What changed in this filing

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Item 1A. Risk Factors

2025-08-12 compared with 2025-05-13 · 111 added, 86 removed, 631 unchanged (24% of the section changed)

11 unchanged sentences

● We face intense competition in our industry, and we may not be able to compete successfully in our target markets;

● Semiconductor memory and storage markets are highly competitive which could materially and adversely affect our business, results of operations, or financial condition;

● Our operating results may be adversely impacted by worldwide economic and political uncertainties and specific conditions in the markets we address and in which we or our strategic partners or competitors do business, including the cyclical nature of and volatility in the memory market and semiconductor industry;

● Our lack of a significant backlog of unfilled orders and the difficulty inherent in estimating customer demand makes it difficult to forecast our short-term requirements, and any failure to optimally calibrate our production capacity and inventory levels to meet customer demand could adversely affect our revenues, gross margin and earnings;

● Our manufacturing operations involve significant risks;

● We depend on third parties to design and manufacture components for our products and the component products we resell, which exposes us to risks;

● We also depend on third parties to design and manufacture components for our products and the component products we resell, which exposes us to risks;

● If our products or the component products we resell do not meet quality standards or are defective or used in defective systems, we may be subject to quality holds, warranty claims, recalls or liability claims;

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● If we acquire businesses or technologies or pursue other strategic transactions or relationships in the future, these transactions could disrupt our business and harm our operating results and financial condition;

● Increased prices and inflation could negatively impact our margin performance and our financial results;

● Increased prices and inflation or the effects of changes in international trade policies and the changing tariff environment could negatively impact our margin performance and our financial results;

● Geopolitical risks associated with the ongoing conflicts between Russia and Ukraine and Israel and Palestine continue to contribute to heightened market volatility and uncertainty, which could negatively impact our business, financial condition, and results of operations;

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● We have identified a material weakness in our internal control over financial reporting.

If we are unable to remediate the material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business;

While we have taken steps to remediate this material weakness, if we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business;

● We may be unsuccessful in monetizing our intellectual property portfolio;

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● We may not have sufficient working capital to fund our planned operations, and, as a result, we may need to raise additional capital in the future, which may not be available when needed, on acceptable terms or at all.

Our estimates of our operating revenues and expenses and working capital requirements could be incorrect, and we may use our cash resources faster than we anticipate;

● Our inability to increase the authorized number of shares of our capital stock could impede our ability to pursue our strategic objectives, complete equity-based funding activities, provide equity incentives to engage key talent and negatively impact stockholder value;

● The price and trading volume of our common stock has and may continue to fluctuate significantly in reaction to real or perceived developments in our business;

● Adverse developments affecting financial institutions, companies in the financial services industry or the financial services industry generally could adversely affect our operations and liquidity;

● There is a limited market for our common shares, and the trading price of our common shares is subject to volatility;

● Future issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to decline;

● As our shares of common stock are not listed on a national securities exchange, it may be more difficult for you to dispose of your shares and they may be less liquid when compared to securities that are listed on a national securities exchange;

● Future issuances of our common stock or rights to purchase our common stock, including pursuant to our outstanding warrants, equity incentive plans or the March 2025 Purchase Agreement, would result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to decline;

● Sales of our common stock, or the perception that such sales could occur, could cause the market price of our stock to drop significantly, regardless of the state of our business;

● As the sole director, Chun K.

Hong has significant control over all corporate decisions that may not be in the best interest of our other stockholders;

● We do not currently intend to pay dividends on our common stock, and any return to investors is expected to result, if at all, only from potential increases in the price of our common stock.

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As of the reporting date, both Netlist patents found infringed in the jury verdict and judgment are subject to final written decisions by the PTAB in their corresponding IPRs, which are subject to appeals before the CAFC.

In the litigation, Micron has filed post-trial motions for judgment as a matter of law and for a new trial.

These motions may cause a lengthy delay in our ability to collect the damages award and could also result in a reversal or reduction of the damages award.

Even if these post-trial motions are ultimately unsuccessful, we would still need to successfully collect the damages awarded to us.

Following the resolution of these post-trial motions, the litigation may be subject to further appeals.

In the litigation, Micron has filed post-trial motions for judgment as a matter of law and for a new trial, which were denied by the Court.

This case is on appeal before the CAFC.

The outcomes of the IPR appeals and the litigation may affect our ability to collect the damages award and the amount collected.

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We are currently involved in litigation and proceedings at the PTAB based on alleged third-party infringement of our patents, and lawsuits claiming we are infringing others’ intellectual property rights also have been and may in the future be brought against us.

portfolio and our trade secrets, as well as to challenge the validity and scope of the proprietary rights of others.

