What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-28 compared with 2024-02-23 · 432 added, 473 removed, 476 unchanged (66% of the section changed)

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Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Schedule II – Valuation and Qualifying Accounts

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Operating lease right-of-use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

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Accrued payroll and related liabilities

Accrued expenses and other current liabilities

Long-term debt due within one year

Deferred revenue

Other current liabilities

Total current liabilities

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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 Consolidated Financial Statements.

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(in thousands, except per share amounts)

Net product sales

Cost of sales

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Total operating expenses

Operating (loss) income

Other income (expense), net:

Interest income (expense), net

Operating loss

Other income, net:

Interest income, net

Other income, net

Total other income, net

(Loss) income before provision for income taxes

Loss before provision for income taxes

Provision for income taxes

Net (loss) income

(Loss) earnings per share:

Loss per share:

Basic and diluted

Weighted-average common shares outstanding:

Basic and diluted

See accompanying Notes to Consolidated Financial Statements.

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Equity (Deficit)

Balance, January 2, 2021

Issuance of common stock, net

Exercise of stock options

Exercise of warrants

Stock-based compensation

Restricted stock units vested and distributed

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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Restricted stock units vested and distributed

Tax withholdings related to net share settlements of equity awards

Balance, December 28, 2024

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Cash flows from operating activities:

Net income (loss)

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

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

Depreciation and amortization

Interest accrued on convertible promissory notes

Amortization of debt discounts

Non-cash lease expense

Gain on extinguishment of debt

Gain on forgiveness of debt

Stock-based compensation

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Accrued payroll and related liabilities

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Deferred revenue

Other liabilities

Net cash used in operating activities

Cash flows from investing activities:

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Cash flows from financing activities:

Net borrowings (repayments) under line of credit

Net repayments under line of credit

Principal repayments under finance lease

Payments on notes payable and long-term debt

Payments on notes payable

Proceeds from issuance of common stock, net

Proceeds from exercise of stock options and warrants

Proceeds from exercise of stock options

Payments for taxes related to net share settlement of equity awards

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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.

and its wholly owned subsidiaries (collectively the “Company,” “Netlist,” “we,” “us,” or “our”) is a leading innovator in advanced memory and storage solutions, pushing the boundaries of technology to deliver unparalleled performance and reliability.

With a rich portfolio of patented technologies, we have consistently driven innovation in the field of cutting-edge enterprise memory and storage, advancing artificial intelligence and empowering businesses and industries to thrive in the digital age.

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

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.

Our fiscal year 2024 ended on December 28, 2024 and fiscal year 2023 ended on December 30, 2023.

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.

Unless otherwise stated, all information presented herein is based on our fiscal calendar, and references to particular years, quarters, months or periods refer to our fiscal years ended in January or December and the associated quarters, months and periods of those fiscal years.

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.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU is effective for the annual periods beginning January 1, 2024, and becomes effective for interim periods within fiscal years beginning January 1, 2025.

We adopted this guidance on December 28, 2024.

The adoption only impacted our disclosure and has no material impact on the Company’s consolidated financial statements as of and for the year ended December 28, 2024.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which updates expense disclosure requirements on an annual and interim basis.

This ASU is effective for the annual periods beginning after December 15, 2026, and the interim reporting periods beginning after December 15, 2027.

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.

We are currently evaluating the impact of adopting this ASU.

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

Improvements to Income Tax Disclosures, which will require us to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

This ASU is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

We will adopt this ASU using either a prospective or retrospective transition method.

We are currently evaluating the impact of adopting this ASU.

Revenue Recognition

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

License Revenue

For licenses of technology, recognition of revenue is dependent upon whether we have delivered rights to the technology, and whether there are future performance obligations under the contract.

In some instances, the license agreements call for future events or activities to occur in order for milestone amounts to become due from the customer.

The terms of such agreements include payments to us of one or more of the following:

non-refundable upfront fees and royalties on net sales of licensed products.

Historically, these license agreements have not included other future performance obligations for us once the license has been transferred to the customer.

Revenue from non-refundable upfront payments is recognized when the license is transferred to the customer and we have no other performance obligations.

Performance Obligations

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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 December 30, 2023 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.

Contract liabilities (deferred revenues) are comprised of payments received from our customers in advance of transferring products to customers.

As of December 28, 2024, deferred revenue was immaterial.

As of December 30, 2023, there was no deferred revenue.

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 —Credit Agreement and Standby Letters of Credit ).

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

Fair Value Measurements

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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).

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 — Financing

Arrangements).

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

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After all attempts to collect a receivable have failed, the receivable is written off.

As of December 28, 2024 and December 30, 2023, accounts receivable, net, was $ 1.7 million and $ 4.6 million, respectively.

Concentration of Credit Risk

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Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, which generally range from three to seven years .

Leasehold improvements are recorded at cost and amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term.

Leasehold improvements are recorded at cost and amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease

Expenditures for repairs and maintenance are expensed as incurred.

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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.

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.

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Treasury rate that corresponds to the expected term of the grant effective as of the date of the grant.

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

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

regarding dividend payouts.

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

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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.

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 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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All remeasurement gains and losses are included in determining net loss.

Transaction gains and losses were not significant during 2023, 2022 or 2021.

Earnings (Loss) Per Share

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

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.

Transaction gains and losses were not significant during 2024 and 2023.

Loss Per Share

Basic loss per share is calculated by dividing net loss by the weighted-average common shares outstanding during the period.

Diluted loss per share is calculated by dividing the net 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 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 .

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker, the chief executive officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance on a regular basis.

