What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-02-28 · 307 added, 228 removed, 642 unchanged (45% of the section changed)

59 unchanged sentences

Other income, net

Total other income (expense), net

Total other income, net

(Loss) income before provision for income taxes

10 unchanged sentences

Equity (Deficit)

Balance, December 28, 2019

Balance, January 2, 2021

Issuance of common stock, net

Issuance of warrants

Exercise of stock options

6 unchanged sentences

Exercise of stock options

Exercise of warrants

Stock-based compensation

1 unchanged sentence

Tax withholdings related to net share settlements of equity awards

Balance, January 1, 2022

Balance, December 31, 2022

Issuance of common stock, net

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Restricted stock units vested and distributed

Tax withholdings related to net share settlements of equity awards

Balance, December 30, 2023

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Stock-based compensation

Issuance of warrant in lieu of payment

Changes in operating assets and liabilities:

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Net borrowings (repayments) under line of credit

Proceeds from issuance of long-term debt

Principal repayments under finance lease

Payments on note payable and long-term debt

Payments on notes payable and long-term debt

Proceeds from issuance of common stock, net

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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 the 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, in server memory, hybrid memory and storage class memory, to companies that implement our technology.

We operate in one reportable segment, which is the design and manufacture of high-performance memory subsystems for the server, high-performance computing and communications markets.

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

Netlist also licenses its intellectual property.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

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Actual results may differ materially from those estimates.

We have evaluated events occurring subsequent to December 31, 2022, through the filing date of this Annual Report on Form 10-K and concluded that there were no events that required recognition and disclosures, other than those discussed elsewhere in the notes hereto.

We have evaluated events occurring subsequent to December 30, 2023 through the filing date of this Form 10-K and concluded that there were no events that required recognition and disclosures, other than those discussed elsewhere in the notes hereto.

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

Our fiscal year is the 52 - or 53 -week period that ends on the Saturday nearest to December 31.

Our fiscal year 2022 ended on December 31, 2022, fiscal year 2021 ended on January 1, 2022, and fiscal year 2020 ended on January 2, 2021.

All fiscal years presented in this Form 10-K, except fiscal year 2020, included 52 weeks.

Additionally, all quarters, except the fourth quarter of 2020, included 13 weeks.

Fiscal year 2020 included 53 weeks, with a 14 -week fourth quarter.

Our fiscal year 2023 ended on December 30, 2023, fiscal year 2022 ended on December 31, 2022, and fiscal year 2021 ended on January 1, 2022.

All fiscal years presented in this Form 10-K included 52 weeks.

Additionally, all quarters included 13 weeks.

Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in January or December and the associated quarters, months and periods of those fiscal years.

Recently Adopted Accounting Standards

In the first quarter of 2022, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity, and also improves and amends the related earnings per share guidance for both Subtopics.

The adoption of this ASU did not have an impact on the Company’s condensed consolidated financial statements as the Company paid off its convertible debt in December 2021.

Recently Issued Accounting Standards

In December 2023, the FASB issued Update 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This update applies to all entities that are subject to Topic 740.

The amendments in this update improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as the effectiveness of certain other income tax disclosures.

The new standard is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

This standard should be applied on a prospective basis, but retrospective application is permitted.

The Company is currently evaluating the impact of adopting this new standard.

Revenue Recognition

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At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services).

To identify the performance obligations, we consider all of the goods or services promised in the contract regardless of whether they are explicitly stated or are

implied by customary business practices.

To identify the performance obligations, we consider all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

Contracts with customers are comprised of customer purchase orders, invoices (including our standard terms and conditions) and written contracts.

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We continually evaluate whether the revenue generating activities and advanced payment arrangements with customers result in the recognition of contract assets or liabilities.

Generally, we do not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed.

As of January 1, 2022 and December 31, 2022, there were no contract liabilities.

Generally, we do not have material amounts of

contract assets since revenue is recognized as control of goods is transferred or as services are performed.

As of December 30, 2023 and December 31, 2022, there were no contract liabilities.

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

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Restricted Cash

Our restricted cash consists of cash to secure standby letters of credit (see Note 3).

Our restricted cash consists of cash to secure standby letters of credit (see Note 3 —Credit Agreement and Standby Letters of Credit ).

Fair Value Measurements

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The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Our financial instruments consist principally of cash and cash equivalents, restricted cash, a revolving line of credit and note payable.

Cash equivalents consist of short-term investments with original maturities of three months or less and restricted cash consists of cash to secure standby letters of credit (see Note 3).

Our financial instruments consist principally of cash and cash equivalents, restricted cash, and a revolving line of credit.

Cash equivalents consist of short-term investments with original maturities of three months or less and restricted cash consists of cash to secure standby letters of credit (see Note 3 — Credit Agreement and Standby Letters of Credit).

The carrying value of these instruments approximates their fair value due to their short-term nature.

The fair value of the revolving line of credit and the note payable is estimated by using current applicable rates for similar instruments as of the balance sheet date and an assessment of the credit rating.

The carrying values of the revolving line of credit as of December 31, 2022 and January 1, 2022 and the note payable as of December 31, 2022 and January 1, 2022 approximate fair value because the interest rate yield is near current market rates for comparable debt instruments.

The fair value of the revolving line of credit is estimated by using current applicable rates for similar instruments as of the balance sheet date and an assessment of the credit rating.

The carrying values of the revolving line of credit as of December 30, 2023 and December 31, 2022 and the note payable as of December 31, 2022 approximate fair value because the interest rate yield is near current market rates for comparable debt instruments.

Accounts Receivable, net

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We perform credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed necessary, but generally require no collateral.

We believe the concentration of credit risk in our accounts receivable is moderated by our credit evaluation process, relatively short collection terms, a high level of credit worthiness of our customers (see Note 10), foreign credit insurance, and letters of credit issued in our favor.

We believe the concentration of credit risk in our accounts receivable is moderated by our credit evaluation process, relatively short collection terms, a high level of credit worthiness of our customers (see Note 10 — Major Customers, Suppliers and Products), foreign credit insurance, and letters of credit issued in our favor.

The allowance for credit losses is maintained, and such losses historically have not been significant and have been within management’s expectations.

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When such factors and circumstances exist, we compare the projected undiscounted future net cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount.

These projected future cash flows may vary significantly over time as a result of increased

competition, changes in technology, fluctuations in demand, consolidation of our customers and reductions in average sales prices.

These projected future cash flows may vary significantly over time as a result of increased competition, changes in technology, fluctuations in demand, consolidation of our customers and reductions in average

sales prices.

If the carrying value is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized to the extent the carrying value exceeds the estimated fair value of the asset.

The fair value of the asset or asset group is based on market value when available, or when unavailable, on discounted expected cash flows.

