Item 9A. Controls and Procedures
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management conducted an evaluation, with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, due to the material weakness in our internal control over financial reporting described below, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of December 28, 2024.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. 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 U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
In designing our disclosure controls and procedures and internal control over financial reporting, our management recognizes that any control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of our controls and procedures must reflect the fact that there are resource constraints, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations, our disclosure and internal controls may not prevent or detect all instances of fraud, misstatements or other control issues, and our evaluations of disclosure and internal controls cannot provide assurance that all such control issues have been detected. In addition, projections of any evaluation of the effectiveness of disclosure or internal controls to future periods are subject to risks, including, among others, that controls may become inadequate because of changes in conditions or that compliance with policies or procedures may deteriorate.
Our management conducted an evaluation, with the participation of our principal executive officer and principal financial officer, of the effectiveness of our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) as of the end of the period covered by this report. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on this evaluation, due to the lack of an independent board and audit committee and ineffective oversight of the financial reporting process to ensure adequate monitoring and oversight of internal controls, our principal executive officer and our principal financial officer concluded that our internal control over financial reporting was not effective as of December 28, 2024 based on the criteria set forth by COSO.
Notwithstanding the material weakness in our internal control over financial reporting, we have concluded that the consolidated financial statements included in this Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Remediation Initiatives
In an effort to address the identified material weakness and enhance our internal controls related to our lack of an independent board and audit committee, we continue to maintain our financial reporting process we followed to prepare consolidated financial statements in accordance with U.S. GAAP for audit committee meetings on a quarterly and annual basis. We engage all departments groups to identify risks to the achievement of our goals as a basis for determining how the risks should be managed. Our Chief Executive Officer and sole director will oversee the process to ensure all required disclosures are made in our consolidated financial statements on a quarterly and annual basis.
Item 9B.
Other Information
Insider Trading Arrangements
During the fiscal quarter ended December 28, 2024, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as those terms are defined in Item 408 of Regulation S-K).
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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PART II I
Item 10.
Directors, Executive Officers and Corporate Governanc e
Members of our Board of Directors (the “Board”) are elected annually at a meeting of our stockholders and serve for a one-year term until the next annual meeting of our stockholders and until his or her successor is elected and qualified, or until an earlier resignation or removal. Each of our executive officers is appointed by, and serves at the direction of, our Board, subject to the terms of our employment agreement with our President and Chief Executive Officer, which is described under “Employment Agreements – CEO” in Item 11 of this Form 10-K, and which establishes, among other things, such executive officer’s term of office. Our Board currently consists of one sitting director, our Chief Executive Officer, Chun K. Hong.
The table and narrative below provide, for our current director and executive officers, each such individual’s name; age as of March 21, 2025; current position(s) with our Company; tenure in such position(s); information about such individual’s business experience and qualifications, including principal occupation or employment and principal business of the employer, if any, for at least the past five years, and involvement in certain legal or administrative proceedings, if any; and, for our director, other public company director positions held currently or at any time in the last five years and the experiences, qualifications, attributes and skills that led to the conclusion that such individual should serve as a director of our Company. There is no arrangement or understanding between any director or executive officer and any other person(s) pursuant to which such director or executive officer was or is to be selected as a director or executive officer of our Company, and there are no family relationships between any of our directors or executive officers.
Name
Age
Position(s)
Chun K. Hong
64
President, Chief Executive Officer and Sole Director
Gail Sasaki
68
Executive Vice President, Chief Financial Officer and Secretary
Chun K. Hong is one of the founders of Netlist and has been our President and Chief Executive Officer (“CEO”) and a director since our inception in June 2000. Mr. Hong assumed the title of Chairman of the Board of Directors in January 2004 and became the sole member of the Board of Directors in August 2020. Prior to his tenure at Netlist, Mr. Hong has served in various other executive positions including President and Chief Operating Officer of Infinilink Corporation, a DSL equipment company, as Executive Vice President of Viking Components, Inc., a memory subsystems manufacturing company, and as General Manager of Sales at LG Semicon Co., Ltd., a public semiconductor manufacturing company in South Korea. Mr. Hong received his Bachelor of Science degree in economics from Virginia Commonwealth University and his Master of Science degree in technology management from Pepperdine University’s Graduate School of Management. As one of our founders and as our CEO, Mr. Hong brings to the Board extensive knowledge of our organization and our market.