This or other similar proceedings also have and may again subject us to counterclaims or countersuits against us, or the parties we sue have and may again seek to invalidate our patents or other intellectual property rights through reexamination or similar processes at the U.S.

Our business strategy includes litigating claims against others, such as our competitors and customers, to enforce our intellectual property, contractual and commercial rights, including, in particular, our patent portfolio and our trade secrets, as well as to challenge the validity and scope of the proprietary rights of others.

property rights through reexamination or similar processes at the U.S.

Patent and Trademark Office (“USPTO”) or similar bodies.

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The occurrence of any one or more of these risks could cause our performance to materially suffer.

We or any of our third-party partners may fail to comply with our or their contractual obligations under our third-party contracts.

We rely on a variety of third-party vendors, manufacturers, and strategic partners, such as SK hynix, to support critical aspects of our operations.

Our or our third-party partners’ failure to comply with the terms and conditions of these third-party contracts—whether due to oversight, misinterpretation, operational challenges,

or changes in business priorities—could result in contractual breaches.

Such breaches may lead to penalties, termination of agreements, litigation, reputational harm, or disruptions in service delivery.

Additionally, non-compliance could adversely affect our ability to maintain key relationships, negotiate favorable terms in future contracts, or scale our operations efficiently.

Any of these outcomes could materially and adversely impact our financial condition, results of operations, and business prospects.

We are subject to risks relating to our focus on developing our CXL products for our target customer markets.

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● CXL and some of our other next-generation products may require additional time including the services and attention of key employees who have competing demands on their available time and may require capital investment to bring the products to market;

● our development and commercialization strategies for these products;

● our development and commercialization strategies for these products may not align with industry demands;

● we are required to demonstrate the quality and reliability of our products to and qualify them with our customers before purchases are made, which requires investments of time and resources in significant and unpredictable amounts prior to the receipt of any revenues from these customers;

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As a result, sales to small numbers of customers have historically represented and currently represent a substantial portion of our net product sales, and we expect this concentration to continue.

For example, for the quarter ended June 28, 2025, three customers represented approximately 34%, 16%, and 13% of our net product sales, respectively.

Additionally, the composition of major customers and their respective contributions to our net product sales have fluctuated and will likely continue to fluctuate from period to period as our existing and prospective customers progress through the life cycle of the products they produce and sell and experience resulting fluctuations in their product demand.

We believe our performance

depends in significant part on our ability to establish and maintain relationships with and effect substantial sales to our large customers.

We believe our performance depends in significant part on our ability to establish and maintain relationships with and effect substantial sales to our large customers.

We do not have long-term agreements with any of our customers and, as result, any or all of them could decide at any time to decrease, delay or discontinue their purchase of our products or the component products we resell.

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Because of these and other factors, sales to these customers may not continue and the amount of such sales may not reach or exceed historical levels in any future period.

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

We are subject to risks of disruption in the supply of component products.

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As a result, our inventory purchases have historically been concentrated in a small number of suppliers, including SK hynix, from which we obtained a large portion of our products purchased for resale.

We also use consumables and other components, including printed circuit boards, to manufacture our memory subsystems, which we sometimes procure from single or limited sources to take advantage of volume pricing discounts.

We also use consumables and other components, including printed circuit boards, to manufacture our

memory subsystems, which we sometimes procure from single or limited sources to take advantage of volume pricing discounts.

From time to time, shortages in SSDs, volatile memory components, and/or non-volatile memory components have required some suppliers to limit the supply of these components.

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These circumstances may be adversely affected by the recently imposed international tariffs.

If we are unable to obtain a sufficient supply of SSDs, volatile memory components, non-volatile memory components and/or other essential components, as a result of the global tariff environment, a natural disaster, political unrest, military conflict, labor disruptions, medical epidemics, climate change, economic instability, equipment failure or other cause, to avoid interruptions or failures in the delivery of our products as required by our customers or the delivery of these components to customers to whom we resell them directly, these customers may

reduce future orders for these products or not purchase these products from us at all, which could cause our net product sales to decline and harm our operating results.

In addition, our reputation could be harmed due to failures to meet our customers’ demands and, even assuming we are successful in resolving supply chain disruptions, we may not be able to replace any lost business and we may lose market share to our competitors.

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Our prospective customers generally test and evaluate our memory subsystems before purchasing our products and integrating them into their systems.

This extensive qualification process involves rigorous reliability testing and evaluation of our products, which may continue for nine months or longer and is often subject to delays.

This extensive qualification process involves rigorous reliability testing and evaluation of our products, which may continue for nine months or longer and is often

subject to delays.

In addition to qualification of specific products, some of our customers may also require us to undergo a technology qualification if our product designs incorporate innovative technologies that the customer may not have previously encountered.

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Further, the probabilistic nature of AI technologies can result in unwanted, inaccurate, or offensive outputs.