Accordingly, the Company considers itself to be one reportable segment, which is comprised of one operating segment:

resales of third-party products and sale of our modular memory subsystems.

Significant expenses were as follows (in thousands):

Employee Compensation (1)

Stock Based Compensation

Program Expenses (2)

Professional Fees (3)

(1) The amounts are consisted of employee compensation related to both COGS and operating expenses.

The amounts do not include stock-based compensation.

The amounts do not include professional fees.

(2) The amounts are consisted of costs, such as outside services, depreciation, and dues and subscriptions, related to both COGS and operating expenses.

The amounts do not include professional fees.

(3) The amounts are consisted of legal fees, tax and audit fees.

Note 2—Supplemental Financial Information

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Resales of third-party products

Sale of the Company's modular memory subsystems

Sale of our modular memory subsystems

Total net sales

During the second quarter of 2021, we received and recognized an upfront non-refundable license fee of $ 40 million as consideration to enter into a Strategic Product Supply and License Agreement (the “Strategic Agreement”) with SK hynix, Inc., a South Korean memory semiconductor supplier, (“SK hynix”).

The license fee revenue was recognized when we granted the license of our patents to SK hynix, since the performance obligation was satisfied at a point in time.

In connection with the receipt of this fee, during the second quarter of 2021, we recorded a provision for income taxes of $ 6.6 million related to the Korean withholding tax incurred.

Net product sales by country presented below are based on the billing location of the customer (in thousands):

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Total net sales

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.

Earnings (Loss) Per Share

The following table shows the computation of basic and diluted earnings (loss) per share of common stock (in thousands, except per share data):

Net (loss) income

Weighted-average basic shares outstanding

Effect of dilutive securities

Weighted-average diluted shares

Basic (loss) earnings per share

Diluted (loss) earnings per share

People’s Republic of China (“PRC”) includes Hong Kong and Taiwan.

The United States and the PRC accounted for more than 10 % of our net product sales for fiscal years 2024 and 2023.

Loss Per Share

The following table shows the computation of basic and diluted loss per share of common stock (in thousands, except per share data):

Weighted-average basic shares outstanding - basic and diluted

Net loss per share - basic and diluted

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 — 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):

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

Weighted average common share equivalents

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Supplemental disclosure of non-cash investing and financing activities:

Acquisition of property and equipment included in liabilities

Gain on extinguishment of debt

Debt financing of insurance

Note 3—Credit Agreement and Standby Letters of Credit

Note 3—Financing Arrangements

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.

On October 31, 2009, Netlist and Silicon Valley Bank, a division of First-Citizen Bank & Trust Company (“SVB”), 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.

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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.

On November 7, 2023, we entered into a loan and security agreement (the “2023 SVB Credit Agreement”) with 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 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 28, 2024, 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 28, 2024, 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):

Notes payable

amounts due within one year

Long-term debt

Secured Convertible Note

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.

In December 2021, we repaid the full amounts outstanding under the SVIC Note and issued 2,000,000 shares of our common stock upon the exercise of 2,000,000 of our warrants by SVIC for cash proceeds of $ 0.6 million.

The SVIC Warrant was valued at $ 1.2 million, based on its relative fair value, and was recorded as a debt discount.

We also recorded $ 0.2 million of debt issuance costs as a debt discount for professional services fees rendered in connection with the transaction.

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

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 %.

In connection with the SVIC Note, SVIC was granted a first priority security interest in our patent portfolio and a second priority security interest in all of our other tangible and intangible assets.

Upon issuance of the SVIC Note, Netlist, SVB and SVIC entered into an Intercreditor Agreement pursuant to which SVB and SVIC agreed to their relative security interests in our assets.

Additionally, upon issuance of the SVIC Note and the SVIC Warrant, Netlist and SVIC entered into a Registration Rights Agreement pursuant to which we were obligated to register with the Securities and Exchange Commission, upon demand by SVIC, the shares of our common stock issuable upon conversion of the SVIC Note or upon exercise of the SVIC Warrant.

The SVIC Note subjected us to certain affirmative and negative operating covenants.

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 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 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.

The PPP Loan contained customary events of default, and the occurrence of an event of default might result in a claim for the immediate repayment of all amounts outstanding under the PPP Loan.

In May 2021, the full amount outstanding under the PPP Loan was forgiven, resulting in a gain of $ 0.6 million during the second quarter of 2021.

Insurance Policy Finance Agreement

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.

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 consolidated balance sheets.

As of December 28, 2024 and December 30, 2023, (i) outstanding letters of credit were $ 11.9 million and $ 12.4 million, respectively, (ii) outstanding borrowings were $ 1.2 million and $ 3.8 million, respectively, and (iii) availability under the revolving line of credit was $ 0 and $ 0 , respectively.

Note 4—Leases

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Operating leases

Finance leases

Lease modification to increase operating lease assets

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Operating lease right-of-use assets

Accrued expenses and other current liabilities

Other current liabilities

Operating lease liabilities

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Property and equipment, net

Accrued expenses and other current liabilities

Other current liabilities

Other liabilities

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Note 5—Income Taxes

United States and foreign income (loss) before provision for income taxes was as follows (in thousands):

United States and foreign loss before provision for income taxes was as follows (in thousands):

United States

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Provision for income taxes

Income taxes differ from the amounts computed by applying the statutory federal income tax rate of 21 % for 2023, 2022 and 2021.

Income taxes differ from the amounts computed by applying the statutory federal income tax rate of 21 % for fiscal years 2024 and 2023.

The reconciliation of this difference is as follows (in thousands):

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

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.