Gail Sasaki is our Executive Vice President and Chief Financial Officer (“CFO”). Ms. Sasaki has been our Corporate Secretary since August 2007. Ms. Sasaki joined us in 2006 as Vice President of Finance and subsequently assumed the role of CFO in January 2008. Prior to her tenure at Netlist, Ms. Sasaki served in various senior financial roles, including CFO of eMaiMai, Inc., a commercial technology company based in Hong Kong and the PRC; CFO, Senior Vice President of Finance, Secretary and Treasurer of eMotion, Inc. (a Kodak subsidiary and formerly Cinebase Software), a developer of business-to-business media management software and services; and CFO of MicroNet Technology, Inc., a leader in storage technology. Ms. Sasaki also spent seven years in public accounting leaving as an audit manager with Arthur Young (now known as Ernst &Young LLP). Ms. Sasaki earned a Bachelor’s degree from the University of California at Los Angeles, and also earned a Master of Business Administration degree from the University of Southern California.
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Audit Committee
We do not have an audit committee and, as such, do not have an audit committee financial expert.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as all of our other executive officers and employees and all of our directors. Shareholders may download a free copy of our Code of Business Conduct and Ethics from our website (www.netlist.com). We intend to disclose on our website any amendments to or waivers from this code by posting the relevant material on our website ( www.netlist.com ) in accordance with SEC rules.
Insider Trading Policy and Procedures
We maintain an Insider Trading Policy that prohibits directors, officers, employees, consultants and their family members from trading in our stock when in possession of material, non-public information about the Company. Our Insider Trading Policy also prohibits our officers, directors, employees, consultants and their family members from, among other things, engaging in speculative transactions in our securities, including by way of the purchase or sale of a put option, a call option or a short sale (including a short sale “against the box”), but permits pledging if a request is submitted to our corporate secretary at least two weeks prior to the proposed execution of documents evidencing the proposed pledge. Our officers, directors, employees, consultants and their family members may not purchase or sell our stock (i) during the period starting two weeks before the end of each calendar quarter and ending two full trading days after the release of our quarterly or annual earnings results, or (ii) during any blackout period announced by our corporate secretary unless the sale is made pursuant to a 10b5-1 trading plan. We believe that our insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations applicable to us. A copy of our insider trading policy is filed as Exhibit 19 to this Form 10-K.
Equity Award Grant Practices
We do not purposefully time our equity award grants to coincide or be near in time to the release of material non-public information, but some option grants may be granted close in time to the extent those options are being granted upon hiring of new executive officers and in connection with annual grants being made as part of our director compensation policy upon appointment of a new director and on an annual basis at each annual meeting.
Item 11.
Executive Compensatio n
Summary Compensation Table
The following table provides information about the compensation arrangements for fiscal years 2023 and 2024 of (i) our principal executive officer, and (ii) the next two most highly compensated person, other than our principal executive officer, who were serving as an executive officer at the end of fiscal years 2023 and 2024 (our “named executive officers”). Other than our principal executive officer and Chief Financial Officer, we had no other executive officers serving at the end of fiscal years 2023 and 2024. Our named executive officers for each of the last two fiscal years were:
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Name and Principal Position
Year
Base Salary($)
Bonus($)
Stock Awards($)(1)
All Other
Compensation($)(2)
Total($)
Chun K. Hong(3)
2024
450,000
—
997,500
109,914
1,557,414
President, Chief Executive Officer and Sole Director
2023
450,000
—
1,509,475
93,732
2,053,207
Gail Sasaki
2024
275,000
—
133,000
7,858
415,858
Executive Vice President, Chief Financial Officer and Secretary
2023
275,000
—
302,500
5,757
583,257
(1) Represents the grant date fair value of the RSUs granted during the year calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). The grant date fair value was determined using the fair value of the underlying shares of our common stock.
(2) For fiscal year 2024, the amount consists of (a) for Mr. Hong, $11,821 for automobile rental payments, $21,976 for other vehicle-related costs, $36,708 for a country club membership, $29,135 for a health club membership, and $10,274 for income tax and estate planning costs incurred on Mr. Hong’s behalf and (b) for Ms. Sasaki, the amount consists of $1,590 for a health club membership, $3,000 for matching contributions under the 401(k) defined contribution plan and $3,268 for cell phone services.