In the event the AI tools we provide to customers do not perform reliably or in accordance with stated expectations, we may need to disable user access to such AI tools;

In the event the AI tools we provide to customers do not perform reliably or in accordance with stated expectations, we may need to disable user access to such AI

similarly, if the AI tools that we use for internal business purposes do not perform in accordance with expectations, we may be forced to discontinue or restrict the use of such tools.

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We face competition from volatile memory component suppliers, memory module providers, and logic suppliers for many of our products.

We also face competition from the manufacturers and distributors of the component products we resell to customers, as these manufacturers and distributors could decide at any time to sell

these component products to these customers directly.

We also face competition from the manufacturers and distributors of the component products we resell to customers, as these manufacturers and distributors could decide at any time to sell these component products to these customers directly.

Additionally, if and to the extent we enter new markets or pursue licensing arrangements to monetize our technologies and intellectual property portfolio, we may face competition from a large number of competitors that produce solutions utilizing similar or competing technologies.

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If we are unable to compete effectively, then our market position and prospects could deteriorate and our revenues could decline.

Semiconductor memory and storage markets are highly competitive which could materially and adversely affect our business, results of operations, or financial condition.

The semiconductor memory and storage markets are generally highly competitive and companies may use aggressive pricing to obtain market share.

In particular, semiconductor memory and storage markets are highly competitive which could materially and adversely affect our business, results of operations, or financial condition.

The semiconductor memory and storage markets, in particular, are generally highly competitive and companies may use aggressive pricing to obtain market share.

Our suppliers may seek to increase wafer output, improve yields, and reduce die size, which could result in significant increases in worldwide supply and downward pressure on prices.

Increases in worldwide supply of semiconductor memory and storage also result from fabrication capacity expansions, either by way of new facilities, increased capacity utilization, or reallocation of other semiconductor production to semiconductor memory and storage production.

Increases in worldwide supply of semiconductor memory and storage could lead to declines in average selling prices and a decrease in short-term and/or long-term demand resulting in industry oversupply and could materially adversely affect our business, results of operations, or financial condition.

Our operating results may be adversely impacted by worldwide economic and political uncertainties and specific conditions in the markets we address and in which we or our strategic partners or competitors do business, including the cyclical nature of and volatility in the memory market and semiconductor industry.

in worldwide supply of semiconductor memory and storage could lead to declines in average selling prices and a decrease in short-term and/or long-term demand resulting in industry oversupply and could materially adversely affect our business, results of operations, or financial condition.

Changes in domestic and global economic and political conditions, including the recently enacted changes in international tariff policies, make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and these conditions have caused and could continue to cause United States and foreign businesses to slow or decrease spending on our products and the products we resell.

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In addition, these markets have in the past experienced significant downturns, often connected with or in anticipation of maturing product cycles, reductions in technology spending and declines in general economic conditions.

During these downturns, product demand diminishes, production capacity exceeds demand, inventory levels increase and average sale prices decline, all of which would materially adversely

impact our business and operating results.

During these downturns, product demand diminishes, production capacity exceeds demand, inventory levels increase and average sale prices decline, all of which would materially adversely impact our business and operating results.

In addition, because many of our costs and operating expenses are relatively fixed, if we are unable to control our expenses adequately in response to reduced product demand and sales, our gross margin and cash flows would be negatively impacted.

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We do not have long-term agreements with any of our customers.

Instead, our product sales are made primarily pursuant to stand-alone purchase orders that we often receive no more than two weeks in advance of the desired delivery date and that may be rescheduled or cancelled on relatively short notice.

relatively short notice.

The short-term nature of the commitments by many of our customers and our customers’ ability to cancel or defer purchase orders for any reason reduces our backlog of firm orders and our ability to accurately estimate future customer requirements for our products or the component products we resell.

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In addition, the start-up costs associated with implementing new manufacturing technologies, methods and processes, including the purchase of new equipment and any resulting manufacturing delays and inefficiencies, could negatively impact our results of operations.

disease or illness, international tariffs or trade wars, such as the recent tariffs between the United States and PRC, or cyber-attacks, or catastrophic weather events, labor disruptions, or we may need to add manufacturing capacity to satisfy any increased demand for our products.

Additionally, we could experience prolonged disruption, material malfunction, interruption or other loss of operations at any manufacturing facility for any number of reasons, including the occurrence of a contagious disease or illness, international tariffs or trade wars, such as the recent tariffs between the United States and PRC, cyber-attacks, catastrophic weather events, labor disruptions, or conflicts or disagreements between the PRC and Taiwan or the PRC and the United States, or we may need to add manufacturing capacity to satisfy any increased demand for our products.