As of December 28, 2024 and December 30, 2023, a valuation allowance of $ 77.1 million and $ 65.9 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 $ 11.3 million and $ 13.9 million during fiscal years 2024 and 2023, respectively.

These increases in these years primarily relate to the increases in the net operating loss (“NOL”) carryforward and tax credit carryforwards.

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Federal tax credit carryforwards began to expire in 2024 and state tax credits carryforward indefinitely.

In addition, we had $ 0.5 million of NOL in the People’s Republic of China (“PRC”) that expired in 2023, with a remaining amount of $ 2.6 million of NOL carryforward in the PRC at December 30, 2023.

In addition, we had $ 2.5 million of NOL in the PRC that expired in 2024, with a remaining amount of $ 0.5 million of NOL carryforward in the PRC at December 28, 2024.

Utilization of the NOL and tax credit carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code (the “Code”) and similar state and foreign law provisions.

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

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 28, 2024 and December 30, 2023, the interest or penalties accrued related to unrecognized tax benefits were insignificant, and during fiscal years 2024 and 2023, the interest and penalties related to uncertain tax position recorded were insignificant.

As of December 28, 2024, we had no unrecognized tax benefits that would significantly change in the next 12 months.

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These law firms may be retained on a contingent fee basis whereby such law firms are paid on a scaled percentage of any negotiated fee, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained.

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.

Litigation and Inter Partes Reviews

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.

We plan to pursue avenues to monetize our intellectual property portfolio, in which we would generate revenue by selling or licensing our technology, and we intend to vigorously enforce our patent rights against alleged infringers of such rights.

We dedicate substantial resources to protecting and enforcing our intellectual property rights, including with patent infringement proceedings we file against third parties and defense of our patents against challenges made by way of reexamination and review proceedings at the U.S.

Patent and Trademark Office (“USPTO”) and Patent Trial and Appeal Board (“PTAB” or the “Board”).

We expect these activities to continue for the foreseeable future, with no guarantee that any ongoing or future patent protection or litigation activities will be successful, or that we will be able to monetize our intellectual property portfolio.

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 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”).

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 in the U.S.

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

6:21-cv00431 & Case No.

6:21-cv-00430).

These proceedings are based on the alleged infringement by Micron’s LRDIMM and Micron’s non-volatile dual in line memory modules (“NVDIMM”) enterprise memory modules under four U.S.

patents – U.S.

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 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.

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.

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 (“PMIC”), and its high bandwidth memory (“HBM”) components, under six U.S.

Netlist patents:

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 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’ 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 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.

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.

Samsung Litigation

On May 28, 2020, Netlist filed a complaint against Samsung Electronics Co., Ltd.

(“SECL”) in the U.S.

District Court for the Central District of California (“CDCA”) ( Netlist Inc.

Samsung Electronics Co., Ltd ., Case No.

8:20-cv-00993) for SECL’s breach of the Joint Development and License Agreement (“JDLA”) between the parties.

Netlist amended its complaint to seek a declaratory judgment that it properly terminated the JDLA in light of SECL’s material breaches thereof.

On October 14, 2021, the Court granted summary judgment in favor of Netlist on SECL’s breach and Netlist’s termination of the JDLA.

The case proceeded to trial on the issue of damages on December 1, 2021, and the jury reached a verdict for SECL on December 3, 2021.

The Court entered final judgment on February 15, 2022, and both parties appealed to the U.S.

Court of Appeals for the Ninth Circuit.

The Ninth Circuit affirmed-in-part and reversed-in-part the judgment of the District Court, and remanded the case to the District Court, which reopened the case on November 13, 2023.

The case proceeded to trial on May 14, 2024, and the jury reached a verdict for Netlist on May 17, 2024.

On December 26, 2024, the Court granted SECL’s motion for a new trial, holding that one juror’s voir dire responses support a finding of implied juror bias which deprived both parties of their right to a fair trial.

A new trial was held from March 18 to March 21, 2025.

On March 24, 2025, the jury returned a verdict for Netlist.

On October 15, 2021, Samsung Electronics Co., Ltd.

(“SECL”) and Samsung Semiconductor, Inc.

(“SSI”) (collectively, “Samsung”) filed a declaratory judgement action against Netlist in the U.S.

District Court for the District of Delaware (“DDE”) ( Samsung Electronics Co., Ltd.

Netlist, Inc., Case No.

1:21-cv-01453), seeking a declaration that Samsung does not infringe the following Netlist patents:

and 10,474,595 (respectively, the “’912, ’218, ’523, and ’595 Patents”).

Samsung filed amended complaints to add other Netlist patents:

and 11,232,054 (respectively, the “’506, ’339, ’918, and ’054 Patents”).

Netlist filed a motion to dismiss, and on August 1, 2022, the Court granted this motion in part, declining to exercise jurisdiction over the ’912, ’506, ’339, ’918, and ’054 Patents.

On September 12, 2022, Netlist filed a crossclaim against Google LLC and Alphabet, Inc.

(collectively, “Google”).

On November 15, 2022, Google filed a motion to dismiss this case as to Google or, alternatively, for a severance, stay, and dismissal of willfulness and indirect infringement allegations.

This motion was heard on May 22, 2023.

On December 1, 2023, the Court stayed this case pending the resolution of the above CDCA case.

On December 20, 2021, Netlist filed a complaint against Samsung in the U.S.

District Court for the Eastern District of Texas (“EDTX”), case no.

2:21-cv-00463, for infringement of the ’506, ’339, and ’918 Patents.

Netlist later amended its complaint to additionally assert infringement of the ’054 Patent as well as U.S.

8,787,060 and 9,318,160 (respectively, the “’060 and ’160 Patents”).