(3) Mr. Hong received no additional compensation for his service as a director.
Narrative Disclosure to Summary Compensation Table
Compensation to our named executive officers generally consists of an annual base salary, bonus compensation and equity compensation.
Annual Base Salary
The base salaries of our named executive officers are subject to adjustment and generally determined and approved by our sole director. The base salaries of each of our named executive officers during the fiscal years 2023 and 2024 are described below under the section “Employment Agreements – CEO .”
Bonus
Our bonuses are discretionary with substantial weight given to financial performance during the year and the enhancement of long-term stockholder value. Our named executive officers did not receive bonuses in Fiscal 2024.
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Equity-Based Incentives
Our equity award program is the primary vehicle for offering long-term incentives to our named executive officers. Our equity-based incentives have historically been granted in the form of options to purchase shares of our common stock and restricted stock unit awards that are settled in shares of our common stock upon vesting, and we have granted to both our named executive officers awards that vest over a long-term period subject to continued service. We believe that equity awards more closely align the interests of our named executive officers with our stockholders, provide our named executive officers with incentives linked to long-term performance, and create an ownership culture. To date, we have not had an established set of criteria for granting equity awards; instead, the Board or our sole director exercises judgment and discretion. The sole director considers, among other things, the role and responsibility of the named executive officer, competitive factors, the amount of stock-based equity compensation already held by the named executive officer, and the cash-based compensation received by the named executive officer, to determine the level and types of equity awards that it approves.
Employment Agreements – CEO
In September 2006, we entered into an employment agreement with our President and CEO, Mr. Hong. This agreement provides for a base salary plus other specified benefits, including the reimbursement of professional fees and expenses incurred in connection with income and estate tax planning and preparation, income tax audits and the defense of income tax claims; the reimbursement of membership fees and expenses for professional organizations and one country club; the reimbursement of employment-related legal fees; automobile rental payments and other vehicle-related expenses; and the reimbursement of health club membership fees and other similar health-related expenses. Mr. Hong may earn annual cash performance bonuses, at the discretion of our Board, of up to 100% of his base salary based upon the achievement of individual and Company performance objectives.
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Potential Payments Upon Termination or Change of Control
Mr. Hong’s employment agreement automatically renews for additional one-year periods unless we provide or Mr. Hong provides notice of termination six months prior to the renewal date, but at all times Mr. Hong may terminate his employment upon six months’ advance written notice to us and we may terminate Mr. Hong’s employment upon 30 days’ advance written notice to Mr. Hong. If we terminate Mr. Hong’s employment without cause or if he resigns from his employment for good reason, which includes a termination or resignation upon a change of control of our Company, Mr. Hong would be entitled to receive continued payments of his base salary for one year, reimbursement of medical insurance premiums during that period unless he becomes employed elsewhere, a pro-rated portion of his annual performance bonus, and, if any severance payment is deemed to be an “excess parachute payment” within the meaning of Section 280G of the Code, an amount equal to any excise tax imposed under Section 4999 of the Code. In addition, upon any such termination or resignation, any unvested stock options held by Mr. Hong would immediately become fully vested and exercisable as of the effective date of the termination or resignation. If Mr. Hong’s employment is terminated due to death or disability, he or his estate would receive a lump-sum payment equal to half of his annual base salary and any stock options held by Mr. Hong would vest to the same extent as they would have vested one year thereafter. Additionally, if Mr. Hong’s employment is terminated due to death or disability, 25% of the shares subject to outstanding stock options, or such lesser amount as is then unvested, would immediately vest and become exercisable. If Mr. Hong resigns without good reason or is terminated for cause, we would have no further obligation to him other than to pay his base salary or other amounts earned by him through the date of resignation or termination.