Under these circumstances, our manufacturing costs may increase, decrease our gross margin, decrease our control over manufacturing processes, limit our ability to satisfy customer requirements and demand and delay new product development until we secure additional manufacturing capacity, which we may not be able to do in a timely manner, on acceptable terms or at all.

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The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

We depend on third parties to design and manufacture components for our products and the component products we resell, which exposes us to risks.

We also depend on third parties to design and manufacture components for our products and the component products we resell, which exposes us to risks.

Components that are used in our products, as well as all of the component products we resell, are designed and manufactured by third parties.

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If one or more of our design or manufacturing partners experiences a manufacturing disruption for any number of factors including labor disruptions, catastrophic weather events, political instability, acts of terror or war, and military hostilities in multiple geographies (including the ongoing conflict in Ukraine and recent events in Israel and Palestine), and the occurrence of a contagious disease or illness, fails to dedicate adequate resources to the production of the components we use in our products or the components we resell, experiences financial instability or otherwise fails to perform its obligations to us in a timely manner or at satisfactory quality levels, our ability to bring products to market or deliver products to our customers, as well as our reputation, could suffer and our business and prospects could be materially harmed.

In the event of any failure by our component manufacturers, we may have no readily available alternative source of supply for these components, since, in our experience, the lead time needed to establish a relationship with a new design or manufacturing partner is substantial, and the time for our OEM customers to re-qualify our products with components from a new vendor is also significant.

In the event of any failure by our component

manufacturers, we may have no readily available alternative source of supply for these components, since, in our experience, the lead time needed to establish a relationship with a new design or manufacturing partner is substantial, and the time for our OEM customers to re-qualify our products with components from a new vendor is also significant.

Additionally, even if an alternative manufacturer is available, we may not be able to engage the manufacturer on acceptable terms, which could result in increased costs, timing requirements or other adverse changes.

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However, these component manufacturers may not be able to achieve these tasks.

Additionally, our manufacturing partners may not continue to devote adequate resources to produce our products or the component products we resell or continue to advance the process design technologies on which the customer qualifications of our products are

Any of these risks could limit our ability to meet customer demand and materially adversely affect our business and operating results.

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As is common in our industry, we have a number of agreements in which we have agreed to defend, indemnify and hold harmless our customers and suppliers from damages and costs that may arise from the infringement by our products of third-party patents, trademarks or other proprietary rights, claims based on our negligence or willful misconduct and indemnities involving the accuracy of representations and warranties.

We also have indemnification obligations (i) to our director and officers to the maximum extent permitted under the laws of the State of Delaware, (ii) pertaining to obligations, demands, claims, relating to liabilities claimed or asserted by other parties in connection with transactions contemplated by applicable investment or loan documents, and (iii) arising from other claims related to certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities or may face other claims arising from our use of the applicable premises.

We also have indemnification obligations (i) to our director and officers to the maximum extent permitted

under the laws of the State of Delaware, (ii) pertaining to obligations, demands, claims, relating to liabilities claimed or asserted by other parties in connection with transactions contemplated by applicable investment or loan documents, and (iii) arising from other claims related to certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities or may face other claims arising from our use of the applicable premises.

The scope of these indemnities varies, the duration of these indemnities is often perpetual after execution of an agreement, and the maximum potential amount of future payments we could be required to make under these indemnities is often unlimited.

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We believe our future success will be dependent on our ability to retain the services of these key employees, develop their successors and properly manage the transition of their roles should departures occur.

The loss of these key employees or their inability to continue to provide their services could delay the development and introduction of new or enhanced products or technologies, negatively impact our ability to sell our existing products, limit our ability to pursue our other business goals and strategies and otherwise

harm our business.

We do not have employment agreements with any of our employees other than Chun K.

Hong, our President, Chief Executive Officer and sole member of our board of directors, and as a result most of our employees may terminate their employment with us at any time.

Hong, our President, Chief Executive Officer and a member of our board of directors, and as a result most of our employees may terminate their employment with us at any time.

Our future success also depends on our ability to attract, retain and motivate highly skilled engineering, manufacturing and other technical and sales personnel.

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Further, our reliance on independent sales representatives subjects us to risks, as we have very little control over their activities and they are generally free to market and sell other, potentially competing, products.

As a result, these independent sales representatives could devote insufficient time or resources to marketing our products or

the component products we resell, could market them in an ineffective manner or could otherwise be unsuccessful in selling adequate quantities of these products.

As a result, these independent sales representatives could devote insufficient time or resources to marketing our products or the component products we resell, could market them in an ineffective manner or could otherwise be unsuccessful in selling adequate quantities of these products.

Our operations could be disrupted by power outages, natural disasters, cyber-attacks or other factors.