Management believes there is no impairment of long-lived assets as of December 31, 2022 and January 1, 2022.

Management believes there is no impairment of long-lived assets as of December 30, 2023 and December 31, 2022.

We determine if an arrangement is a lease at inception.

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Stock-Based Compensation

Stock-based awards are comprised principally of stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”).

Stock-based awards are comprised principally of stock options and restricted stock units (“RSUs”).

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period, which is the vesting period, on a straight-line basis, net of estimated forfeitures.

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

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

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

Deferred income tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and the amounts that are reported in the income tax returns.

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We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of our position.

benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized.

The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more

likely than not to be realized.

The amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax laws, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination.

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Diluted earnings (loss) per share is calculated by dividing the net income (loss) by the weighted-average shares and dilutive potential common shares outstanding during the period.

Dilutive potential shares consist of dilutive shares issuable upon the exercise of outstanding stock options and warrants computed using the treasury stock method, shares issuable under the conversion feature of a convertible note using the “if-converted” method, and shares issuable upon the vesting of RSAs and RSUs.

In periods of net loss, basic and diluted loss per share are the same, as the effect of dilutive potential shares on loss per share is anti-dilutive.

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accumulated depreciation and amortization

Substantially all our property and equipment are located within the United States as of December 31, 2022 and January 1, 2022.

Substantially all our property and equipment are located within the United States as of December 30, 2023 and December 31, 2022.

Disaggregation of Net Sales

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Total net sales

China includes Hong Kong and Taiwan.

People’s Republic of China includes Hong Kong and Taiwan.

The United States and China accounted for more than 10 % of our net product sales for 2023, 2022 and 2021.

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Diluted (loss) earnings per share

We computed net loss per share using the two-class method required for unvested participating securities through the three months ended March 28, 2020 as restricted stock awards were considered participating securities until they vested in full during that quarter.

No allocation of undistributed earnings to participating securities was performed for periods with net loss as such securities do not have a contractual obligation to share in our loss.

The table below sets forth 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 of the SVIC Note (see Note 4) using the “if-converted” method, and the vesting of RSAs and RSUs.

The table below sets forth 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 of the SVIC Note (see Note 4 — Debt) using the “if-converted” method, and the vesting of RSUs.

These potential weighted average common share equivalents have been excluded from the diluted net loss per share for 2023 and 2022 calculations above, as their effect would be anti-dilutive (in thousands):

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Debt financing of insurance

Note 3—Credit Agreement

On October 31, 2009, Netlist and Silicon Valley Bank (“SVB”) entered into a credit agreement, which may from time to time be amended, modified, supplemented or restated, (“the SVB Credit Agreement”), which provides 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, and the borrowing base is limited to 85 % of eligible accounts receivable, subject to certain adjustments, and 50 % of eligible inventory.

Borrowings accrue 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 is April 28, 2023, as amended.

Note 3—Credit Agreement and Standby Letters of Credit

SVB Credit Agreements

On October 31, 2009, Netlist and Silicon Valley Bank entered into a credit agreement, which may from time to time be amended, modified, supplemented or restated, (“the 2009 SVB Credit Agreement”), which provides for a revolving line of credit up to $ 10.0 million, as amended.

The 2009 SVB Credit Agreement was amended on April 29, 2022, and the borrowing base is limited to 85 % of eligible accounts receivable, subject to certain adjustments, and 50 % of eligible inventory.

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 %.

On the maturity date, April 28, 2023, the 2009 SVB Credit Agreement terminated in accordance with its terms.

In connection with the termination of the 2009 SVB Credit Agreement, all outstanding obligations for principal, interest, and fees were paid in full and all liens securing such obligations were released.

On November 7, 2023, we entered into a loan and security agreement (the “2023 SVB Credit Agreement”) with Silicon Valley Bank, a division of First-Citizen Bank & Trust Company (“SVB”), which provides for a revolving line of credit up to $ 10.0 million.

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

Borrowings accrue interest on advance at a per annum rate equal to the greater of 8.50 % and the Prime Rate.

The maturity date is November 7, 2025.

The 2023 SVB Credit Agreement requires letters of credit to be secured by cash, which is classified as restricted cash in the accompanying consolidated balance sheets.

As of December 31, 2022 and January 1, 2022, (i) outstanding letters of credit were $ 18.6 million and $ 10.8 million, respectively, and (ii) outstanding borrowings were $ 4.9 million and $ 7.0 million, respectively.

There was no availability under the revolving line of credit as of December 31, 2022 and January 1, 2022.

As of December 30, 2023, (i) outstanding letters of credit were $ 12.4 million, (ii) outstanding borrowings were $ 3.8 million, and (iii) availability under the revolving line of credit was $ 0 .

As of December 30, 2023, all obligations under the 2023 SVB Credit Agreement were secured by a first priority security interest in our tangible and intangible assets.

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As of December 30, 2023, we were in compliance with our covenants under the 2023 SVB Credit Agreement.

Standby Letters of Credit

As of December 30, 2023, the amount of outstanding letters of credit was approximately $ 12.1 million, consisting of an irrevocable letter of credit issued by Silicon Valley Bank on our behalf to a third party expiring on December 31, 2023, which was subsequently amended on January 4, 2024 to extend the term to December 31, 2024, and two irrevocable letters of credit issued by Citibank, N.A.

on our behalf to third parties expiring on May 15, 2024 and

June 6, 2024, respectively.

As of December 30, 2023, 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.

Our debt consisted of the following (in thousands):

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Secured Convertible Note

On November 18, 2015, in connection with entering into the Joint Development and License Agreement (the “JDLA”) with Samsung, we issued to SVIC a secured convertible note (the “SVIC Note”) and stock purchase warrant (the “SVIC Warrant”).

On November 18, 2015, in connection with entering into the Joint Development and License Agreement (the “JDLA”) with Samsung Electronics Co., Ltd.

(“SECL”), we issued to SVIC No.

28 New Technology Business Investment L.L.P., a Korean limited liability partnership (“SVIC”) a secured convertible note (the “SVIC Note”) and stock purchase warrant (the “SVIC Warrant”).

The SVIC Note had an original principal amount of $ 15.0 million, accrued interest at a rate of 2.0 % per year, was due and payable in full on December 31, 2021, and was convertible into shares of our common stock at a conversion price of $ 1.25 per share, subject to certain adjustments, on the maturity date of the SVIC Note.

Upon our change of control prior to the maturity date of the SVIC Note, the SVIC Note might, at our option, be assumed by the surviving entity or be redeemed upon the consummation of such change of control for the principal and accrued but

unpaid interest as of the redemption date.