For purposes of Mr. Hong’s employment agreement:
● “cause” means a reasonable determination by the Board, acting in good faith based upon actual knowledge at the time, that Mr. Hong has (i) materially breached the terms of his employment agreement, or any other material agreement between us and Mr. Hong, including an arbitration agreement and a proprietary information and invention assignment agreement, (ii) committed gross negligence or engaged in serious misconduct in the execution of his assigned duties, (iii) been convicted of a felony or other serious crime involving moral turpitude, (iv) materially refused to perform any lawful duty or responsibility consistent with Mr. Hong’s position with our Company, or (v) materially breached his fiduciary duty or his duty of loyalty to our Company;
● “good reason” means (i) the assignment to Mr. Hong, without his consent, of duties inconsistent with his position so as to constitute a diminution of status with our Company, including an assignment of Mr. Hong to a position other than President and Chief Executive Officer of our Company, (ii) our reduction of Mr. Hong’s base salary as in effect at any time without Mr. Hong’s consent, other than a decrease of up to (and including) 10% in connection with an adverse change in the business operations or financial condition of our Company, (iii) the occurrence of a change of control, or (iv) a requirement that Mr. Hong relocate (or report on a regular basis) to an office outside of Orange County without his consent; and
● a “change of control” means the occurrence of any of the following: (i) any person or entity is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of our Company representing a percentage of the combined voting power of our then-outstanding securities that is greater than 50%, (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date of Mr. Hong’s employment agreement, constituted our Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of our Company) whose appointment or election by the Board or nomination for election by our stockholders is approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the date of Mr. Hong’s employment agreement or whose appointment, election or nomination for election was previously so approved or recommended; (iii) there is consummated a merger or consolidation of our Company in which our Company does not survive or our Company survives but the shares of our
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common stock outstanding immediately prior to such merger or consolidation represent 50% or less of the voting power of our Company after such merger or consolidation; or (iv) our stockholders approve a plan of our complete liquidation or dissolution or there is consummated an agreement for our sale or disposition of all or substantially all of our assets, other than a sale or disposition of all or substantially all of our assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by our stockholders in substantially the same proportions as their ownership of our Company immediately prior to such sale.
We have not entered into an employment agreement with Ms. Sasaki, our Executive Vice President, Chief Financial Officer and Secretary. For 2024 and 2023, Ms. Sasaki received an annualized base salary of $275,000 and $275,000, respectively. If the employment of Ms. Sasaki is terminated due to death or disability, any stock options held by Ms. Sasaki would vest to the same extent as they would have vested one year thereafter. Additionally, if the employment of Ms. Sasaki is terminated due to death or disability, 25% of the shares subject to outstanding stock options, or such lesser amount as is then unvested, would immediately vest and no additional shares would vest thereafter. Ms. Sasaki is eligible for a target cash bonus of 75% of her base salary, which were to be determined by our Board in its discretion based on various factors.
Retirement Benefits
We maintain a savings plan that qualifies as a defined contribution plan under Section 401(k) of the Code, to which all of our employees, including our named executive officers, are able to contribute up to the limit prescribed by applicable tax rules on a before-tax basis. All of these employee contributions are fully vested upon contribution. In addition, we may make matching contributions on the contributions of our employees on a discretionary basis. In fiscal years 2024 and 2023, we made matching contributions of $117,195 and $115,733, respectively.
Health and Welfare Benefits
We provide the following benefits to our named executive officers on the same basis provided to all of our employees:
● medical insurance including mental health, dental and vision;
● life insurance and accidental death and dismemberment insurance;
● a Section 401(k) plan for which discretionary matching contributions provided by Netlist;
● short- and long-term disability insurance;
● medical and dependent care flexible spending account; and
● a health savings account.
