What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-06 · 130 added, 141 removed, 439 unchanged (38% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(In thousands, except par value) (Unaudited)

Current Assets:

6 unchanged sentences

Operating lease right-of-use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:

2 unchanged sentences

Accrued payroll and related liabilities

Accrued expenses and other current liabilities

Debt due within one year

Deferred revenue

Other current liabilities

Total current liabilities

3 unchanged sentences

Commitments and contingencies

Stockholders' equity:

Stockholders' equity (deficit):

Preferred stock, $ 0.001 par value— 10,000 shares authorized:

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Accumulated deficit

Total stockholders' equity

Total liabilities and stockholders' equity

Total stockholders' equity (deficit)

Total liabilities and stockholders' equity (deficit)

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) (Unaudited)

Three Months Ended

Six Months Ended

Cost of sales

18 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders Equity (Unaudited)

(In thousands)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands) (Unaudited)

Stockholders'

Equity (Deficit)

Balance, December 30, 2023

5 unchanged sentences

Balance, March 30, 2024

Issuance of common stock, net

Exercise of stock options

Stock-based compensation

Restricted stock units vested and distributed

Balance, June 29, 2024

Stockholders'

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Balance, April 1, 2023

Issuance of common stock, net

Exercise of stock options

Stock-based compensation

Restricted stock units vested and distributed

Balance, July 1, 2023

See accompanying Notes to the Condensed Consolidated Statements.

1 unchanged sentence

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Three Months Ended

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

Six Months Ended

Cash flows from operating activities:

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Accrued payroll and related liabilities

Accrued expenses and other liabilities

Deferred revenue

Other liabilities

Net cash used in operating activities

21 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1—Description of Business

Netlist, Inc.

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

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.

Note 1—Summary of Significant Accounting Policies

Basis of Presentation

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

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

Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 30, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2024.

In the opinion of management, all adjustments for the fair presentation of the Company’s condensed consolidated financial statements have been made.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 30, 2023, included in our Annual Report on Form 10-K filed with the SEC on February 23, 2024.

In the opinion of management, all adjustments for the fair presentation of our condensed consolidated financial statements have been made.

The adjustments are of a normal recurring nature except as otherwise noted.

The results of operations for the interim periods are not necessarily indicative of the results to be expected for other periods or the full fiscal year.

The Company has evaluated events occurring subsequent to March 30, 2024 through the filing date of this Quarterly Report on Form 10-Q and concluded that there were no events that required recognition and disclosures other than those discussed elsewhere in the notes hereto.

We have evaluated events occurring subsequent to June 29, 2024 through the filing date of this Quarterly Report on Form 10-Q and concluded that there were no events that required recognition and disclosures other than those discussed elsewhere in the notes hereto.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Netlist, Inc.

The condensed consolidated financial statements include the accounts of Netlist, Inc.

and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

The Company’s fiscal year is the 52 - or 53 -week period that ends on the Saturday nearest to December 31.

The Company’s fiscal year 2024 will include 52 weeks and ends on December 28, 2024.

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

Our fiscal year 2024 will include 52 weeks and ends on December 28, 2024.

Each quarter of fiscal year 2024 will be comprised of 13 weeks.

Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in January and the associated quarters, months and periods of those fiscal years.

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

Use of Estimates

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Actual results may differ materially from those estimates.

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.

Note 2—Supplemental Financial Information

6 unchanged sentences

Three Months Ended

Six Months Ended

Weighted-average basic shares outstanding - basic and diluted

3 unchanged sentences

Three Months Ended

Six Months Ended

Weighted average common share equivalents

2 unchanged sentences

Three Months Ended

Six Months Ended

Resales of third-party products

Sale of the Company's modular memory subsystems

Sale of our modular memory subsystems

Total net sales

Major Customers and Products

The Company’s net product sales have historically been concentrated in a small number of customers.

Our net product sales have historically been concentrated in a small number of customers.

The following table sets forth the percentage of net product sales made to customers that each comprise 10% or more of total product sales:

Three Months Ended

Six Months Ended

Less than 10% of net sales during the period.