The SVIC Warrant granted SVIC a right to purchase 2,000,000 shares of our common stock at an exercise price of $ 0.30 per share, subject to certain adjustments, was only exercisable in the event we would exercise our right to redeem the SVIC Note prior to its maturity date, and would expire on December 31, 2025.

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These amounts were being amortized to interest expense over the term of the SVIC Note using the interest method.

For 2021 and 2020, we amortized $ 0.2 million and $ 0.2 million, respectively, to interest expense in the accompanying consolidated statements of operations.

For 2021, we amortized $ 0.2 million, to interest expense in the accompanying consolidated statements of operations.

The effective interest rate, including accretion of the SVIC Note to par and amortization of debt issuance costs, was approximately 3.4 %.

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We made the repayment of $ 16.8 million on December 27, 2021 and SVIC purchased 2,000,000 shares of common stock at an exercise price of $ 0.30 per share on December 28, 2021.

As a result, neither the SVIC Note nor the SVIC Warrant remained outstanding as of December 31, 2022 and January 1, 2022.

As a result, neither the SVIC Note nor the SVIC Warrant remained outstanding as of December 30, 2023 and December 31, 2022.

Paycheck Protection Program Loan

On April 23, 2020, we entered into an unsecured promissory note with a principal amount of $ 0.6 million through Hanmi Bank under the Paycheck Protection Program (“PPP”) (the “PPP Loan”) administered by the Small Business Administration (“SBA”) and established as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The PPP Loan bore interest at 1.0 % per annum and would mature on April 23, 2022 with the first six months of interest and principal payments deferred.

The PPP Loan bore interest at 1.0 % per annum and would mature on April 23, 2022 with the first six

months of interest and principal payments deferred.

The amount borrowed under the PPP Loan was guaranteed by the SBA and was eligible for forgiveness in an amount equal to the sum of the eligible costs, including payroll, benefits, rent and utilities, incurred by us during the 24-week period beginning on the date we received the proceeds.

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Insurance Policy Finance Agreement

As of December 31, 2022 and January 1, 2022, we had $ 0.4 million and $ 0.6 million, respectively, in short-term notes payable for the financing of insurance policies.

On December 29, 2021, we entered into a short-term note payable for $ 0.6 million bearing interest at 3.9 % to finance insurance policies.

Principal and interest payments on this note began January 15, 2022 and were made evenly based on a straight line amortization over a 9-month period with the final payment being made on September 15, 2022.

On January 4, 2023, we entered into a short-term notes 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.

As of December 30, 2023 and December 31, 2022, we had $ 0 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 on January 15, 2023 and were made evenly based on a straight line amortization over a 9-month period with the final payment made on September 15, 2023.

Note 5—Leases

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In making such judgments, significant weight is given to evidence that can be objectively verified.

As of December 31, 2022 and January 1, 2022, a valuation allowance of $ 52.0 million and $ 43.1 million, respectively, has been provided based on our assessment that it is more likely than not that sufficient taxable income will not be generated to realize the tax benefits of the temporary differences.

As of December 30, 2023 and December 31, 2022, a

valuation allowance of $ 65.9 million and $ 52.0 million, respectively, has been provided based on our assessment that it is more likely than not that sufficient taxable income will not be generated to realize the tax benefits of the temporary differences.

The valuation allowance increased by $ 13.9 million, $ 8.9 million and $ 3.8 million during 2023, 2022, and 2021, respectively.

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We include interest and penalties related to uncertain tax positions within the provision for income taxes.

As of December 31, 2022 and January 1, 2022, the interest or penalties accrued related to unrecognized tax benefits were insignificant, and during 2022, 2021 and 2020, the interest and penalties related to uncertain tax position recorded were

insignificant.

As of December 30, 2023 and December 31, 2022, the interest or penalties accrued related to unrecognized tax benefits were insignificant, and during 2023, 2022 and 2021, the interest and penalties related to uncertain tax position recorded were insignificant.

As of December 30, 2023, we had no unrecognized tax benefits that would significantly change in the next 12 months.

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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.

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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”) Patent Trial and Appeal Board (“PTAB”).

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.

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.

On December 4, 2009, Netlist filed a patent infringement lawsuit against 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.

7,619,912 (the “‘912 Patent”) which relates generally to technologies to implement rank multiplication.

The NDCA case was stayed, pending challenges to the ‘912 Patent before the USPTO.

Eventually, the U.S.

Court of Appeals for the Federal Circuit confirmed the ‘912 Patent’s validity on June 15, 2020, and the NDCA case stay was lifted and the case proceeded before Hon.

Senior Judge Armstrong, where the parties entered cross motions for summary judgment.

On May 5, 2022, Hon.

Chief Judge Seeborg entered an Order granting Netlist’s Motion for Summary Judgement that Claim 16 of the ‘912 Patent is not subject to Google’s pleaded defense of Intervening Rights.

On July 13, 2022, Chief Judge Seeborg ordered – shortly before the planned July 14, 2022 case management conference – that the case be stayed for a 90-day period pending the outcome of an action initiated by Samsung Electronic Co., Ltd.

(“Samsung”) in Delaware involving the ‘912 Patent.

Samsung’s Delaware cause of action for the ‘912 Patent was dismissed by Judge Andrews there, and Netlist shortly thereafter brought a lawsuit against Samsung for their infringement of at least the ‘912 Patent in the U.S.

District Court for the Eastern District of Texas (“EDTX”).

In light of the pendency of the ‘912 Patent matter Netlist brought against Samsung in EDTX, Chief Judge Seeborg entered an order via stipulation on October 17, 2022 staying the NDCA Google case until the resolution of that EDTX action.

On July 26, 2022, Netlist filed a patent infringement lawsuit against Google Cloud EMEA Limited, Google Germany GmbH, Redtec Computing GmbH, and Google, Inc., 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’s submitted its statement of defense.

The date for a final oral hearing on the issues in that German action are currently scheduled for November 9, 2023.

7,619,912 (the “‘912 Patent”).

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

(collectively, “Samsung”) in the United States District Court for the Eastern District of Texas (“EDTX”) ( Netlist, Inc.

Samsung Elecs.

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.

As of the reporting date, the date for oral hearings before the Dusseldorf Court is currently scheduled for April 11, 2024.

On October 15, 2021, SECL and Samsung Semiconductor Inc.

(“SSI”) initiated a declaratory judgement action against Netlist in the U.S.

District Court for the District of Delaware (“DDE”) ( Samsung Elecs.

Co., Ltd., et.

Netlist, Inc.

1:21-cv-01453-RGA).

On September 12, 2022, Netlist amended its Counterclaims to include counterclaims against Google, LLC and Alphabet, Inc (together, “Google”).

