung ‘912 Patent IPR (which included Micron’s claims via joinder) following USPTO Director Katherine Vidal’s sua sponte Director Review and scheduled the ‘912 Patent IPR for an oral hearing on January 31, 2024.

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.

On June 23, 2023, the

matters were joined with the corresponding Samsung IPRs on the same patents.

As of the reporting date, the ‘918 and ‘054 Patent IPRs are scheduled for an oral hearing on September 11, 2023.

On May 8, 2023, Micron filed IPR requests contesting the validity of the ‘060 and ‘160 Patents, along with motions requesting joinder to the pending Samsung IPRs related to the same patents (see below).

As of the reporting date, Netlist’s deadline to provide its preliminary response to each of these Micron IPRs is August 24, 2023.

Samsung Litigations

3 unchanged sentences

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

Netlist on each of its three claims and confirmed conclusively that the licenses granted by Netlist under the JDLA were terminated.

On February 15, 2022, the Court entered a final judgment in favor of 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 June 8, 2023, the Ninth Circuit Court of Appeals heard oral arguments from both parties on the matter following completion of all briefing.

As of the reporting date, the Ninth Circuit Court of Appeals has not yet entered its Order on the matter.

On October 15, 2021, Samsung initiated a declaratory judgement action against Netlist in the DDE ( Samsung Elecs.

7 unchanged sentences

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.

ET before Judge Jennifer L.

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.

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.

(jointly “Google”) to the action.

On November 15, 2022, Google responded to Netlist’s Counterclaims by filing a Motion to Dismiss or alternatively to Sever and Stay the counterclaims.

On May 22, 2023, the Court heard oral arguments on Google’s Motion to Dismiss or alternatively, Sever and Stay and Dismiss Willfulness and Indirect Infringement Allegations.

As of the reporting date, the Court has not entered an Order on Google’s motion, the Claim Construction hearing is still set for October 20, 2023, and the Jury Trial is still scheduled to begin on February 3, 2025.

On November 19, 2021, Samsung filed IPR requests contesting the validity of the ‘218, the ‘595, and the ‘523 Patents.

Netlist filed its initial responses to Samsung’s IPR petitions on February 18, 2022, contesting the institution of any IPR on the grounds propounded.

As of the reporting date, the PTAB 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 and ‘595 Patents unpatentable.

On December 20, 2021, Netlist filed a complaint for patent infringement against Samsung 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.

Netlist brought claims under the ‘339, ‘918, ‘054, ‘060, and ‘160 Patents in its Jury Trial, which concluded on April 21, 2023, with the entry of the jury’s verdict into the public record.

The jury unanimously found that Samsung willfully infringed Netlist’s ‘339, ‘918, ‘054, ‘060, and ‘160 Patents through the sale of their DDR4 LRDIMMs, DDR5 DIMMs, and HBMs, and that none of the patent claims asserted at trial were invalid.

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 May 30, 2023, Hon.

Chief Judge Gilstrap conducted a bench trial to assess the merits of Samsung’s affirmative defenses excusing its infringement of only the ‘339, ‘918, and ‘054 Patents.

As of the reporting date, the Court has not yet entered an Order regarding the outcome the May Bench Trial, or a Judgement contemplating both the Jury and Bench Trial.

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.

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 October 19, 2022, the PTAB instituted IPR trials on the ‘912 and ‘339 Patents, 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

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.

Vidal entered an Order in the ‘912 Patent 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 reassess whether Google is a “Real Party in Interest.” On June 30, 2023, the Board resumed the trial on the Samsung ‘912 Patent IPR, which now also includes Micron’s claims via joinder (see above), and scheduled the ‘912 Patent IPR for further substantive briefing and an oral hearing on January 31, 2024.

Oral arguments for the joined Samsung ‘339 and ‘506 Patent IPRs were heard on July 19, 2023 and July 20, 2023, respectively.

As of the reporting date, the Board has not issued a final written decision regarding Samsung’s IPRs of the ‘339 and ‘506 Patents.

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.

As of the reporting date, Micron has joined these Samsung IPRs on the ‘918 and ‘054 Patents, and oral arguments are set to be heard on September 11, 2023.

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.

As of the reporting date, the infringement matters are set for an Oral Hearing in the Dusseldorf Court on September 5, 2023.

On August 1, 2022, Netlist filed a complaint for patent infringement against Samsung 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.

On August 15, 2022, Netlist filed its first amended complaint here, further addressing Samsung’s infringement of the ‘215 and ‘417 Patents.

On October 21, 2022, Hon.

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.

8,787,060 (the “‘060 Patent”) and 9,318,160 (the “‘106 Patent”).

On August 26, 2022, Samsung filed two IPR petitions contesting the validity of Netlist’s ‘060 and ‘160 Patents.

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.

As of the reporting date, the Board instituted trials for both IPRs, set substantive briefing deadlines, and ultimately the date for oral argument on January 11, 2024.

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.

The Board accorded these IPRs a filing date of January 10, 2023 and Netlist filed its Patent Owner Preliminary Responses by the May 9, 2023 deadline.

As of the reporting date, the Board has not yet entered an institution decision on either of Samsung’s IPR petitions here.

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.

The Board accorded Samsung’s IPR petition a filing date on June 14, 2023.

As of the reporting date, Netlist’s deadline to submit its preliminary response to the petition is September 14, 2023.

Other Contingent Obligations

4 unchanged sentences

(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;

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;

6 unchanged sentences

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.

No shares of preferred stock were outstanding as of July 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.

7 unchanged sentences

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.

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

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.

5 unchanged sentences

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.

During the six months ended July 1, 2023, Lincoln Park purchased an aggregate of 7,300,000 shares of our common stock for a net purchase price of $ 21.6 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 41,500 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.

Subsequently, from July 2, 2023 through August 3, 2023, Lincoln Park purchased an aggregate of 160,000 shares of our common stock for a net purchase price of $ 0.5 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 947 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”).

As of July 1, 2023, the Company had 113,836 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.

1 unchanged sentence

Stock Options

The following table summarizes the activity related to stock options during the three months ended April 1, 2023:

The following table summarizes the activity related to stock options during the six months ended July 1, 2023:

(in thousands)

1 unchanged sentence

Expired or forfeited

Outstanding as of April 1, 2023

Outstanding as of July 1, 2023

Restricted Stock Units

The following table summarizes the activity related to RSUs during the three months ended April 1, 2023:

The following table summarizes the activity related to RSUs during the six months ended July 1, 2023:

(in thousands)

Balance nonvested as of December 31, 2022

Balance nonvested as of April 1, 2023

Balance nonvested as of July 1, 2023

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

Cost of sales

1 unchanged sentence

Selling, general and administrative

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.

As of July 1, 2023, the Company had approximately $ 11.3 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.

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 1. Financial Statements