On April 14, 2023, this case proceeded to a jury trial on the ’339, ’918, ’054, ’060, and ’160 Patents.

On April 21, 2023, the jury returned a verdict finding that Samsung willfully infringed all five patents and awarded $ 303 million in damages to Netlist.

(The collectability of the damages award may be affected by the outcomes of pending appeals of final written decisions in the respective Inter Partes Reviews of the five patents;

see below.) On August 11, 2023, the Court entered final judgment.

On August 9, 2024, Samsung filed a notice of appeal to the U.S.

Court of Appeals for the Federal Circuit (“CAFC”), case no.

On January 6, 2025,

Samsung filed a motion to stay this appeal pending the resolution of the above CDCA case.

On February 18, 2025, the CAFC denied this motion without prejudice.

The appeal is pending.

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

2:22-cv-00293), for infringement of the ’912 Patent.

Netlist later amended its complaint to additionally assert infringement of U.S.

and 10,268,608 (respectively, the “’417, ’215, and ’608 Patents”).

On November 12, 2024, this case proceeded to a jury trial on the ’912, ’417, and ’608 Patents.

On November 22, 2024, the jury returned a verdict finding that Samsung willfully infringed all three patents and awarded $ 118 million in damages to Netlist.

(The collectability of the damages award may be affected by the outcomes of pending appeals of final written decisions in the respective Inter Partes Reviews of the three patents;

see below.) On December 2, 2024, the Court entered final judgment.

On December 4, 2024, Netlist filed a motion for a preliminary injunction and a subsequent permanent injunction.

On December 30, Samsung filed a combined post-trial motion for judgment as a matter of law and for a new trial, and a motion to amend the judgment and to stay this case pending the resolution of the above CDCA case.

On January 31, 2025, the Court denied Netlist’s motion for a preliminary injunction and a subsequent permanent injunction.

On October 9, 2023, Samsung filed a declaratory judgement action against Netlist in the U.S.

District Court for 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.

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

1:23-cv-01122-RGA), seeking a declaration that Samsung does not infringe Netlist’s U.S.

11,386,024 (the “’024 Patent”).

On November 6, 2023, Netlist moved to dismiss for lack of subject matter jurisdiction and failure to state a claim.

On March 4, 2025, the Court denied this motion.

On May 22, 2024, Samsung filed a declaratory judgement action against Netlist in the U.S.

District Court for the DDE (Case no.

1:24-cv-00614), seeking a declaration that Samsung does not infringe Netlist’s U.S.

11,880,319 (the “’319 Patent”).

On July 15, 2024, Netlist moved to dismiss for lack of subject matter jurisdiction and failure to state a claim, which the Court denied as moot in view of Samsung’s First Amended Complaint filed on August 5, 2024.

On August 21, 2024, Netlist moved to dismiss the First Amended Complaint for lack of subject matter jurisdiction and failure to state a claim.

On March 4, 2025, the Court denied this motion.

Micron Litigation

On April 28, 2021, Netlist filed complaints against Micron Semiconductor Products, Inc., Micron Technology, Inc., and Micron Technology Texas, LLC (collectively, “Micron”) in the Western District of Texas (“WDTX”) (Case Nos.

6:21-cv-00430 and 6:21-cv-00431), for infringement of U.S.

and 10,489,314 (respectively, the “’833, ’035, ’608, and ’314 Patents”).

On February 14, 2022, the Court granted Micron’s motion to transfer venue for convenience to another court within WDTX, and the transferred cases were assigned new case nos.

1:22-cv-00134 and 1:22-cv-00136.

On May 11, 2022, the Court granted motions to stay the two cases pending the respective Inter Partes Reviews of the ’833, ’035, ’608, and ’314 Patents.

On June 10, 2022, Netlist filed a complaint against Micron in EDTX (Case No.

2:22-cv-00203), for infringement of the ’506, ’339, ’918, ’054, ’060 and ’160 Patents.

On May 19, 2023, Micron filed a motion to stay this case pending the respective Inter Partes Reviews of the six asserted patents.

On October 22, 2023, the magistrate judge issued a claim construction order, which the Court adopted on January 17, 2024.

On January 3, 2024, the magistrate judge issued a recommendation to deny Micron’s motion to stay this case, which the Court adopted on January 31, 2024.

On February 10, 2024, the Court vacated its prior order, staying this case pending the respective Inter Partes Reviews of the six asserted patents.

On August 1, 2022, Netlist filed a complaint against Micron in EDTX (Case No.

2:22-cv-00293), for infringement of the ’912 Patent.

Netlist later amended its complaint to additionally assert infringement of the ’417 and ’215 Patents.

On May 20, 2024, this case proceeded to a jury trial on the ’912 and ’417 Patents.

On May 23, 2024, the jury returned a verdict finding that Samsung willfully infringed both patents and awarded $ 445 million in damages to Netlist.

The collectability of the damages award may be affected by the

outcomes of pending appeals of final written decisions in the respective Inter Partes Reviews of the two patents;

On July 11, 2024, the Court entered final judgment.

On August 7, 2024, Micron filed post-trial motions for judgment as a matter of law and for a new trial.

On December 11, 2023, Micron filed a complaint against Netlist in the District Court of the Fourth Judicial District of the State of Idaho, Ada County (“Idaho State Court”) (Case No.

CV01-23-19920), alleging that Netlist violated Idaho Code § 48-1703 by making a bad faith assertion of infringement of the ’833 Patent in WDTX.

Netlist removed the case to the U.S.

District Court for the District of Idaho, and Micron moved to remand the case to the Idaho State Court.

On August 16, 2024, the District of Idaho remanded this case to the Idaho State Court.