On November 15, 2022, Google 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 heard oral arguments for Google’s Motion to Dismiss or alternatively, Sever and Stay and Dismiss Willfulness and Indirect Infringement Allegations.

On October 10, 2023, the DDE Court entered an order granting-in-part and denying-in-part SECL and SSI’s prior motion to stay the matter in light of pending Inter Partes Reviews (“IPRs”) and a Ninth Circuit appeal, in effect staying claims with respect to Netlist’s U.S.

9,858,218 (the “‘218 Patent”) and 10,474,595 (the “‘595 Patent”), while allowing claims under Netlist’s U.S.

10,217,523 (the “‘523 Patent”) to proceed.

On October 20, 2023, the Court held a claim construction hearing involving all parties.

As part of the hearing, the Court also sought feedback from parties as to the issue of whether the matter should be stayed pending review of the Ninth Circuit’s recent unpublished decision on the underlying Central District of California action.

On December 1, 2023, the Court entered an Oral Order staying the matter until the development of any action by any other court pertaining to Samsung’s and Netlist’s rights under the JDLA that may merit lifting the stay.

Micron Litigations

On April 28, 2021, Netlist filed a complaint for patent infringement against Micron Technology, Inc.

(“Micron”) in the U.S.

On April 28, 2021, Netlist filed a complaint for patent infringement against Micron in the U.S.

District Court for the Western District of Texas, Waco Division (“WDTX”) (Case No.

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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 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).

Following entry of that stay order on September 2, 2022, Micron moved the Court to “temporarily” lift the stay to add counterclaims for declaratory judgment of noninfringement of U.S.

9,858,215 (the “’215 Patent”), 10,860,506 (the “’506 Patent”), 10,949,339 (the “’339 Patent”), 11,016,918 (the “’918 Patent”), 11,232,054 (the “’054 Patent”), 11,093,417 (the “’417 Patent”), and the ‘912 Patent.

This addition would encompass four of the six patents asserted in Netlist’s initial EDTX filing against Micron (Case No.

2:22-cv-00203 – further details of this case below), and all three of the patents asserted in Netlist’s second EDTX filing against Micron (Case No.

2:22-cv-00294 – further details of this case below).

On October 5, 2022, Judge Yeakel denied Micron’s motion and returned the action to a stayed state, asking only that the parties submit status reports within 10 days of any activity in the relevant underlying IPR proceedings.

As of the reporting date, the matter remains stayed pending the outcome of the related IPR proceedings.

The consolidated case was assigned to Hon.

Judge Lee Yeakel (new Case No.

1:22-cv-00134, and 1:22-cv-00136), and the parties have 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 IPR proceedings against the four patents asserted by Netlist in these consolidated cases (the ‘833, ‘035, ‘608, and ‘314 Patents).

On May 4, 2023, the consolidated cases were reassigned to Docket II in the WDTX Austin Division, given Hon.

Judge Yeakel’s retirement.

As of the reporting date, the parties have filed a status report with Austin District Court Judge Robert Pitman, and the matter remains assigned to Judicial 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 granted Micron’s request for the ‘035, ‘833, and ‘314 Patents, but denied its request for instituting an IPR trial 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 for the ‘035, ‘833, and ‘314 Patents are set for April, June, and August 2023, respectively.

On March 31, 2022, Netlist filed a patent infringement lawsuit against Micron in Germany (“Micron Dusseldorf Case”), seeking damages based on their infringement of EP735 and EP660.

On June 24, 2022, Netlist filed an extension of its Complaint requesting injunctive relief.

Micron filed its statement of defense, thus setting Netlist’s deadline for a response as December 1, 2022.

Further, 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, the date for the oral hearing in the Micron Dusseldorf Case is set for May 3, 2023.

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

On August 28, 2023, the PTAB determined that all challenged claims of the ‘833 Patent were unpatentable.

On October 30, 2023, the PTAB determined that all challenged claims of the ‘314 Patent were patentable.

On December 29, 2023, Micron filed a Notice of Appeal for the ‘314 Patent IPR decisions, indicating its intent to challenge the PTAB’s validity findings at the United States Court of Appeals for the Federal Circuit.

As of the reporting date, Micron has not yet submitted its opening appeal brief.

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.

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.

As of the reporting date, the Micron Dusseldorf Action is scheduled for oral hearings April 11, 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.

On September 2, 2022, contemporaneously with its filing in the stayed WDTX action, Micron moved the Court to stay and sever aspects of this initial EDTX case.

Following the denial of its parallel motion in the WDTX, Micron moved to withdraw its stay motion in this case, which Hon.

Chief Judge Gilstrap entered on October 15, 2022.

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 on October 30, 3023 the Court entered an Order confirming the Claim Construction outcome.

The Jury Trial was initially scheduled to begin on January 22, 2024, but as of the reporting date the Court has stayed the matter pending the outcome of the ‘060 and ‘160 Patent IPRs.

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 September 12, 2022, Micron moved to stay this second EDTX action in light of its parallel motions pending in both the WDTX and initial EDTX cases.

Given the denial of Micron’s motion in the WDTX on October 5,

2022, Micron moved to withdraw its motion to stay in this action, which Chief Judge Gilstrap entered on October 13, 2022.

On October 21, 2022, Chief Judge Gilstrap ordered that this Micron action and a parallel action by Netlist against Samsung on the same patents (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 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 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.

The claim construction hearing was advanced and took place before Hon.

Chief Judge Gilstrap on September 26, 2023.

On November 21, 2023, the Court entered its Claim Construction Order.

As of the reporting date, the consolidated case is set for a final pretrial conference on March 6, 2024, with jury trial beginning on April 22, 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, 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 October 17, 2023 and October 18, 2023, the PTAB issued final written decisions stating that all challenged claims of the ‘506 and ‘339 Patents were unpatentable, respectively.

Netlist filed Requests for Rehearing of the ‘506 and ‘339 Patent IPRs final written decisions on November 16, 2023 and November 17, 2023, respectively.

On December 20, 2023, the Board denied Netlist’s Request for Rehearing on the ‘506 Patent IPR result.

As of the reporting date, Netlist has filed a Notice of Appeal challenging the Board’s final written decision for the ‘506 Patent, and the PTAB denied Netlist’s Request for Rehearing on the ‘339 Patent IPR result.

On January 31, 2024, an oral hearing was conducted for the Samsung ‘912

Patent IPR proceeding joined by Micron.

As of the reporting date, the PTAB has not yet entered its final written decision for the ‘912 Patent IPR.

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).

On June 23, 2023, the matters were joined with the corresponding Samsung IPRs on the same patents.

On September 5, 2023, oral hearings for the ‘918 and ‘054 Patent IPRs were held.