As of March 30, 2024, two customers represented approximately 54 % and 19 % of aggregated gross accounts receivables, respectively.

As of June 29, 2024, one customer represented approximately 69 % of aggregated gross accounts receivables.

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

The loss of a major customer or a reduction in sales to or difficulties collecting payments from these customers could significantly reduce the Company’s net sales and adversely affect its operating results.

The Company mitigates risks associated with foreign and domestic receivables by purchasing comprehensive credit insurance.

The Company resells certain component products to end-customers that are not reached in the distribution models of the component manufacturers, including storage customers, appliance customers, system builders and cloud and datacenter customers.

For the three months ended March 30, 2024 and April 1, 2023, resales of these products represented approximately 87 % and 77 % of net product sales, respectively.

Note 4—Credit Agreement and Standby Letters of Credit

2023 SVB Credit Agreement

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 loss of a major customer or a reduction in sales to or difficulties collecting payments from these customers could significantly reduce our net sales and adversely affect its operating results.

We mitigate risks associated with foreign and domestic receivables by purchasing comprehensive credit insurance.

We resell certain component products to end-customers that are not reached in the distribution models of the component manufacturers, including storage customers, appliance customers, system builders and cloud and datacenter customers.

For the three and six months ended June 29, 2024, resales of these products represented approximately 90 % and 89 % of net product sales, respectively.

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

Note 3—Financing Arrangements

On November 7, 2023, we entered into a loan and security agreement (the “2023 SVB Credit Agreement”) with Silicon Valley Bank (“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.

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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 March 30, 2024 and December 30, 2023, (i) outstanding letters of credit and restricted cash were $ 12.4 million and $ 12.4 million, respectively, (ii) outstanding borrowings were $ 4.4 million and $ 3.8 million, respectively, and (iii) availability under the revolving line of credit was $ 0 and $ 0 , respectively.

As of March 30, 2024, all obligations under the 2023 SVB Credit Agreement were secured by a first priority security interest in our tangible and intangible assets.

As of June 29, 2024, all obligations under the 2023 SVB Credit Agreement were secured by a first priority security interest in our tangible and intangible assets.

The 2023 SVB Credit Agreement subjects us to certain affirmative and negative covenants, including financial covenants with respect to our liquidity and restrictions on the payment of dividends.

As of March 30, 2024, we were in compliance with our covenants under the 2023 SVB Credit Agreement.

Standby Letters of Credit

As of March 30, 2024, the amount of outstanding letters of credit was approximately $ 12.2 million, consisting of an irrevocable letter of credit issued by SVB on our behalf to a third party expiring on December 31, 2024, and two irrevocable letters of credit issued by Citibank, N.A.

on our behalf to third parties expiring on May 15, 2025 and June 6, 2025, respectively.

As of March 30, 2024, no amount has been drawn from the letters of credit.

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

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

Notes payable

amounts due within one year

Long-term debt

Insurance Policy Finance Agreement

As of March 30, 2024 and December 30, 2023, we had $ 0.4 million and $0, respectively, in short-term notes payable for the financing of insurance policies.

On January 23, 2024, we entered into a short-term note payable for $ 0.5 million bearing interest at 8.42 % to finance insurance policies.

Principal and interest payments on this note began on February 15, 2024 and are made evenly based on a straight line amortization over an 8-month period.

As of June 29, 2024, we were in compliance with our covenants under the 2023 SVB Credit Agreement.

We have letters of credit issued by SVB under the 2023 SVB Credit Agreement and Citibank, N.A., which are secured by cash and are classified as restricted cash in the condensed consolidated balance sheets.

As of June 29, 2024 and December 30, 2023, (i) outstanding letters of credit were $ 12.4 million and $ 12.4 million, respectively, (ii) outstanding borrowings were $ 4.6 million and $ 3.8 million, respectively, and (iii) availability under the revolving line of credit was $ 0 and $ 0 , respectively.

Note 4—Leases

The Company has operating and finance leases primarily associated with office and manufacturing facilities and certain equipment.