Due to the geographic concentration of our manufacturing operations in our PRC facility and our small number of suppliers, including SK hynix for many of the components and/or products we resell, a disruption resulting from equipment or power failures, quality control issues, human errors, government intervention, cyber-attacks or natural disasters, including earthquakes and floods, could require significant costs to repair and could interrupt or interfere with product manufacture and sale and cause significant delays in product shipments, which could harm our customer relationships, financial condition and results of operations.

Due to the geographic concentration of our manufacturing operations in our PRC facility and our small number of suppliers, including SK hynix for many of the components and/or products we resell, a disruption resulting from equipment or power failures, quality control issues, human errors, government intervention, cyber-attacks, geopolitical changes or natural disasters, including earthquakes and floods, could require significant costs to repair and could interrupt or interfere with product manufacture and sale and cause significant delays in product shipments, which could harm our customer relationships, financial condition and results of operations.

In the past, our PRC facility has suffered water damage as a result of heavy rains and floods, which forced us to temporarily halt manufacturing at the facility while necessary repairs or equipment replacements were made.

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We store key data about our business, including certain customer data, information about our and our customers’ intellectual property and other proprietary information, on our global information technology systems.

Any material failure or malfunctioning of our global information technology systems, errors or misuse by system users, cyber-attacks, difficulties migrating stand-alone systems to our centralized systems or inadequacy of the systems in addressing the needs of our operations could disrupt our ability to timely and accurately manufacture and ship products, divert management’s and key employees’ attention from other business matters and involve significant costs and other resources to repair or otherwise resolve, any of which could have a material adverse effect on our business, financial condition and results of operations.

which could have a material adverse effect on our business, financial condition and results of operations.

Any such event could also materially disrupt our ability to timely and accurately process, report and evaluate key operating metrics and key components of our results of operations, financial position and cash flows and could adversely affect our ability to complete other important business processes, such as maintenance of our disclosure controls and procedures and internal control over financial reporting.

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Because the techniques used to gain unauthorized access to information technology systems evolve frequently and often are not recognized until successful, we may be unable to anticipate these techniques or implement adequate preventative measures in a timely manner.

The growth of AI capabilities may also lead to new or more sophisticated methods of attack that are not anticipated.

Any security breach could require significant resources to correct, if correction is possible, and could result in a material disruption to our business, misappropriation or loss of data, loss of confidence in us by our customers, damage to our reputation, and legal liability.

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or foreign data protection laws that are applicable to us, including the California Consumer Privacy Act (“CCPA”) which went into effect in January 2020.

Further, the California Privacy Rights Act (“CPRA”), which became effective in 2023 and amends the CCPA, creates additional obligations with respect to processing and storing personal information, as well as establishes a new regulatory authority to enforce

the CCPA and CPRA which is in the process of drafting and implementing new regulations.

Unlike other state privacy laws, the CCPA also regulates personal information collected in a business to business and in human resources contexts which impacts our business operations.

Further, there continues to be some uncertainly about how certain provisions of the CCPA will be interpreted and how the law will be enforced.

These laws, the regulations, and their interpretation and application are constantly evolving, and they could be interpreted and applied in a manner that is inconsistent with our current practices or they could become more stringent over time.

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The appropriate level of protection measures is required to be taken for each respective category of data.

Also in the PRC, the Personal Information Protection Law, which took effect on November 1, 2023, introduced stringer protection measures for processing personal information.

Also in the PRC, the Personal Information Protection Law, which took effect on November 1, 2023, introduced stringent protection measures for processing personal information.

We may be required to make further adjustments to our business practices to comply with the data security and data protection laws in the PRC, and such regulations may interfere with intended business activities, or cause us to incur additional costs.

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To manage future growth effectively, including any expansion of volume in our manufacturing facility in the PRC, we must be able to improve and expand our systems and controls, which we may not be able to do in a timely or cost-effective manner.

In addition, our management team has relatively limited experience managing a rapidly growing business.

addition, our management team has relatively limited experience managing a rapidly growing business.

As a result, they may not be able to manage any future growth we may experience.

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If any of these risks occur, we may not be able to realize the intended benefits of an acquisition or strategic transaction or relationship, and our operating results, financial condition and business prospects could be materially negatively affected.

Increased prices and inflation could negatively impact our margin performance and our financial results.

Increased prices and inflation or the effects of changes in international trade policies and the changing tariff environment could negatively impact our margin performance and our financial results.

Increased inflation, including rising prices for raw materials, parts and components, freight, packaging, labor and energy increases, the costs to manufacture and distribute our products, and we may be unable/are not always able to fully to pass these costs on to our customers.

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We may experience inflation in connection with the newly enacted and proposed international tariffs.

If inflation in these costs increases beyond our ability to control for them through measures such as implementing operating efficiencies, we may not be able to increase prices to sufficiently offset the effect of various cost increases without negatively impacting customer demand, thereby negatively impacting our margin performance and results of operations.