On December 5, 2023 and December 6, 2023, the PTAB entered final written decisions for the ‘918 and ‘054 Patent IPRs, respectively, finding in both instances that all challenged claims were unpatentable.

On January 5, 2024 and January 6, 2024, Netlist filed requests for USPTO Director Review of the ‘918 and ‘054 Patents final written decisions, respectively.

As of the reporting date, the PTAB and USPTO has not responded to Netlist’s requests.

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).

On October 26, 2023, the PTAB instituted the Micron ‘060 and ‘160 Patent IPRs and joined them with the earlier-filed ‘060 and ‘160 Patent IPRs.

An oral hearing was held on January 11, 2024, and as of the reporting date the PTAB has not issued its final written decisions.

On July 28, 2023, Micron filed two IPR petitions contesting the validity of the ‘215 and ‘417 Patents.

On January 3, 2024, the PTAB granted institution and joinder to Samsung’s earlier-filed IPRs for the same two patents.

On December 11, 2023, Micron filed a complaint in the District Court for the Fourth Judicial District of the State of Idaho alleging Netlist violated Idaho Code § 48-1703 through its assertion of the ‘833 Patent in the WDTX (hereafter the “First Idaho Complaint”).

Netlist removed the matter from State Court to the Federal District Court for the District of Idaho on January 2, 2024.

On January 18, 2024, the matter was assigned to Judge David C.

Nye for all proceedings.

On February 7, 2024, Netlist moved to dismiss Micron’s First Idaho Complaint, and on February 8, 2024 responded to a motion from Micron to remand the matter back to Idaho State Court.

Micron’s reply in support of its remand motion is due February 22, 2024, and its response to Netlist’s Motion to Dismiss the case is due February 28, 2024.

On December 22, 2023, Netlist filed a Declaratory Judgment action in the Federal District Court for the EDTX, Marshall Division, seeking confirmation from the Court that Netlist has not made a bad-faith assertion of patent infringement against Micron.

On January 19, 2024, Micron filed a Motion to Dismiss.

On February 7, 2024, Netlist amended its complaint, which set Micron’s responsive pleading to be due February 21, 2024.

The Court has set a scheduling conference for this matter on March 25, 2024.

On January 16, 2024, Micron filed a second complaint in the District Court for the Fourth Judicial District of the State of Idaho alleging Netlist violated Idaho Code § 48-1703, this time for Netlist’s assertion of the ‘918 and ‘054 Patents in the EDTX.

As of the reporting date, Netlist removed the matter from State Court to the Federal District Court for the District of Idaho.

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”).

District Court for the Central District of California for Samsung’s breach of the parties’ 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 Netlist on each of its three claims and confirmed conclusively that all licenses granted 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 issued a Time Schedule Order on February 28, 2022.

On February 15, 2022, the Court entered a final judgment in favor of Netlist on each of its three claims and confirmed 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.

As of the reporting date, the parties have completed briefing on the appeal and cross-appeal, and await the Appeal Court setting a date for oral argument in 2023.

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

District Court for the District of Delaware (“DDE”), requesting in relevant part that the Delaware District Court declare that Samsung does not infringe Netlist’s U.S.

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.

As of the reporting date, Samsung seeks leave to add the ‘054 Patent (issued Jan.

25, 2022) to the action.

Netlist believes Samsung’s claims levied in the DDE action meritless, and the relief Samsung requests unjustified.

Netlist filed a motion seeking dismissal of Samsung’s operative DDE complaint, and an opposition contesting the inclusion of the ‘054 Patent as part of Samsung’s proposed second amended complaint filing.

On August 1, 2022, the Court entered an Order on the pending motions denying Samsung’s request to amend its operative complaint a second time to add a count against the ‘054 Patent, and granting-in-part Netlist’s motion that various causes of action be dismissed.

Specifically, Hon.

Judge Andrews dismissed all of Samsung’s counts related to Netlist’s ‘912, ‘506, ‘339, and ‘918 Patents.

Thus, on August 22, 2022, Netlist entered its Answer to Samsung’s remaining Counterclaims.

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 claims directed at Google specifically from the action.

As of the reporting date, briefing has concluded and Netlist requested an oral argument on Google’s motion.

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, the PTAB has granted Samsung’s IPR requests related to the ‘218, ‘523, and ‘595 Patents.

Netlist filed its Patent Owner’s Response for the ‘523 Patent IPR on August 4, 2022, and its Patent Owner Responses for the ‘218 Patent and ’595 Patent IPRs on August 15, 2022.

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), leaving the PTAB to enter its final written decision on all three IPRs by the second quarter of 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-463) 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 June 8, 2023, the Ninth Circuit Court of Appeals heard oral arguments from both parties on the matter following completion of all briefing.

On October 17, 2023, the Ninth Circuit panel issued an

unpublished memorandum affirming-in-part and reversing-and-remanding-in-part the District Court’s rulings.

On November 8, 2023, the Ninth Circuit issued a mandate to the California Central District Court, whereupon the Court issued an Order reopening the case as of November 13, 2023.

After collecting a joint statement of the case from the parties, the Court ordered the parties to rebrief the remaining issues in the summary judgment proceedings based only on the existing record.

On February 5, 2024, the Court held a hearing on the remaining summary judgment issues, and on February 6, 2024 issued an Order denying all of the parties’ various pending motions.

In the same Order, the Court set the matter for a jury trial to begin on March 26, 2024, with a final pretrial conference set for March 18, 2024.

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

Co., Ltd., et.

Netlist, Inc.

1:21-cv-01453-RGA), where it requested in relevant part that the DDE declare that Samsung does not infringe the ‘218, ‘523, ‘595, ‘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 Patent claims in Delaware.

On September 12, 2022, Netlist amended its Counterclaims to include counterclaims tying 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.

On October 10, 2023, the Court entered an order granting-in-part and denying-in-part Samsung’s prior motion to stay the matter in light of pending IPRs and a Ninth Circuit appeal, staying claims with respect to the ‘218 and ‘595 Patents, while allowing claims under the ‘523 Patent to proceed.

On December 1, 2023, the Court entered an Oral Order staying the matter entirely until the development of any action by any other court pertaining to Samsung’s and Netlist’s rights under the JDLA that may merit lifting the stay.

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

On May 3, 2023, the PTAB issued a final written decision finding all of the claims of the ‘523 Patent valid and patentable, while on May 8, 2023 and May 9, 2023, it found all of the claims of the ‘218 and ‘595 Patents, respectively, 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.

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 May 4, 2022, Netlist complied with the EDTX local patent rules and served its preliminary

infringement contentions on Samsung.

On May 27, 2022, Samsung moved to stay this action and sever the patents it sought to add to its Declaratory Judgement action in Delaware.