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Outstanding Equity Awards at Fiscal Year End
The following table shows information about the equity awards held by our named executive officers as of the end of fiscal year 2024:
Option Awards
Stock Awards
Name
Grant Date
Number of Securities
Underlying Unexercised
Options Exercisable(#)(1)
Number of Securities
Underlying Unexercised
Options Unexercisable(#)(1)
Option
Exercise Price($)
Option
Expiration Date
Number of Shares
That Have Not
Vested(#)(2)
Market Value of
Shares That Have Not
Vested($)(2)
Chun K. Hong
1/6/2015
300,000
—
0.84
1/6/2025
—
—
1/18/2016
300,000
—
0.70
1/18/2026
—
—
2/14/2017
300,000
—
1.02
2/14/2027
—
—
1/13/2021
937,500
62,500
0.72
1/13/2031
—
—
1/25/2022
—
—
—
—
300,000
251,250
3/16/2023
—
—
—
—
374,250
313,434
5/14/2024
—
—
—
—
750,000
628,125
Gail Sasaki
1/13/2021
—
—
—
—
12,500
10,469
1/25/2022
—
—
—
—
125,000
104,688
3/16/2023
—
—
—
—
25,000
20,938
5/14/2024
—
—
—
—
100,000
83,750
(1)
Represents stock option awards granted under the Amended and Restated 2006 Equity Incentive Plan (the “Amended 2006 Plan”). These stock option awards that are not fully exercisable vest in 16 equal quarterly installments, subject to continued service on each vesting date, subject to accelerated vesting in certain circumstances as described under “Employment Agreements – CEO” above.
(2)
Represents RSUs granted under the Amended 2006 Plan. Restrictions on RSUs lapse in eight equal semi-annual installments from the grant date.
Director Compensation
Our sole director receives no additional compensation for his service as director.
Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We did not grant stock options or similar awards as part of our equity compensation program in fiscal year 2024. If stock options or similar awards are granted, our policy is to not grant stock options or similar awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement, and not time the public release of such information based on stock option grant dates, but some option grants may be granted close in time to the extent those options are being granted upon hiring of new executive officers and in connection with annual grants being made as part of our director compensation policy upon appointment of a new director and on an annual basis at each annual meeting. These restrictions do not apply to RSUs or other types of equity awards that do not include an exercise price related to the market price of our common stock on the date of grant.
During the period covered by this report, we have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
During fiscal year 2024, none of our named executive officers were awarded options with an effective grant date during any period beginning four business days before the filing or furnishing of a Form 10-Q, Form 10-K, or Form 8-K that disclosed material nonpublic information (other than a Form 8-K that disclosed a material
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new option award grant under Item 5.02(e)), and ending one business day after the filing or furnishing of such reports.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matter s
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth information regarding the ownership of our common stock, as of March 21, 2025 (the “Table Date”) unless otherwise indicated in the footnotes to the table, by (i) all persons known by us to beneficially own more than 5% of our common stock, (ii) each of our current directors, (iii) each of our named executive officers, and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, each person named below possesses sole voting and investment power over all shares of common stock shown as beneficially owned by such person. Unless otherwise indicated, the address for each person named below is c/o Netlist, Inc., 111 Academy, Suite 100, Irvine, CA 92617.
Name of Beneficial Owner
Shares Beneficially Owned
Percent of Class(1)
Chun K. Hong (2)
6,898,235
2.5%
Gail Sasaki (3)
133,158
*
All executive officers and directors as a group (2 persons) (4)
7,198,554
2.8%
*
Represents beneficial ownership of less than 1%.
(1) All ownership percentages are based on 273,994,997 shares of our common stock outstanding as of the Table Date.
(2) Represents (i) 1,787,500 shares of common stock issuable upon the exercise of stock options and restricted stock units that are or will be vested and exercisable within 60 days after the Table Date and (ii) 5,110,735 outstanding shares of common stock, of which 3,611,177 shares are held by Mr. Hong and his wife, Won K. Cha, as co-trustees of the Hong-Cha Community Property Trust. Mr. Hong and Ms. Cha possess shared voting and investment power over the shares of common stock held by the Hong-Cha Community Property Trust, and each disclaims beneficial ownership of such shares except to the extent of his or her pecuniary interest therein.
(3) Represents 25,000 shares of common stock from restricted stock that will vest within 60 days after the Table date and 108,158 shares of common stock outstanding.
(4) Represents (i) 1,812,500 shares of common stock issuable upon the exercise of stock options and restricted stock units that are or will be vested and exercisable within 60 days after the Table Date and (ii) 5,218,893 outstanding shares of common stock.
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Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 28, 2024 about compensation plans under which our equity securities are authorized for issuance:
Equity Compensation Plan Information
Plan Category
(a) Number of securities to be issued
upon exercise of
outstanding options, warrants and rights
(b) Weighted-average exercise price of
outstanding options,
warrants and rights($)(1)
(c) Number of securities remaining
available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders
6,258,873
(2)
0.78
692,001
(3)
Equity compensation plans not approved by security holders
415,000
(4)
1.01
—
Total
6,673,873
0.06
692,001
(1) The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and do not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs, which have no exercise price.