On August 20, 2024, Netlist appealed the remand to the CAFC, case no.

2024-2281, and moved the District of Idaho to stay the remand.

On September 17, 2024, Micron moved to dismiss or transfer the appeal to the U.S.

Court of Appeals for the Ninth Circuit, which the CAFC denied on December 19, 2024.

Both the appeal and Netlist’s motion to stay the remand remain pending.

On September 18, 2024, Netlist moved to dismiss the Idaho State Court case for lack of personal jurisdiction and failure to state a claim, which the Idaho State Court denied on December 5, 2024.

The Idaho State Court case is currently set for trial starting on October 27, 2025.

On December 23, 2023, Netlist filed a complaint for declaratory judgment against Micron in EDTX (Case No.

2:23-cv-00628), seeking a declaration that Netlist had not asserted patent infringement in bad faith against Micron in the prior EDTX patent infringement cases.

On January 19, 2024, Micron moved to dismiss this case for lack of subject matter jurisdiction.

On February 7, 2024, Netlist filed a First Amended Complaint.

On July 19, 2024, the Court denied Micron’s motion to dismiss as moot.

On December 5, 2024, Netlist moved for a protective order to preclude Micron from seeking discovery into Netlist’s subjective intent in filing the prior EDTX patent infringement cases.

On December 13, 2024, Micron moved to stay this case on abstention grounds.

This case is currently set for trial starting on July March 27, 2025, the Court stayed this case pending the CAFC appeals of the IPR decisions on the Netlist patents asserted against Micron in the prior EDTX patent infringement cases resolution.

On January 16, 2024, Micron filed a complaint against Netlist in Idaho State Court (Case No.

CV01-24-01032), alleging that Netlist violated Idaho Code § 48-1703 by making a bad faith assertion of infringement of the ’918 and ’054 Patents in the EDTX.

Netlist removed the case to the U.S.

District Court for the District of Idaho, and Micron moved to remand the case to the Idaho State Court.

On August 13, 2024, the District of Idaho remanded this case to the Idaho State Court.

On August 20, 2024, Netlist appealed the remand to the CAFC, case no.

2024-2282, and moved the District of Idaho to stay the remand.

On September 10, 2024, the appeal was consolidated with the above related appeal, case no.

Netlist’s motion to stay the remand remain pending.

On September 17, 2024, Netlist moved to dismiss the Idaho State Court case for lack of personal jurisdiction and failure to state a claim, which the Idaho State Court denied on December 20, 2024.

The Idaho State Court case is currently set for trial starting on July 20, 2026.

Google Litigation

On December 4, 2009, Netlist filed a complaint against Google, Inc.

District Court for the Northern District of California (Case no.

3:09-cv-05718), for infringement of the ’912 Patent.

On October 17, 2022, the Court entered a stipulated order to stay this case until the resolution of the patent infringement suit against Samsung filed on August 1, 2022 in EDTX (Case No.

2:22-cv-00293), including any appeal thereof.

Inter Partes Review (“IPR”) Proceedings

On October 15, 2021, SECL filed a Petition for IPR of the ’218 Patent (Case No.

IPR2022-00062).

On May 8, 2023, the Patent Trial & Appeal Board (“PTAB”) issued a final written decision finding all challenged claims unpatentable.

On October 15, 2021, SECL filed a Petition for IPR of the ’523 Patent (Case No.

IPR2022-00063).

On May 3, 2023, the PTAB issued a final written decision finding no challenged claims unpatentable.

On July 3, 2023,

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 and ‘339 Patents, while two days later it instituted an IPR trial on the ’506 Patent.

On January 5, 2023, USPTO Director Katherine K.

Vidal entered an Order in the ‘912 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.

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 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.

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.

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.

SECL filed a notice of appeal to the CAFC (Case No.

The CAFC heard oral arguments on March 4, 2025.

On March 5, 2025, the CAFC affirmed the PTAB’s final written decision.

On October 15, 2021, SECL filed a Petition for IPR of the ’595 Patent (Case No.

IPR2022-00064).

On May 9, 2023, the PTAB issued a final written decision finding all challenged claims unpatentable.

On February 17, 2022, SECL filed a Petition for IPR of Claim 16 of the ’912 Patent (Case No.

IPR2022-00615).

On November 18, 2022, Micron also filed a Petition for IPR of Claim 16 of the ’912 Patent, IPR2023-00203.

On April 17, 2024, the PTAB issued a final written decision in the two IPRs finding Claim 16 of the ’912 Patent unpatentable.

On September 10, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

The appeal is pending.

On March 2, 2022, SECL filed a Petition for IPR of the ’339 Patent (Case No.

IPR2022-00639).

On November 18, 2022, Micron also filed a Petition for IPR of the ’339 Patent (Case No.

IPR2023-00204).

On October 18, 2023, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On April 11, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

The appeal is pending.

On March 22, 2022, SECL filed a Petition for IPR of the ’506 Patent (Case No.

IPR2022-00711).

On November 18, 2022, Micron also filed a Petition for IPR of the ’506 Patent (Case No.

IPR2023-00205).

On October 17, 2023, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On February 21, 2024, Netlist filed a notice of appeal to the CAFC, case no.

The appeal is pending.

On March 30, 2022, Micron filed a Petition for IPR of the ’314 Patent (Case No.

IPR2022-00745).

On October 30, 2023, the PTAB issued a final written decision finding no challenged claims unpatentable.

On December 29, 2023, Micron filed a notice of appeal to the CAFC (Case No.

The appeal is pending.

On May 17, 2022, SECL filed a Petition for IPR of the ’918 Patent (Case No.