On August 2, 2022, Samsung withdrew that first motion to stay in light of Judge Andrews’s order mandating dismissal of all Samsung’s claims related to the Texas Netlist patents the day before.

On August 30, 2022 Samsung moved to stay the action a second time, this time in light of its IPR petitions, and its appeal of the Central District California Judgment at the 9th Circuit Court of Appeals.

The matter was fully briefed as of October 17, 2022.

As of the reporting date, the claim construction hearing took place on November 4, 2022 in Hon.

Magistrate Judge Roy Payne’s Court.

On December 14, 2022, Magistrate Payne entered an order construing all fourteen claim terms in dispute.

As of the reporting date, the matter is set for pretrial proceedings.

The Final Pretrial Conference is currently set for March 27, 2023, while the trial start is now set for April 17, 2023.

The ‘506, ‘339, ‘918, ‘060, ‘160, and ‘054 Patents are hereafter collectively referred to as the “EDTX1 Patents.” 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 approximately $ 303 million for Samsung’s infringement.

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.

On August 11, 2023, Chief Judge Gilstrap issued a memorandum and Order denying Samsung’s requested relief and finding that the ‘918 and ‘054 patents were not unenforceable due to equitable estoppel, prosecution laches, or unclean hands, and that the ‘339 patent was not unenforceable due to unclean hands.

The same day, the Court entered a Final Judgment against the Samsung Defendants for $ 303 million for Samsung’s willful infringement through the date of trial, but declined awarding enhanced damages.

As of the reporting date, the parties have filed post-judgment motions, including a motion by Samsung to vacate the final judgment in light of the Ninth Circuit’s recent decision.

The parties have briefed all of the post-judgment motions, and as of the reporting date the Court has not yet entered its final order.

Additionally, as of the reporting date, all of the EDTX1 Patents are either subject to IPR final written decisions, or an IPR trial.

The outcome of each of the IPR proceedings related to each of the EDTX1 Patents may affect the underlying collectability of the jury award in this matter.

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 November 2, 2022, Netlist file a Request for Rehearing for the ‘912 Patent institution decision, while simultaneously requesting review of the institution decision be undertaken by the USPTO’s Precedential Opinion Panel.

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 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 PTAB 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.

As of the reporting date, Netlist has timely filed its Patent Owner Responses for the ‘339 and ‘506 Patent IPR proceedings.

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.

On October 17, 2023 and October 18, 2023, the PTAB issued final written decisions stating that all challenged claims of the ‘506 and ‘339 Patents were unpatentable, respectively.

Netlist filed Requests for Rehearing of the ‘506 and ‘339 Patent IPR final written decisions on November 16, 2023 and November 17, 2023, respectively.

On December 20, 2023, the Board denied Netlist’s Request for Rehearing on the ‘506 Patent IPR result.

On January 31, 2024, an oral hearing was conducted for the Samsung ‘912 Patent IPR proceeding joined by Micron.

As of the reporting date, the PTAB has not yet entered its final written decision for the ‘912 Patent IPR.

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, making Netlist’s deadline to file its Patent Owner Response March 1, 2023.

On June 3, 2022, Netlist filed a patent infringement lawsuit 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.

Micron has joined these Samsung IPRs on the ‘918 and ‘054 Patents, and oral arguments were heard on September 7, 2023.

On January 5, 2024 and January 6, 2024, Netlist filed requests for USPTO Director Review of the ‘918 and ‘054 Patents, respectively, final written decisions.

As of the reporting date, the PTAB and USPTO have not responded to Netlist’s requests for rehearing on these IPR final written decisions.

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.

An Oral Hearing was held in the Dusseldorf Court on September 5, 2023 to determine the question of infringement specifically.

The Court confirmed at the hearing that an Order would issue either staying the matter until a decision was reached on validity by the German Federal Patent Court, or a dismissal of the case if there were no infringement.

On September 25, 2023, the Dusseldorf Court entered a stay of the matter until the German Federal Patent Court renders a decision in the nullity actions currently pending for EP735 and EP660.

As of the reporting date, the German Federal Patent Court’s oral hearing on EP735 is set in March 2024, while the hearing on EP660 is set for July 2024.

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 August 31, 2022, Samsung Semiconductor, Inc.

and Samsung Electronics America, Inc.

sought and received extensions of time to respond to Netlist’s first amended complaint until October 7, 2022.

Before answering on September 20, 2022, Samsung collectively moved the Court to sever and transfer the ‘912 Patent from the action and stay the remaining portions of this proceeding in light of Samsung’s appeal before 9th Circuit Court of Appeals.

The matter is fully briefed, but Samsung’s response deadline remains currently set for November 29, 2022.

Apart from Samsung’s early motion practice and its remaining response deadline, 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 January 20, 2023, following the entry of Samsung’s First Amended Answer, Netlist moved the Court for Leave to File a Second Amended Complaint that would include additional claims of infringement related specifically to Samsung’s infringement of Netlist’s ‘608 Patent.

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 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.

The claim construction hearing was advanced and took place before Hon.

Chief Judge Gilstrap on September 26, 2023.

On November 21, 2023, the Court entered its Claim Construction Order.

As of the reporting date, the consolidated case has a docket control order listing the final pretrial conference on March 6, 2024, with jury trial beginning on April 22, 2024.

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 parties await the Board’s decision on institution.

An oral hearing was held on January 11, 2024, and as of the reporting date the PTAB has not issued its final written decisions.

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, making the deadline for Netlist to file its Patent Owner Preliminary Response April 10, 2023.

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.

On August 1, 2023, the Board entered an Order instituting a trial for both of Samsung’s IPR petitions.

The Board simultaneously set a schedule for briefing deadlines, and the date for oral arguments on May 3, 2024.

On January 3, 3024, the PTAB joined the later-filed and substantially-identical Micron IPRs for the ‘215 and ‘417 Patents to Samsung’s IPRs.

As of the reporting date, Netlist has filed its Patent Owner Response, and awaits further briefing by Petitioner Samsung.

On April 27, 2023, Samsung filed an IPR petition contesting the validity of the ‘608 Patent.

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

On December 12, 2023, the PTAB instituted an IPR trial for the ‘608 Patent, despite having previously denied institution from Micron’s earlier-filed IPR petition of the same Patent.

On December 26, 2023, Netlist filed a request for review of the institution decision by the Director of the USPTO.

As of the reporting date, the PTAB and USPTO Director have denied Netlist’s requests.

Netlist’s deadline to file a Patent Owner’s Response is currently set for March 29, 2024.

On October 9, 2023, Samsung initiated a second declaratory judgement action against Netlist in the DDE ( Samsung Elecs.

Co., Ltd., et.

Netlist, Inc.