We have operating and finance leases primarily associated with office and manufacturing facilities and certain equipment.

The determination of which discount rate to use when measuring the lease obligation was deemed a significant judgment.

1 unchanged sentence

Three Months Ended

Six Months Ended

Operating lease cost

1 unchanged sentence

Operating cash flows from operating leases

For the three months ended March 30, 2024 and April 1, 2023, finance lease costs and cash flows from finance leases were immaterial.

For the six months ended June 29, 2024 and July 1, 2023, finance lease costs and cash flows from finance leases were immaterial.

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

1 unchanged sentence

Operating lease right-of-use assets

Accrued expenses and other current liabilities

Other current liabilities

Operating lease liabilities

4 unchanged sentences

Property and equipment, net

Accrued expenses and other current liabilities

Other current liabilities

Other liabilities

7 unchanged sentences

Finance leases

Maturities of lease liabilities as of March 30, 2024, were as follows (in thousands):

Maturities of lease liabilities as of June 29, 2024, were as follows (in thousands):

2024 (remainder of the year)

6 unchanged sentences

Litigation and Patent Reexaminations

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

We are, from time to time, a party to litigation that arises in the normal course of our 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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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.

against Samsung Electronics Co., Ltd.

(“SECL”), Samsung Semiconductor Inc.

(“SSI”), and Samsung Electronics America Inc.

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

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As of the reporting date, the German Federal patent Court has issued its order finding the EP735 null, and the proceedings before the Dusseldorf Court are currently stayed pending the outcome of the nullity reviews of the asserted EP patents.

On October 15, 2021, Samsung Electronics Co.

(“SECL”) and Samsung Semiconductor Inc.

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

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

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

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On April 19, 2024, Netlist filed a motion to transfer the matter to the Eastern District of Texas, Marshall Division.

As of the reporting date, the matter remains assigned to Judicial Docket II of the WDTX, Austin Division Court pending briefing and a decision on Netlist’s motion.

This motion was denied, and the matter remains assigned to Judicial Docket II of the WDTX, Austin Division Court.

As noted above, Micron filed requests to bring IPR proceedings against Netlist’s ‘314, ‘035, ‘608, and ‘833 Patents.

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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 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.

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.

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As of the reporting date, the German Federal Patent Court has issued its order finding the EP735 null, and the Micron Dusseldorf Action has been stayed pending the outcome of the nullity reviews of the asserted EP patents.

The Federal Patent Court has scheduled a hearing for EP660 on November 7, 2024.

On June 10, 2022, Netlist filed a complaint for patent infringement against Micron in the EDTX, Marshall Division (Case No.

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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.

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.

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The Court held the final pretrial conference for the consolidated case on March 6, 2024.

As of the reporting date, the case is scheduled for a jury trial starting on May 20, 2024.

This case went to trial in May 2024 and the jury awarded Netlist $445 million for Micron’s infringement.

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).

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24-1707, the “‘339 Appeal”), and as of the reporting date has not filed its Opening Appeal Brief.

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

On January 31,

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

On April 17, 2024, the PTAB entered its final written decision for the ‘912 Patent IPR, finding the challenged claim 16 unpatentable.

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On March 18, 2024, the USPTO denied Netlist’s request for Director Review of the ‘918 and ‘054 Patent IPRs.

As of the reporting date, Netlist has not filed a notice of appeal challenging the Board’s final written decision for the ‘918 or ‘054 Patent IPRs.

Netlist has filed a notice of appeal challenging the Board’s final written decision for the ‘918 or ‘054 Patent IPRs on May 24, 2024.

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).

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On May 1, 2024, Netlist requested a director review of the final written decisions.

The Director Review was denied on June 17, 2024.

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

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The parties completed briefing on the Samsung ‘417 and ‘215 Patent IPRs that Micron had joined and held oral arguments on May 3, 2024.

As of the reporting date, the PTAB has not yet issued its final written decision.

The PTAB issued its final written decision on July 30, 2024, determining all challenged claims unpatentable .