IPR2022-00996).

On January 6, 2023, Micron also filed a Petition for IPR of the ’918 Patent, case no.

IPR2023-00406.

On December 6, 2023, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On May 20, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

The appeal is pending.

On May 17, 2022, SECL filed a Petition for IPR of the ’054 Patent (Case No.

IPR2022-00999).

On January 6, 2023, Micron also filed a Petition for IPR of the ’054 Patent (Case No.

IPR2023-00405).

On December 5, 2023, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On May 20, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

On June 3, 2024, this appeal was consolidated with the above appeal on the IPR of the ’918 Patent (Case No.

On August 26, 2022, SECL filed a Petition for IPR of the ’160 Patent (Case No.

IPR2022-01427).

On May 8, 2023, Micron also filed a Petition for IPR of the ’160 Patent, case no.

IPR2023-00883.

On April 1, 2024, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On August 19, 2024, Netlist filed a notice of appeal to the CAFC, case no.

The appeal is pending.

On August 26, 2022, SECL filed a Petition for IPR of the ’060 Patent (Case No.

IPR2022-01428).

On May 8, 2023, Micron also filed a Petition for IPR of the ’060 Patent (Case No.

IPR2023-00882).

On April 1, 2024, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On August 19, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

On September 6, this appeal was consolidated with the above appeal on the IPR of the ’160 Patent (Case No.

On January 10, 2023, SECL filed a Petition for IPR of the ’215 Patent, case no.

IPR2023-00455.

On May 8, 2023, Micron also filed a Petition for IPR of the ’215 Patent (Case No.

IPR 2023-01142).

On July 30, 2024, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

December 10, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

The appeal is pending.

On January 10, 2023, SECL filed a Petition for IPR of the ’417 Patent (Case No.

IPR2023-00454).

On May 8, 2023, Micron also filed a Petition for IPR of the ’417 Patent (Case No.

IPR2023-01141).

On July 30, 2024, the PTAB issued a final written decision in the two IPRs finding all challenged claims unpatentable.

On December 10, 2024, Netlist filed a notice of appeal to the CAFC (Case No.

On January 15, 2025, this appeal was consolidated with the above appeal on the IPR of the ’215 Patent (Case No.

On April 27, 2023, SECL filed a Petition for IPR of the ’608 Patent (Case No.

IPR2023-00847).

On January 10, 2024, Micron also filed a Petition for IPR of the ’608 Patent (Case No.

IPR2024-00370).

On July 23, 2024, the PTAB denied institution of the IPR sought by Micron.

On December 10, 2024, the PTAB issued a final written decision in the IPR brought by SECL finding no challenged claims unpatentable.

On January 13, 2025, SECL filed a notice of appeal to the CAFC (Case No.

The appeal is pending.

On October 18, 2024, SECL filed a Petition for IPR of the ’024 Patent (Case No.

IPR2025-00001).

On February 20, 2025, Netlist filed its preliminary response to the Petition.

On October 24, 2024, SECL filed a Petition for IPR of the ’319 Patent (Case No.

IPR2025-00002).

On February 21, 2025, Netlist filed its preliminary response to the Petition.

German Proceedings

On March 31, 2022, Netlist filed infringement claims against Micron in Dusseldorf, Germany, seeking damages for infringement of European Patents EP 2,454,735 (“EP735”) and EP 3,404,660 (“EP660”).

On September 1, 2022, Micron initiated nullity proceedings on the two patents in the German Federal Patent Court.

On March 27, 2023, the Dusseldorf Court rescheduled the infringement hearing until April 11, 2024.

On March 18, 2024, the Dusseldorf Court stayed the case until the German Federal Patent Court decisions on the nullity proceedings on EP735 and EP660 either become final or are reversed or remanded on appeal.

On June 3, 2022, Netlist filed infringement claims against Samsung in Dusseldorf, Germany, seeking damages for infringement of European Patents EP735 and EP660.

On September 25, 2023, the Dusseldorf Court stayed the case until the German Federal Patent Court decisions on the nullity proceedings on EP735 and EP660 either become final or are reversed or remanded on appeal.

On July 26, 2022, Netlist filed infringement claims against Google Cloud EMEA Limited, Google Germany GmbH, Redtec Computing GmbH, and Google LLC in Dusseldorf, Germany, seeking damages for infringement of European Patents EP735 and EP660.

In the nullity proceeding on EP735, the German Federal Patent Court issued its reasons of judgment revoking EP735 on April 18, 2024.

Netlist filed an appeal on May 13, 2024.

An oral hearing at the Federal Court of Justice is set for May 21, 2026.

In the nullity proceeding on EP660, the German Federal Patent Court issued its reasons of judgment revoking EP660 on February 18, 2025.

Netlist filed an appeal on March 12, 2025.

Other Contingent Obligations

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(iii) indemnities involving the accuracy of representations and warranties in certain contracts;

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

(iv) indemnities to our directors and officers to the

maximum extent permitted under the laws of the State of Delaware;

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

9 unchanged sentences

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).

Series A Preferred Stock (the “Preferred Stock”), at a purchase price of $ 6.56 per Unit, subject to adjustment.

On April 17, 2024, we entered into a fourth amendment (the “Fourth Amendment”) to the Rights Agreement, pursuant to which Equiniti Trust Company, LLC was appointed as our rights agent and the definition of “Expiration Date” in the Rights Agreement was amended to extend the term for an additional three-year period 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.

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 and August 14, 2020) will expire on the close of business on April 17, 2024.

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, 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.

2 unchanged sentences

The number of shares of the common stock authorized for issuance is 450,000,000 .