1:23-cv-01122-RGA), where it requested in relevant part that the DDE declare that Samsung does not infringe Netlist’s U.S.

11,386,024 (the “‘024 Patent”) and that Netlist allegedly breached its contractual obligations to the Joint Electron Device Engineering Council and thus harmed Samsung as a third-party beneficiary.

Netlist filed a motion to dismiss the action on November 6, 2023.

As of the reporting date, the parties have completed briefing on Netlist’s motion and the Court has yet to enter an order.

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 include, among others:

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;

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(iv) indemnities to our directors and officers to the maximum extent permitted under the laws of the State of Delaware;

(v) indemnities to SVB pertaining to all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with transactions contemplated by the applicable investment or loan documents, as applicable;

(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.

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Our 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 December 31, 2022 or January 1, 2022.

No shares of preferred stock were outstanding as of December 30, 2023 or December 31, 2022.

On April 17, 2017, we 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, our board of directors authorized and declared a dividend of one right (each, a “Right”) for each outstanding share of our 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 our common stock issued by us (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 us, when exercisable and subject to adjustment, one unit consisting of one one -thousandth of a share (a “Unit”) of our Series A Preferred Stock (the “Preferred Stock”), at a purchase price of $ 6.56 per Unit, subject to adjustment.

Series A Preferred Stock (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 our common stock, and (ii) 10 business days (or such later date as may be determined by our 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.

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

During 2020, Lincoln Park did not purchase shares of our common stock under the 2019 Purchase Agreement.

During 2021, Lincoln Park purchased an aggregate of 2,075,503 shares of our common stock for a net purchase price of $ 3.6 million under the 2019 Purchase Agreement.

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In connection with the purchases, during 2021, we issued to Lincoln Park an aggregate of 356,843 shares of our common stock as additional commitment shares in noncash transactions.

During 2021, Lincoln Park purchased an aggregate of 9,544,595 shares of our common stock for a net purchase price of $ 7.8 million under the 2020 Purchase Agreement.

In connection with the purchases, during 2021, we issued to Lincoln Park an aggregate of 356,843 shares of our common stock as additional commitment shares in noncash transactions.

In February 2021, we completed the sales under the 2020 Purchase Agreement.

First 2021 Lincoln Park Purchase Agreement

On July 12, 2021, we entered into a purchase agreement (the “First 2021 Purchase Agreement”) with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $ 17.4 million in shares of our common stock subject to the conditions and limitations set forth in the First 2021 Purchase Agreement.

As consideration for entering into the First 2021 Purchase Agreement, we issued to Lincoln Park 80,000 shares of our common stock as initial commitment shares in a noncash transaction on July 12, 2021 and would issue up to 120,500 additional shares of

our common stock as additional commitment shares on a pro rata basis in connection with any additional purchases.

July 2021 Lincoln Park Purchase Agreement

On July 12, 2021, we entered into a purchase agreement (the “July 2021 Purchase Agreement”) with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $ 17.4 million in shares of our common stock subject to the conditions and limitations set forth in the July 2021 Purchase Agreement.

As consideration for entering into the July 2021 Purchase Agreement, we issued to Lincoln Park 80,000 shares of our common stock as initial commitment shares in a noncash transaction on July 12, 2021 and would issue up to 120,500 additional shares of our common stock as additional commitment shares on a pro rata basis in connection with any additional purchases.

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

During 2021, Lincoln Park purchased an aggregate of 2,383,748 shares of our common stock for a net purchase price of $ 17.4 million under the First 2021 Purchase Agreement.

During 2021, Lincoln Park purchased an aggregate of 2,383,748 shares of our common stock for a net purchase price of $ 17.4 million under the July 2021 Purchase Agreement.

In connection with the purchases, during 2021, we issued to Lincoln Park an aggregate of 120,500 shares of our common stock as additional commitment shares in noncash transactions.

In October 2021, we completed the sales under the First 2021 Purchase Agreement.

Second 2021 Lincoln Park Purchase Agreement

On September 28, 2021, we entered into a purchase agreement (the “Second 2021 Purchase Agreement”) with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $ 75 million in shares of our common stock subject to the conditions and limitations set forth in the Second 2021 Purchase Agreement.

Concurrent with the execution of the Second 2021 Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park relating to our common stock to be sold to Lincoln Park.

As consideration for entering into the Second 2021 Purchase Agreement, we issued to Lincoln Park 218,750 shares of our common stock as initial commitment shares in a noncash transaction on September 28, 2021 and will issue up to 143,750 additional shares of our common stock as additional commitment shares on a pro rata basis in connection with any additional purchases.

In October 2021, we completed the sales under the July 2021 Purchase Agreement.

September 2021 Lincoln Park Purchase Agreement

On September 28, 2021, we entered into a purchase agreement (the “September 2021 Purchase Agreement”) with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $ 75 million in shares of our common stock subject to the conditions and limitations set forth in the September 2021 Purchase Agreement.

Concurrent with the execution of the September 2021 Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park relating to our common stock to be sold to Lincoln Park.

As consideration for entering into the September 2021 Purchase Agreement, we issued to Lincoln Park 218,750 shares of our common stock as initial commitment shares in a noncash transaction on September 28, 2021 and will issue up to 143,750 additional shares of our common stock as additional commitment shares on a pro rata basis in connection with any additional purchases.

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

Pursuant to the Second 2021 Purchase Agreement, on any business day and as often as every other business day over the 36-month term of the Second 2021 Purchase Agreement, we have the right, from time to time, at our sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 750,000 shares of our common stock, provided Lincoln Park’s obligation under any single such purchase will not exceed $ 4.0 million, unless we and Lincoln Park mutually agree to increase the maximum amount of such single regular purchase.

If we direct Lincoln Park to purchase the maximum number of shares of common stock we then may sell in a regular purchase, then in addition to such regular purchase, and subject to certain conditions and limitations in the Second 2021 Purchase Agreement, we 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 our common stock traded during a specified period on the applicable purchase date as set forth in the Second 2021 Purchase Agreement.

Under certain circumstances and in accordance with the Second 2021 Purchase Agreement, we may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.

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, we have the right, from time to time, at our sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 750,000 shares of our common stock, provided Lincoln Park’s obligation under any single such purchase will not exceed $ 4.0 million, unless we and Lincoln Park mutually agree to increase the maximum amount of such single regular purchase.

If we direct Lincoln Park to purchase the maximum number of shares of common stock we 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, we 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 our 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, we may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.

We control the timing and amount of any sales of our common stock to Lincoln Park.

There is no upper limit on the price per share that Lincoln Park must pay for our common stock under the Second 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 Second 2021 Purchase Agreement.

In all instances, we may not sell shares of our common stock to Lincoln Park under the Second 2021 Purchase Agreement if that would result in Lincoln Park beneficially owning more than 9.99 % of our common stock.