If inflation in these costs increases beyond our ability to control for them through measures such as implementing operating efficiencies, we may not be able

to increase prices to sufficiently offset the effect of various cost increases without negatively impacting customer demand, thereby negatively impacting our margin performance and results of operations.

Geopolitical risks associated with the ongoing conflicts between Russia and Ukraine and Israel and Palestine continue to contribute to heightened market volatility and uncertainty, which could negatively impact our business, financial condition, and results of operations.

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We are exposed to additional business, regulatory, political, operational, financial and economic risks related to our international sales and operations.

We sell products to foreign corporations and deliver products to facilities located in foreign countries.

We sell products to foreign corporations and deliver products to facilities located in foreign countries, and, as of the quarter ended June 28, 2025, a majority of our net sales were to customers located in the PRC.

To facilitate this process and to meet the long-term projected demand for our products, we utilize manufacturing facilities in the PRC, Taiwan and Korea where we produce our products.

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While we are not presently aware of any direct impacts of these restrictions on our supply chain, the UFLPA may have an adverse effect on global supply chains which could adversely impact our business and results of operations.

management team, particularly if we encounter operational, legal or cultural difficulties or disruptions at our PRC, Taiwan and Korea facilities.

Additionally, our management has limited experience creating or overseeing foreign operations generally, and the ongoing administration and operation of our PRC facility may require substantial amounts of time and attention by our management team, particularly if we encounter operational, legal or cultural difficulties or disruptions at our PRC, Taiwan and Korea facilities.

In addition, under its current leadership, the government of the PRC has been pursuing economic reform policies, including by encouraging foreign trade and investment.

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The PRC has retaliated with increased tariffs on U.S.

Some of these additional tariffs have been implemented and others have been conditionally paused, and it is reasonably possible that new or additional tariffs will be periodically announced given the current global trade environment.

A significant portion of our sales are to customers located in the PRC.

Depending upon their implementation and duration of these tariffs, as well as our ability to mitigate their impact, these tariffs and any other future regulatory actions implemented on a broader range of products or raw materials could materially affect our business, including in the form of increased cost of goods sold, decreased margins, increased pricing for customers and consumers, reduced sales of our products, and disruptions in our supply chain.

The volatility and unpredictability of international trade policies and conditions add further complexity to our operations, making it challenging to forecast and plan effectively.

We are not able to predict future trade policy of the United States (including any potential changes in U.S.

trade policy if there is a change in administration) or of any foreign countries in which we operate or purchase goods, or the terms of any trade agreements or their impact on our business.

The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence or threat of a trade war or other governmental action related to tariffs or trade agreements or policies, has the potential to

adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S.

economies, which in turn could have a material adverse effect on our business, operating results and financial condition.

Moreover, the PRC’s legislature has adopted a national security law to substantially change the way Hong Kong has been governed since the territory was handed over by the United Kingdom to the PRC in 1997.

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Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic.

We cannot assure you that the PRC, Taiwan and Korea regulatory authorities will not determine that our

manufacturing facilities in PRC, Taiwan and Korea do not violate the local laws, rules or regulations.

We cannot assure you that the PRC, Taiwan and Korea regulatory authorities will not determine that our manufacturing facilities in PRC, Taiwan and Korea do not violate the local laws, rules or regulations.

The PRC, Taiwan and Korea have broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance.

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As a result, RMB may not be freely convertible into other currencies at all times.

If the PRC government institutes changes in currency conversion procedures or imposes additional restrictions on currency conversion, our operations and our operating results could be negatively impacted.

PRC government institutes changes in currency conversion procedures or imposes additional restrictions on currency conversion, our operations and our operating results could be negatively impacted.

In addition, PRC law imposes restrictions on the movement of funds outside of the PRC.

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In particular, some of our manufacturing processes may require us to handle and dispose of hazardous materials from time to time.

For example, in the past our manufacturing operations have

used lead-based solder in the assembly of our products.

For example, in the past our manufacturing operations have used lead-based solder in the assembly of our products.

Today, we use lead-free soldering technologies in our manufacturing processes, as this is required for products entering the European Union.

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It is difficult and costly to manage the requirements of every authority having jurisdiction over our various activities and to comply with their varying standards.

Additionally, any changes to existing regulations or adoption of new regulations may result in significant additional expense to us or our customers.

Additionally, any changes to existing regulations

or adoption of new regulations may result in significant additional expense to us or our customers.

Further, our failure to comply with any applicable laws and regulations may result in a variety of administrative, civil and criminal enforcement measures, including monetary penalties or imposition of sanctions or other corrective requirements, any of which could materially adversely affect our reputation and our business.

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We have identified a material weakness in our internal control over financial reporting.