2019 Lincoln Park Purchase Agreement

On June 24, 2019, we entered into a purchase agreement (“the 2019 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 $ 10 million in shares of our common stock subject to the conditions and limitations set forth in the 2019 Purchase Agreement.

As consideration for entering into the 2019 Purchase Agreement, we issued to Lincoln Park 818,420 shares of our common stock as initial commitment shares in a noncash transaction on June 24, 2019 and would issue up to 818,420 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 2,075,503 shares of our common stock for a net purchase price of $ 3.6 million under the 2019 Purchase Agreement.

In connection with the purchases, during 2021, we issued to Lincoln Park an aggregate of 294,787 shares of our common stock as additional commitment shares in noncash transactions.

In July 2021, we completed the sales under the 2019 Purchase Agreement.

2020 Lincoln Park Purchase Agreement

On March 5, 2020, we entered into another purchase agreement (“the 2020 Purchase Agreement”) with Lincoln Park, pursuant to which we had the right to sell to Lincoln Park up to an aggregate of $ 20 million in shares of our common stock over the 36 -month term of the 2020 Purchase Agreement subject to the conditions and limitations set forth in the 2020 Purchase Agreement.

As consideration for entering into the 2020 Purchase Agreement, we issued to Lincoln Park 1,529,052 shares of our common stock as initial commitment shares in a noncash transaction on March 6, 2020 and would issue up to 917,431 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 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.

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 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 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 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 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 September 2021 Purchase Agreement.

In connection with the purchases, we issued to Lincoln Park an aggregate of 8,502 shares of our common stock as additional commitment shares in noncash transactions.

During 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.

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 had 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 previously issued to Lincoln Park 218,750 shares of our common stock as initial commitment shares in a noncash transaction on September 28, 2021 and would 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 would not receive any cash proceeds from the issuance of these additional commitment shares.

On October 1, 2024, the September 2021 Purchase Agreement terminated on its terms.

We controlled the timing and amount of any sales of our common stock to Lincoln Park over the 36-month term of the September 2021 Purchase Agreement.

There was no upper limit on the price per share that Lincoln Park was required to pay for our common stock under the September 2021 Purchase Agreement, but in no event would shares be sold to Lincoln Park on a day the closing price was less than the floor price specified in the September 2021 Purchase Agreement.

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

The September 2021 Purchase Agreement did not limit our ability to raise capital from other sources at our sole discretion, except that, subject to certain exceptions, we could 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 had the right to terminate the September 2021 Purchase Agreement at any time, at no cost to us.

During fiscal year 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.

During fiscal year 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.

The September 2021 Purchase Agreement terminated on its terms on October 1, 2024.

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.

On August 14, 2023, the Company entered into a Securities Purchase Agreement (the “2023 Purchase Agreement”) with certain investors, pursuant to which the Company issued and sold 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.

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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:

2024 Offering

On October 11, 2024, we entered into a Securities Purchase Agreement (the “2024 Purchase Agreement”) with certain investors, pursuant to which we issued and sold to the investors in a registered offering (the “2024 Offering”) an aggregate of (i) 13,636,364 shares of our common stock, (ii) Series A Common Stock Purchase Warrants (the “Series A Warrants”) to purchase up to an aggregate of 13,636,364 shares of our common stock, and (iii) Series B Common Stock Purchase Warrants (the “Series B Warrants,” collectively, the “Warrants”) to purchase up to 13,636,364 shares of our common stock, at a per share purchase price of $ 1.10 per share and accompanying warrants.

The 2024 Offering closed on October 15, 2024.

The net proceeds to us from the 2024 Offering were approximately $ 14.2 million, after deducting placement agent fees and offering costs paid by us.

The Warrants are or were exercisable at any time on or after the issuance date and contain provisions with the beneficial ownership limited to 4.99 % of the number of shares of our common stock outstanding immediately after giving effect to the issuance of share of our common stock issuable upon the exercise of the Warrants, which percentage may be increased up to 9.99 % upon the notice to us.

The Series A Warrants have a term of five years from the issuance date and have an exercise price of $ 1.30 per share.

The Series B Warrants had a term of 100 days and an exercise price of $ 1.10 per share.

None of the Series B Warrants were exercised prior to their expiration.

Pursuant to the 2024 Purchase Agreement, our director and executive officers entered into lock-up agreements with us, pursuant to which they agreed not to offer for sale, contract to sell, or sell any shares of our common stock or any securities convertible into, or exercisable or exchangeable for, shares of our common stock, for a period of 100 days from the closing of the 2024 Offering, subject to certain customary exceptions.

The 2024 Purchase Agreement also provides that we may not, subject to the exceptions described in the 2024 Purchase Agreement, effect or enter into any Variable Rate Transactions (as defined in the 2024 Purchase Agreement) until the one-year anniversary of the closing date of the 2024 Offering.

Warrant activity during fiscal years 2024 and 2023 is as follows:

(in thousands)

Outstanding as of January 2, 2021

Outstanding as of January 1, 2022

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 .

Outstanding as of December 28, 2024

During fiscal year 2024, in connection with the 2024 Offering, we issued warrants to purchase up to 27,272,728 shares of our common stock with a weighted average exercise price of $ 1.20 .

During fiscal year 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 8—Benefit Plans

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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 date of grant.

The weighted-average assumptions used in the Black-Scholes option pricing model and the resulting weighted-average grant date fair value of stock options granted were as follows:

Expected term (in years)

Expected volatility

Risk-free interest rate

Expected dividends

Weighted-average grant date fair value per share

The following table summarizes the activity related to stock options during 2023:

The following table summarizes the activity related to stock options during fiscal year 2024:

(in thousands)

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Vested and expected to vest as of December 28, 2024

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.