The Second 2021 Purchase Agreement does not limit our ability to raise capital from other sources at our sole discretion, except that, subject to certain exceptions, we may not enter into any Variable Rate Transaction (as defined in the Second 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 Second 2021 Purchase Agreement.

We have the right to terminate the Second 2021 Purchase Agreement at any time and at no cost to us.

During 2021, Lincoln Park purchased an aggregate of 1,550,000 shares of our common stock for a net purchase price of $ 10.9 million under the Second 2021 Purchase Agreement.

There is no upper limit on the price per share that Lincoln Park must pay for our 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, we may not sell shares of our 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 our common stock.

The September 2021 Purchase Agreement does not limit our ability to raise capital from other sources at our sole discretion, except that, subject to certain exceptions, we 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.

We have the right to terminate the September 2021 Purchase Agreement at any time and at no cost to us.

During 2021, Lincoln Park purchased an aggregate of 1,550,000 shares of our common stock for a net purchase price of $ 10.9 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 20,809 shares of our common stock as additional commitment shares in noncash transactions.

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 Second 2021 Purchase Agreement.

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.

Subsequent to December 31, 2022, Lincoln Park purchased an aggregate of 2,650,000 shares of our common stock for a net purchase price of $ 4.3 million under the Second 2021 Purchase Agreement.

In connection with the purchase, we issued to Lincoln Park an aggregate of 8,284 shares of our common stock as additional commitment shares in noncash transactions.

Warrant activity during 2021 is as follows:

During 2023, Lincoln Park purchased an aggregate of 7,865,000 shares of our common stock for a net purchase price of $ 23.4 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 44,939 shares of our common stock as additional commitment shares in noncash transactions.

Subsequently, from December 31, 2023 through February 19, 2024, Lincoln Park purchased an aggregate of 1,235,000 shares of our common stock for a net purchase price of $ 2.1 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 4,068 shares of our common stock as additional commitment shares in noncash transactions.

2023 Offering

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

The 2023 Offering closed on August 17, 2023.

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

The warrants are exercisable at any time on or after the issuance date, have a term of five years from the issuance date, and have an exercise price of $ 3.20 per share and contain customary 4.99 %/ 9.99 % blocker provisions.

In addition, pursuant to the 2023 Purchase Agreement, the Company and our director and executive officers entered into lock-up agreements, pursuant to which they agreed not to offer for sale, contract to sell, or sell any shares of the Company’s common stock or any securities convertible into, or exercisable or exchangeable for, shares of the Company’s common stock, for a period of 90 days from the closing of the 2023 Offering, subject to certain customary exceptions.

The 2023 Purchase Agreement also provides that the Company may not effect or enter into any Variable Rate Transactions (as defined in the 2023 Purchase Agreement) until the six month anniversary of the closing date of the 2023 Offering.

Sales of the Company’s common stock pursuant to the September 2021 Purchase Agreement are permitted after 90 days following the closing of the 2023 Offering.

Warrant activity during 2023, 2022, and 2021 is as follows:

(in thousands)

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Outstanding as of January 1, 2022

In August and December 2020, we issued warrants to purchase up to 175,000 and 125,000 shares of our common stock at exercise prices of $ 0.20 and $ 0.50 per share, respectively, to a consulting firm as partial consideration for their services rendered.

During 2020, we issued 255,813 shares of our common stock upon the cashless exercise of 300,000 of our warrants.

Outstanding as of December 31, 2022

Outstanding as of December 30, 2023

During 2021, we issued (i) 13,111,110 shares of our common stock upon the exercise of 13,111,110 of our warrants for total cash proceeds of $ 7.9 million and (ii) 697,387 shares of our common stock upon the cashless exercise of 800,000 of our warrants.

During 2023, in connection with the 2023 Offering, we issued warrants to purchase up to 11,111,112 shares of our common stock with an exercise price of $ 3.20 .

Note 9—Benefit Plans

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(in thousands)

Outstanding as of January 1, 2022

Outstanding as of December 31, 2022

Expired or forfeited

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Vested and expected to vest as of December 30, 2023

The total intrinsic value of stock options exercised during 2022 and 2021 was $ 1.5 million and $ 10.8 million, respectively.

There was no significant intrinsic value of options exercised during 2020.

Restricted Stock Awards and Restricted Stock Units

RSAs granted under the Amended 2006 Plan vest annually on each anniversary of the grant date over a two-year term.

The total intrinsic value of stock options exercised during 2023, 2022 and 2021 was $ 1.1 million, $ 1.5 million and $ 10.8 million, respectively.

Restricted Stock Units

RSUs granted for employees and consultants generally vest semi-annually from the grant date over a four -year term and RSUs granted for independent directors fully-vested on the grant date.

There was no activity related to RSAs during 2022.

The following table summarizes the activity related to RSUs during 2023:

(in thousands)

Balance nonvested as of January 1, 2022

Balance nonvested as of December 31, 2022

Balance nonvested as of December 30, 2023

Stock-Based Compensation

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We may make matching contributions on the contributions of a participant on a discretionary basis.

During 2022 and 2021, our matching contributions totaled $ 0.1 million and $ 0.1 million, respectively.

During 2020, we did no t make any matching contributions.

During 2023, 2022 and 2021, our matching contributions totaled $ 0.1 million, $ 0.1 million and $ 0.1 million, respectively.

Note 10—Major Customers, Suppliers and Products

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Less than 10 % of total net product sales

As of December 30, 2023, two customers represented approximately 60 % and 10 %, respectively, of aggregate gross accounts receivable.

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

As of January 1, 2022, four customers represented approximately 26 %, 16 %, 13 % and 13 %, respectively, of aggregate gross accounts receivable.

The loss of any of our significant customers or a reduction in sales to or difficulties collecting payments from any of these customers could significantly reduce our net product sales and adversely affect our operating results.

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We have audited the accompanying consolidated balance sheets of Netlist, Inc.

and subsidiaries (the “Company”) as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the “Company”) as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2024 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

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and subsidiaries (the “Company”) as of December 30, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, because of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively, “the consolidated financial statements”) , and our report dated February 28, 2023 expressed an unqualified opinion on those consolidated financial statements.

In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 30, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively, “the consolidated financial statements”) , and our report dated February 23, 2024 expressed an unqualified opinion on those consolidated financial statements.

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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

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As a result, the Company has ineffective oversight of the financial reporting process due to the lack of an audit committee and the lack of an independent board of directors to ensure adequate monitoring and oversight of internal controls.

Additionally, the Company did not have effective monitoring as it did not implement effective monitoring controls that were responsive to changes in the business.

The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the fiscal year 2023 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data