While we have taken steps to remediate this material weakness, if we are unable to remediate the material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business.

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 our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As of March 29, 2025,

management concluded that our internal control over financial reporting was ineffective due to one material weakness.

The identified material weakness, as of March 29, 2025, relates to the lack of an independent board and audit committee and ineffective risk assessment and monitoring controls.

While the control deficiency identified did not result in any identified misstatements, a reasonable possibility exists that a material misstatement to the annual or interim condensed consolidated financial statements and disclosures will not be prevented or detected on a timely basis.

In an effort to address the identified material weakness and enhance our internal controls, our finance and accounting personnel are continuing to follow all of the same procedures that they undertook in preparation for independent audit committee meetings on a quarterly and annual basis.

Our Chief Executive Officer and sole director will oversee these processes and review materials prepared by the finance and accounting staff as well as our independent registered public accounting firm on a quarterly and annual basis.

If our measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting occur in the future, we may not be able to timely or accurately report our results of operations or maintain effective disclosure controls and procedures.

If we are unable to report financial information timely or accurately, or to maintain effective disclosure controls and procedures, we could be required to restate our financial statements and be subject to, among other things, regulatory or enforcement actions, securities litigation, limitations on our ability to access capital markets, debt rating agency downgrades or rating withdrawals, or loss in confidence of our investors, any one of which could adversely affect the valuation of our common stock and our business prospects.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.

As of June 28, 2025, our management concluded there was a material weakness in our internal controls due to the lack of an independent board and audit committee until the recent board appointments and audit committee’s reformation in June 2025.

As a result of these circumstances and the related lack of independent committee oversight of the financial reporting process, our principal executive officer and our principal financial officer concluded that our internal control over financial reporting was not effective as of June 28, 2025 based on the criteria set forth by COSO.

In June 2025, we formed an Audit Committee and appointed two additional independent members of our Board of Directors.

This Audit Committee now assists in evaluating our system of internal controls and provides oversight of our financial reporting process.

Despite the reformation of our Audit Committee and these recent appointments, the material weakness discussed above cannot be considered remediated until these controls operate for a sufficient period and management has concluded, through testing, that our internal controls are operating effectively.

We can give no assurance that the measures we have taken and

plan to take in the future will remediate the material weakness identified or that any additional material weaknesses will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.

Risks Related to Intellectual Property and Litigation

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We may not have sufficient working capital to fund our planned operations, and, as a result, we may need to raise additional capital in the future, which may not be available when needed, on acceptable terms or at all.

To support our activities in the near term, we expect to rely on cash generated from our business, the cash received under the Strategic Product and License Agreement (the “Strategic Agreement”) entered into on April 5, 2021 with SK hynix, proceeds from issuances of debt and equity securities, proceeds from our registered offering with certain investors, the equity financing available under the March 2025 Purchase Agreement entered into with Lincoln Park on March 13, 2025, and borrowing availability under our credit facility with SVB.

Our estimates of our operating revenues and expenses and working capital requirements could be incorrect, and we may use our cash resources faster than we anticipate.

To support our activities in the near term, we expect to rely on cash generated from our business, the cash received under the Strategic Agreement entered into on April 5, 2021 with SK hynix, proceeds from issuances of debt and equity securities, proceeds from our registered offerings with certain investors, the equity financing available under the March 2025 Purchase Agreement entered into with Lincoln Park on March 13, 2025, and borrowing availability under our credit facility with SVB.

Taking into account our planned activities and sources of capital, we believe we have sufficient cash resources to satisfy our capital needs for at least the next 12 months.

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● the amount and timing of vendor payments and the collection of receivables, among other factors affecting our working capital;

● whether our current customers continue purchasing our products;

● changing projected inventory needs and estimates;

● our receipt of cash proceeds from the exercise of outstanding stock options to acquire our common stock;

● the results of ongoing litigation and legal proceedings;

● the nature and timing of acquisitions or other strategic transactions or relationships in which we engage, if any;

● changes in international trade policies;

● the costs associated with the continued operation, and any future growth, of our business.

As of June 28, 2025, we do not have any additional borrowing availability under the revolving line of credit with SVB.

Pursuant to the June 2025 Purchase Agreement, we may not effect any sale under the March 2025 Purchase Agreement for a period of 90 days from the closing of the June 2025 Offering.

Further, pursuant to the terms of the June 2025 Purchase Agreement, we have agreed for a period of 90 days from the closing of the June 2025 Offering not to (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or Common Stock Equivalents (as defined in the June 2025 Purchase Agreement) or (ii) file any registration statement or amendment or supplement to any registration statement.