(2) This number includes the following outstanding awards granted under the Amended 2006 Plan: 3,256,363 shares subject to outstanding stock options and 3,002,510 shares subject to outstanding RSUs.
(3) Consists of shares that remained available for future issuance under the Amended 2006 Plan as of December 28, 2024, which provides that the number of shares of common stock issuable under the Amended 2006 Plan automatically increases on the first day of each calendar year by the number of shares equal to the lesser of (i) 2.5% of the issued and outstanding shares of common stock as of January 1 of such year and (ii) 1,200,000 shares of common stock.
(4) Consists of 415,000 RSUs outstanding as of December 28, 2024.
Item 13.
Certain Relationships and Related Transactions, and Director Independenc e
Related Party Transactions
Except as described below and except for employment arrangements, since December 30, 2023, there has not been, nor is there currently proposed, any transaction or series of transactions in which our Company was or is to be a participant, in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for our last two completed fiscal years, and in which any director, officer or beneficial owner of more than 5% of our common stock, or member of any such person’s immediate family, had or will have a direct or indirect material interest.
Our Executive Vice President of Sales and Operations (formerly, our Vice President of Netlist Base and Commodity Sales), Paik K. Hong, is the brother of Chun K. Hong, our President, Chief Executive Officer and sole director. For fiscal year 2024, Mr. P. K. Hong earned a cash salary of $250,000. He received $1,400 for weekly fitness training and $3,000 for matching contributions for a savings plan that qualifies as a defined contribution plan under Section 401(k) of the Code. He was also granted 100,000 shares of RSUs with the grant date fair value of $133,000 measured in accordance with ASC 718. For fiscal year 2023, Mr. P. K. Hong earned a cash salary of $233,334. He received $14,950 for weekly fitness training and $3,000 for matching contributions for a savings plan that qualifies as a defined contribution plan under Section 401(k) of the Code. He was also granted 50,000 shares of RSUs with the grant date fair value of $182,500 measured in accordance with ASC 718. The grant date fair value was determined using the fair value of the underlying shares of our common stock.
We have entered into indemnification agreements with each of our sole director and executive officers. In general, these agreements require us to indemnify each such individual to the fullest extent permitted under
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Delaware law against certain liabilities that may arise by reason of their service for us, and to advance expenses incurred as a result of any such proceeding as to which any such individual could be indemnified.
Director Independence
Due to the dissolution of all committees of the Board and reduction of the number of directors to one director, our President and CEO, Mr. Hong, in August 2020, we currently do not have an independent director.
Item 14.
Principal Accountant Fees and Service s
Fees Paid to Independent Registered Public Accounting Firm
Our independent registered public accounting firm is Macias Gini O’Connell LLP (“MGO”). MGO served as our independent public accounting firm for the fiscal year ended December 28, 2024, beginning in September 2024. KMJ Corbin & Company LLP (“KMJ”) served as our independent registered public accounting firm for the fiscal year ended December 30, 2023 and for the fiscal year ended December 28, 2024 until September 2024. The following table presents fees for professional services rendered by MGO for the fiscal year ended December 28, 2024 and by KMJ for the fiscal years ended December 28, 2024 and December 30, 2023.
Fiscal Year ended
December 28, 2024
Fiscal Year ended
December 30,
2023
MGO
KMJ
KMJ
Audit Fees (1)
$
245,275
$
41,450
$
270,200
Audited-Related Fees (2)
—
—
—
Tax Fees (2)
—
—
—
All Other Fees (2)
—
—
—
Total Fees
$
245,275
$
41,450
$
270,200
( 1) Audit fees consist of fees billed or expected to be billed to us for professional services rendered for the audit of our annual consolidated financial statements, the review of our interim condensed consolidated financial statements included in our quarterly reports and the audit of our internal control over financial reporting as required by Section 404. These fees also include fees billed to us for professional services that are normally provided in connection with statutory and regulatory filings or engagements, including the review of our registration statements on Form S-3 and Form S-8 and certain other related matters, such as the delivery of comfort letters and consents in connection with these registration statements.