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 (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.

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.

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On January 10, 2024, Micron filed an IPR petition, again contesting the validity of the ‘608 Patent, along with a motion to join Samsung’s instituted parallel IPR proceeding.

As of the reporting date, the PTAB has not yet entered an order instituting a trial under Micron’s petition or joining Micron’s second ‘608 Patent challenge to Samsung’s co-pending challenge.

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.

On July 23, 2024, the PTAB denied institution of Micron’s petition.

and ‘054 Patents in the EDTX.

On February 9, 2024, Netlist removed the matter from State Court to the Federal District Court for the District of Idaho.

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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.

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 Samil PricewaterhouseCoopers were consequential damages, rather than recoverable general damages.

On June 8, 2023, the Ninth Circuit Court of Appeals heard oral arguments from both parties on the matter following completion of all briefing.

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On March 28, 2024, the Court reset the final pretrial conference to May 6, 2024 at 2:00 pm, and kept the trial start date as May 14, 2024.

As of the reporting date, the Court has maintained the May 14, 2024 trial start date.

This case went to trial and the jury found that Netlist properly terminated the JDLA in light of Samsung’s material breach.

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

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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.

As of the reporting date, the case remains stayed.

While such a determination has been made by the District Court for the Contral District of California, the case remains stayed.

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 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 July 10, 2023, Samsung filed a Notice of Appeal challenging the Board’s decision upholding the patentability of the ‘523 Patent, thus instituting an appeal before the CAFC of the ‘523 Patent IPR result (CAFC Case No.

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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.

Both 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.

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

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.

On July 24, 2024, the Court (i) denied Samsung’s post-trial motions, (ii) upheld the jury's verdict and damages award in the April 2023 trial and (iii) confirmed that Samsung willfully infringed Netlist's patented technologies and that none of Samsung’s asserted claims are valid.

On February 17, 2022, Samsung filed an IPR request contesting the validity of only claim 16 of the ‘912 Patent.

Samsung then filed two additional IPR requests contesting the validity of the ‘506 and ‘339 Patents.

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On January 5, 2023, USPTO Director Katherine K.

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.

Vidal entered an Order in the ‘912 Patent proceeding initiating 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, by that time, also included 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, respectively, Patents were unpatentable.

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On February 9, 2024, the PTAB denied Netlist’s Request for Rehearing on the ‘339 Patent IPR result.

Netlist filed its Notice of Appeal challenging the Board’s final written decision for the ‘339 Patent, thus instituting an appeal before the CAFC of the ‘339 Patent IPR result (CAFC Case No.

Netlist filed its Notice of Appeal challenging the Board’s final written decision for the ‘339 Patent, thus instituting an appeal before the CAFC of the ‘339 Patent IPR

result (CAFC Case No.

24-1707), and as of the reporting date has not filed its Opening Appeal Brief.

1 unchanged sentence

On April 17, 2024, the PTAB entered its final written decision for the ‘912 Patent IPR, finding the challenged claim 16 unpatentable.

Netlist then filed a request for director review, which was denied on July 10, 2024.

As of the reporting date, Netlist has not filed a notice of appeal challenging the Board’s final written decision for the ‘912 Patent IPR.

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On March 18, 2024, the USPTO denied Netlist’s request for Director Review of the ‘918 and ‘054 Patent IPRs.

As of the reporting date, Netlist has not filed a notice of appeal challenging the Board’s final written decision for the ‘918 or ‘054 Patent IPRs.

Netlist filed a notice of appeal challenging the Board’s final written decision for the ‘918 or ‘054 Patent IPRs on May 24, 2024.

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 (“Samsung Dusseldorf Action”).

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The German Federal Patent Court has issued its order finding the EP735 null, and the Samsung Dusseldorf Action has been stayed pending the outcome of the nullity reviews of the asserted EP patents.

The Federal Patent Court has scheduled a hearing for the EP660 on November 7, 2024.

On August 1, 2022, Netlist filed a complaint for patent infringement against Samsung in the EDTX (Case No.