The total intrinsic value of stock options exercised during fiscal years 2024 and 2023 was $ 0.2 million and $ 1.1 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.

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

The following table summarizes the activity related to RSUs during fiscal year 2024:

(in thousands)

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

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

During fiscal years 2024 and 2023, our matching contributions totaled $ 0.1 million and $ 0.1 million, respectively.

Note 9—Major Customers, Suppliers and Products

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Less than 10 % of total net product sales

As of December 28, 2024, three customers represented approximately 25 % , 11 % , and 10 % , respectively, of aggregate gross accounts receivable.

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.

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 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 2023, 2022 and 2021, resales of these products represented approximately 85 %, 84 % and 79 %, respectively, of our net product sales.

For fiscal years 2024 and 2023, resales of these products represented approximately 92 % and 85 % , respectively, of our net product sales.

Our purchases are typically concentrated in a small number of suppliers.

The following table shows the percentage of purchases made from suppliers that each comprise 10% or more of total purchases:

Less than 10 % of purchases during the year

The following table shows the percentage of purchases made from supplier(s) that each comprise 10% or more of total purchases:

While we believe alternative suppliers may be available, our dependence on a small number of suppliers and the lack of any guaranteed sources for the essential components of our products and the components we resell exposes us to several risks, including the inability to obtain an adequate supply of these components, increases in their costs, delivery delays and poor quality.

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Any of these events could have a material adverse effect on our business, operating results and financial condition.

Note 10 – Subsequent Events

On March 13, 2025, we entered into a purchase agreement (the “March 2025 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 March 2025 Purchase Agreement.

Concurrent with the execution of the March 2025 Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park relating to the common stock to be sold to Lincoln Park.

As consideration for entering into the March 2025 Purchase Agreement, we issued to Lincoln Park 1,123,023 shares of our common stock as initial commitment shares in a noncash transaction on March 13, 2025 and will issue up to 1,123,023 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 March 2025 Purchase Agreement, on any business day and as often as every other business day over the 36-month term of the March 2025 Purchase Agreement, we have the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 750,000 shares of our common stock, provided Lincoln Park’s obligation under any single such purchase will not exceed $ 3.0 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 it then may sell in a regular purchase, then in addition to such regular purchase, and subject to certain conditions and limitations in the March 2025 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 March 2025 Purchase Agreement.

Under certain circumstances and in accordance with the March 2025 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 March 2025 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 March 2025 Purchase Agreement.

In all instances, we may not sell shares of our common stock to Lincoln Park under the March 2025 Purchase Agreement if that would result in Lincoln Park beneficially owning more than 9.99 % of its common stock.

The March 2025 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 March 2025 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 March 2025 Purchase Agreement.

We have the right to terminate the March 2025 Purchase Agreement at any time, at no cost to us.

Subsequently, from March 14, 2025 through March 21, 2025, Lincoln Park purchased an aggregate of 460,000 shares of our common stock for a net purchase price of $ 0.5 million under the March 2025 Purchase Agreement.

In connection with the purchase, we issued to Lincoln Park an aggregate of 866 shares of our common stock as additional commitment shares in noncash transactions.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Netlist, Inc.

Opinion on the Financial Statements

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

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.

Irvine, California

Opinion on the Consolidated Financial Statements

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

and subsidiaries (the “Company”) as of December 28, 2024, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended, 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 28, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the sole member of the board of directors and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Valuation

Critical Audit Matter Description

As described in Note 1 to the consolidated financial statements, inventories are valued at the lower of cost or the net realizable value.

Management evaluates inventory balances for excess quantities and obsolescence on a regular basis by analyzing estimated demand, inventory on hand, sales levels and other information.

Auditing management’s assessment of net realizable value for inventory was challenging because the determination of lower of cost or net realizable value and excess and obsolete inventory reserves is judgmental and considers a number of factors that are affected by market and economic conditions, such as forecasted product demand, dynamic pricing environments, product life cycles and industry supply and demand.

Additionally, for certain newer products there is limited historical data with which to evaluate forecasts.

How the Critical Audit Matter Was Addressed in the Audit

We tested the effectiveness of internal controls related to management’s process for developing the estimates of the net realizable value of inventories and excess and obsolete inventory reserves, including evaluating management’s assumptions of forecasted product demand and testing the completeness and accuracy of the underlying data used in the analyses.

Evaluating management’s product demand forecast for reasonableness involved considering historical sales by product, comparing prior period estimates to actual results of the same period, and considering macroeconomic trends within the industry that could impact the movement of the products provided by the Company.

We performed procedures to compare recent sales transactions or market data to cost of inventories in order to assess that the carrying value of inventories was the lower of cost or net realizable value.

/s/ KMJ Corbin & Company LLP

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

We determined that there are no critical audit matters.

/s/ Macias Gini & O’Connell LLP

We have served as the Company's auditor since 2024

Irvine, California

February 23, 2024

March 28, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Netlist, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Netlist, Inc.

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 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.

The following material weakness has been identified and included in management’s assessment:

● The Company’s sole member of the board of directors also serves in an executive management role at the Company.

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.

Opinion on the Consolidated Financial Statements

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

and subsidiaries (the “Company”) as of December 30, 2023, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended, and the related notes and the schedule listed in the Index at Item 15 for the year ended December 30, 2023 (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 the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KMJ Corbin & Company LLP

We have served as the Company's auditor since 2005.

Irvine, California

We served as the Company’s auditor from 2005 to 2024.

Glendora, California

February 23, 2024

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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