(2) KMJ and MGO did not bill to us any audit-related fees, tax fees or other fees in fiscal years ended December 28, 2024 and December 28, 2023.
Pre-Approval Policies and Procedures
Our sole director pre-approves all audit and permissible non-audit services to be performed for us by our independent registered public accounting firm, except for certain “de minimus” non-audit services that may be ratified by sole director. Our sole director pre-approved all services performed by KMJ and MGO in fiscal year 2024.
98
Table of Contents
PART IV
Item 15.
Exhibits and Financial Statement Schedule s
(a) Documents filed as part of this report
(1) All financial statements
Index to Consolidated Financial Statements
Page
Consolidated Balance Sheets
56
Consolidated Statements of Operations
57
Consolidated Statements of Stockholders’ Equity (Deficit )
58
Consolidated Statements of Cash Flows
59
Notes to Consolidated Financial Statements
60
Reports of Independent Registered Public Accounting Firm
85
Schedule II – Valuation and Qualifying Accounts
99
(2) Financial statement schedules
Schedule II – Valuation and Qualifying Accounts (in thousands)
AR Allowance and Sales Returns Reserve
Balance at Beginning of Year
Charged to Expense
Write-offs
Balance at End of Year
December 30, 2023
$
137
$
(69)
$
—
$
68
December 28, 2024
$
68
$
(27)
$
—
$
41
All financial statement schedules have been omitted, as they are not required, not applicable, or the required information is otherwise included.
(3) Exhibit listing
Incorporated by Reference
Exhibit No.
Description
Filed Herewith
Form
File No.
Exhibit
Filing Date
3.1
Restated Certificate of Incorporation of Netlist, Inc.
10-Q
001-33170
3.1
August 15, 2017
3.1.1
Certificate of Amendment to the Restated Certificate of Incorporation of Netlist, Inc.
10-Q
001-33170
3.1.1
August 15, 2017
3.1.2
Certificate of Amendment of the Restated Certificate of Incorporation of Netlist, Inc.
8-K
001-33170
3.1
August 17, 2018
3.1.3
Certificate of Amendment of the Restated Certificate of Incorporation of Netlist, Inc.
8-K
001-33170
3.1
August 10, 2020
3.1.4
Certificate of Designation of the Series A Preferred Stock of Netlist, Inc.
10-Q
001-33170
3.1.2
August 15, 2017
3.2
Second Amended and Restated Bylaws of Netlist, Inc.
10-Q
001-33170
3.2
November 7, 2024
4.1
Description of the Registrant’s Securities
10-K
001-33170
4.1
March 10, 2020
99
Table of Contents
Incorporated by Reference
Exhibit No.
Description
Filed Herewith
Form
File No.
Exhibit
Filing Date
4.2
Rights Agreement, dated as of April 17, 2017, by and between Netlist, Inc. and Computershare Trust Company, N.A., As Rights Agent
8-K
001-33170
4.1
April 17, 2017
4.3
Amendment No. 1 to Rights Agreement, dated as of April 16, 2018, by and between Netlist, Inc. and Computershare Trust Company, N.A., As Rights Agent
8-K
001-33170
4.1
April 17, 2018
4.4
Amendment No. 2 to Rights Agreement, dated as of April 16, 2019, by and between Netlist, Inc. and Computershare Trust Company, N.A., As Rights Agent
8-K
001-33170
4.1
April 17, 2019
4.5
Amendment No. 3 to Rights Agreement, dated as of August 14, 2020, by and between Netlist, Inc. and Computershare Trust Company, As Rights Agent
8-K
001-33170
4.1
August 14, 2020
4.6
Form of Warrant Agreement to Purchase Common Stock issued pursuant to the Securities Purchase Agreement, dated September 12, 2018
8-K
001-33170
4.1
September 14, 2018
4.7
Form of Warrant
8-K
001-33170
4.1
August 15, 2023
4.8
Amendment No. 4 to Rights Agreement, dated as of April 17, 2024, by and between Netlist, Inc. and Equiniti Trust Company, LLC, as rights agent
8-K
001-33170
4.1
April 17, 2024
4.9
Form of Series A Warrant
8-K
001-33170
4.1
October 11, 2024
4.10
Form of Series B Warrant
8-K
001-33170
4.2
October 11, 2024
10.1#
Form of Indemnity Agreement for officers and directors
S-1
333-136735
10.12
August 18, 2006
10.2#
Employment Agreement, dated September 5, 2006, between Netlist, Inc. and Chun K. Hong
S-1
333-136735
10.13
September 27, 2006
10.3#
Amended and Restated 2006 Equity Incentive Plan of Netlist, Inc.