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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 July 20,2023 Netlist filed an amended complaint asserting infringement of the ‘608 Patent by Samsung.

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

1 unchanged sentence

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

The final pretrial conference was held on March 6, 2024, and as of the reporting date, the Court has not set the jury trial start date.

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

Trial is scheduled to begin on September 9, 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.

1 unchanged sentence

On May 1, 2024, Netlist requested a director review of the final written decisions.

Director review was denied on June 17, 2024.

On January 10, 2023, Samsung filed two IPR petitions contesting the validity of the ‘215 and ‘417 Patents.

4 unchanged sentences

The parties completed briefing on the ‘417 and ‘215 Patent IPRs and held oral arguments on May 3, 2024.

As of the reporting date, the PTAB has not yet issued its final written decisions.

The PTAB issued its final written decisions on July 30, 2024, finding all challenged claims unpatentable.

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

3 unchanged sentences

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

Netlist filed its Patent Owner’s Response on March 29, 2024.

As of the reporting date, Samsung has not yet filed its reply.

An oral hearing is scheduled for September 5, 2024.

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

19 unchanged sentences

Serial Preferred Stock

The Company’s authorized capital stock includes 10,000,000 shares of serial preferred stock, with a par value of $ 0.001 per share.

No shares of preferred stock were outstanding as of March 30, 2024 or December 30, 2023.

On April 17, 2017, the Company entered into a rights agreement (as amended from time to time, the “Rights Agreement”) with Computershare Trust Company, N.A., as rights agent.

In connection with the adoption of the Rights Agreement and pursuant to its terms, the Company’s board of directors authorized and declared a dividend of one right (each, a “Right”) for each outstanding share of the Company’s common stock to stockholders of record at the close of business on May 18, 2017 (the “Record Date”), and authorized the issuance of one Right for each share of the Company’s common stock issued by the Company (except as otherwise provided in the Rights Agreement) between the Record Date and the Distribution Date (as defined below).

On April 17, 2024, the Company appointed Equiniti Trust

Company, LLC (“Equiniti”) as rights agent under the Rights Agreement pursuant to that certain Amendment No.

4 to Rights Agreement, dated as of April 17, 2024, by and between the Company and Equiniti (the “Fourth Amendment”).

Each Right entitles the registered holder, subject to the terms of the Rights Agreement, to purchase from the Company, when exercisable and subject to adjustment, one unit consisting of one one -thousandth of a share (a “Unit”) of Series A Preferred Stock of the Company (the “Preferred Stock”), at a purchase price of $ 6.56 per Unit, subject to adjustment.

Subject to the provisions of the Rights Agreement, including certain exceptions specified therein, a distribution date for the Rights (the “Distribution Date”) will occur upon the earlier of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired or otherwise obtained beneficial ownership of 15 % or more of the then-outstanding shares of the Company’s common stock, and (ii) 10 business days (or such later date as may be determined by the Company’s board of directors) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.

The Rights are not exercisable until the Distribution Date and, unless earlier redeemed or exchanged by the Company pursuant to the terms of the Rights Agreement (as amended on April 16, 2018, April 16, 2019, August 14, 2020, and April 17, 2024) will expire on the close of business on April 17, 2027.

In connection with the adoption of the Rights Agreement, the Company’s board of directors approved a Certificate of Designation of the Series A Preferred Stock (the “Certificate of Designation”) designating 1,000,000 shares of its serial preferred stock as Series A Preferred Stock and setting forth the rights, preferences and limitations of the Preferred Stock.

The Company filed the Certificate of Designation with the Secretary of State of the State of Delaware on April 17, 2017.

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 June 29, 2024 or December 30, 2023.

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).

On April 17, 2024, we appointed Equiniti Trust Company, LLC (“Equiniti”) as our rights agent under the Rights Agreement pursuant to that certain Amendment No.

4 to Rights Agreement, dated as of April 17, 2024, by and between us and Equiniti (the “Fourth Amendment”).

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.

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.