10-K
001-33170
10.3
March 22, 2019
10.4#
Form of Restricted Stock Award Agreement issued pursuant to the Amended and Restated 2006 Equity Incentive Plan of Netlist, Inc.
10-Q
001-33170
10.2
May 17, 2010
10.5#
Form of Incentive Stock Option Award Agreement issued pursuant to the Amended and Restated 2006 Equity Incentive Plan of Netlist, Inc.
10-K
001-33170
10.6
March 31, 2017
10.6
Lease, dated April 28, 2021, by and between Netlist, Inc. and University Research Park, LLC
8-K
001-33170
10.1
May 3, 2021
100
Table of Contents
Incorporated by Reference
Exhibit No.
Description
Filed Herewith
Form
File No.
Exhibit
Filing Date
10.7 Ù
Form of Securities Purchase Agreement, dated August 14, 2023, by and among Netlist, Inc. and the purchasers identified therein
8-K
001-33170
10.1
August 15, 2023
10.8 Ù
Placement Agency Agreement, dated August 14, 2023, by and between Netlist, Inc. and Roth Capital Partners, LLC.
8-K
001-33170
10.2
August 15, 2023
10.9
Form of Lock-Up Agreement
8-K
001-33170
10.3
August 15, 2023
10.10
Loan and Security Agreement, dated November 7, 2023, between Silicon Valley Bank, a division of First-Citizens Bank & Trust Company and Netlist, Inc.
10-Q
001-33170
10.4
November 9, 2023
10.11 Ù
Form of Securities Purchase Agreement dated October 11, 2024 between Netlist, Inc. and the purchasers identified therein
8-K
001-33170
10.1
October 11, 2024
10.12 Ù
Placement Agency Agreement dated October 11, 2024 by and between Netlist, Inc. and Roth Capital Partners, LLC
8-K
001-33170
10.2
October 11, 2024
10.13 Ù
Form of Lock-Up Agreement
8-K
001-33170
10.3
October 11, 2024
10.14 Ù
Purchase Agreement, dated as of March 13, 2025, between Netlist, Inc. and Lincoln Park Capital Fund, LLC
8-K
001-33170
1.1
March 13, 2025
10.15 Ù
Registration Rights Agreement, dated as of March 13, 2025, between Netlist, Inc. and Lincoln Park Capital Fund, LLC
8-K
001-33170
1.2
March 13, 2025
19
Insider Trading Policy
X
21
Subsidiaries of Netlist, Inc.
10-K
001-33170
21.1
March 1, 2022
23.1
Consent of Macias Gini & O’Connell LLP
X
23.2
Consent of KMJ Corbin & Company LLP
X
31.1
Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
X
31.2
Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer
X
32+
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
X
101.INS
Inline XBRL Instance Document
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
101
Table of Contents
Incorporated by Reference
Exhibit No.
Description
Filed Herewith
Form
File No.
Exhibit
Filing Date
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
104
The cover page from the Company’s Annual
X
Report on Form 10-K for the fiscal year ended December 30, 2023 (formatted as inline XBRL and contained in Exhibit 101)
+
Furnished herewith.
#
Management contract or compensatory plan or arrangement.
Ù
Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the SEC.
Item 16.
Form 10-K Summary.
None.
102
Table of Contents
SIGNATURE S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 2025
Netlist, Inc.
By:
/s/ Chun K. Hong
Chun K. Hong
President, Chief Executive Officer and Sole Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Chun K. Hong
President, Chief Executive Officer and Sole Director
Chun K. Hong
(Principal Executive Officer)
March 28, 2025
/s/ Gail Sasaki
Executive Vice President and Chief Financial Officer
Gail Sasaki
(Principal Financial and Accounting Officer)
March 28, 2025
103