The Rights are not exercisable until the Distribution Date and, unless earlier redeemed or exchanged by us pursuant to the terms of the Rights Agreement (as amended on April 16, 2018, April 16, 2019, August 14, 2020, and April 17, 2024) will expire on the close of business on April 17, 2027.

In connection with the adoption of the Rights Agreement, our board of directors approved a Certificate of Designation of the Series A Preferred Stock (the “Certificate of Designation”) designating 1,000,000 shares of our serial preferred stock as Series A Preferred Stock and setting forth the rights, preferences and limitations of the Preferred Stock.

We filed the Certificate of Designation with the Secretary of State of the State of Delaware on April 17, 2017.

September 2021 Lincoln Park Purchase Agreement

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

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

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

The Company controls the timing and amount of any sales of its common stock to Lincoln Park.

There is no upper limit on the price per share that Lincoln Park must pay for the Company’s common stock under the September 2021 Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the September 2021 Purchase Agreement.

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

The September 2021 Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that, subject to certain exceptions, the Company may not enter into any Variable Rate Transaction (as defined in the September 2021 Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the September 2021 Purchase Agreement.

The Company has the right to terminate the September 2021 Purchase Agreement at any time, at no cost to the Company.

On September 28, 2021, we entered into a purchase agreement (the “September 2021 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“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.

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.

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 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, at no cost to us.

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.

During the three months ended March 30, 2024, Lincoln Park purchased an aggregate of 1,240,000 shares of our common stock for a net purchase price of $ 2.1 million under the September 2021 Purchase Agreement.

connection with the purchases, we issued to Lincoln Park an aggregate of 4,085 shares of our common stock as additional commitment shares in noncash transactions.

During the six months ended June 29, 2024, Lincoln Park purchased an aggregate of 3,195,889 shares of our common stock for a net purchase price of $ 5.2 million under the September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park

an aggregate of 10,046 shares of our common stock as additional commitment shares in noncash transactions.

Note 7—Stock-Based Awards

As of March 30, 2024, the Company had 1,772,423 shares of common stock reserved for future issuance under its Amended and Restated 2006 Incentive Plan (“Amended 2006 Plan”).

As of June 29, 2024, we had 547,986 shares of our common stock reserved for future issuance under our Amended and Restated 2006 Incentive Plan (“Amended 2006 Plan”).

Stock options granted under the Amended 2006 Plan generally vest at a rate of at least 25 % per year over four years and expire 10 years from the grant date.

RSUs granted for employees and consultants generally vest in equal installments annually and fully vest over a four-year term from the grant date.

RSUs granted for our employees and consultants generally vest in equal installments annually and fully vest over a four-year term from the grant date.

Stock Options

The following table summarizes the activity related to stock options during the three months ended March 30, 2024:

The following table summarizes the activity related to stock options during the six months ended June 29, 2024:

(in thousands)

1 unchanged sentence

Expired or forfeited

Outstanding as of March 30, 2024

Outstanding as of June 29, 2024

Restricted Stock Units

The following table summarizes the activity related to RSUs during the three months ended March 30, 2024:

The following table summarizes the activity related to RSUs during the six months ended June 29, 2024:

(in thousands)

Balance nonvested as of December 30, 2023

Balance nonvested as of March 30, 2024

Balance nonvested as of June 29, 2024

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

Cost of sales

1 unchanged sentence

Selling, general and administrative

As of March 30, 2024, the Company had approximately $ 8.3 million, net of estimated forfeitures, of unearned stock-based compensation, which it expects to recognize over a weighted-average period of approximately 2.3 years.

Note 10—Warrants

Warrant activity for the three months ended March 30, 2024 is as follows:

(in thousands)

Outstanding as of December 30, 2023

Outstanding as of March 30, 2024

Note 11—Subsequent Events

On April 17, 2024, the Company entered into the Fourth Amendment.

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

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

As of June 29, 2024, we had approximately $ 8.7 million, net of estimated forfeitures, of unearned stock-based compensation, which we expect to recognize over a weighted-average period of approximately 2.4 years.

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

What changed 10-Q

Item 1. Financial Statements