We also have a limited number of authorized shares of our common stock and may not be able to increase the number of authorized shares of our common stock to meet future equity financing

See “Risk Factors — Risks Related to Capitalization and Financial Markets — The inability to increase the authorized capital stock could impede our ability to pursue our strategic objectives, provide equity incentives to engage key talent and negatively impact stockholder value.

” Until we can generate sufficient revenues to finance our cash requirements from our operations, which we may never do, we may need to increase our liquidity and capital resources by one or more measures, which may include, among others, reducing operating expenses, restructuring our balance sheet by negotiating with creditors and vendors, entering into strategic partnerships or alliances, raising additional financing through the issuance of debt, equity or convertible securities or pursuing alternative sources of capital, such as through asset or technology sales or licenses or other alternative financing arrangements.

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Moreover, we may incur substantial costs in pursuing any future capital-raising transactions, including investment banking, legal and accounting fees, printing and distribution expenses and other similar costs, which would reduce the benefit of the capital received from the transaction.

Our inability to increase the authorized number of shares of our capital stock could impede our ability to pursue our strategic objectives, complete equity-based funding activities, provide equity incentives to engage key talent and negatively impact stockholder value.

Pursuant to a Definitive Proxy Statement on Schedule 14A, filed with the SEC on July 24, 2025, an annual meeting of the stockholders will be held to address certain proposals, including a proposal to increase the authorized number of shares of our common stock from 450,000,000 to 675,000,000.

We believe a greater number of authorized shares of our common stock would provide us with flexibility to issue shares of common stock for any proper corporate purpose, which could include strategic investments, strategic partnership arrangements, awards or grants under employee equity incentive plans, equity-based financing to support the execution of our business strategy, or other general purposes.

The availability of additional authorized shares of our common stock would enhance the business and financial flexibility and allow us to execute any of these transactions in the future without the possible delays and significant expense of obtaining additional shareholder approval, unless otherwise required by our governing documents, or applicable laws or regulatory requirements.

We currently have no specific understandings, arrangements or agreements with respect to any future acquisitions that would require us to issue a material amount of new shares of our common stock.

If we are unsuccessful in securing stockholder approval to increase the authorized shares of our common stock, we may not be able to take timely advantage of market conditions or favorable financing or acquisition opportunities that could help us grow and create value for stockholders.

This could impede our ability to

pursue our strategic objectives and restrict the equity incentives available to attract, retain and motivate key talent, which could negatively impact the value of our stock, our business prospects and results of operations.

The price and trading volume of our common stock has and may continue to fluctuate significantly in reaction to real or perceived developments in our business.

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● general political, economic and market conditions, including volatility or uncertainty in these conditions;

● short selling activities;

● third-party manipulation;

● the other risk factors described in this report.

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The balance held in these accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) standard deposit insurance limit or similar government guarantee schemes.

If a financial institution in which we hold such funds fails or is subject to significant adverse conditions in the financial or credit markets, we could be subject to a risk of loss of all or a portion of such uninsured funds or be subject to

a delay in accessing all or a portion of such uninsured funds.

Any such loss or lack of access to these funds could adversely impact our short-term liquidity and ability to meet our obligations.

In addition, if any parties with whom we conduct business are unable to access funds held in uninsured deposit accounts or pursuant to lending arrangements with a financial institution that is placed in receivership by the FDIC, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.

There is a limited market for our common shares, and the trading price of our common shares is subject to volatility.

As our shares of common stock are not listed on a national securities exchange, it may be more difficult for you to dispose of your shares and they may be less liquid when compared to securities that are listed on a national securities exchange.

Netlist common shares began trading on the Over-the-Counter market in October 2018, following the decision to move trading of our common stock from the Nasdaq Capital Market.

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To the extent our common stock is subject to the penny stock regulations, the market liquidity for the shares will be adversely affected.

Future issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to decline.

Future issuances of our common stock or rights to purchase our common stock, including pursuant to our outstanding warrants, equity incentive plans or the March 2025 Purchase Agreement, would result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to decline.

We have historically funded our operations in large part with proceeds from equity and convertible debt financings, and we expect to continue to do so in the future, including through the issuance of up to $75 million in shares of common stock pursuant to the March 2025 Purchase Agreement.

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Sales of our common stock, or the perception that such sales could occur, could cause the market price of our stock to drop significantly, regardless of the state of our business.

As of March 29, 2025, there were 274,573,383 shares of our common stock outstanding.

As of June 28, 2025, there were 292,451,926 shares of our common stock outstanding.

In addition, 2,746,451 shares of our common stock are subject to outstanding stock options, 3,085,505 shares of our common stock are subject to outstanding unvested restricted stock units, and 59,033,196 shares of our common stock are subject to outstanding warrants.

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All outstanding shares of our common stock and stock issuable pursuant to the March 2025 Purchase Agreement are eligible for sale in the public market under applicable federal securities laws, subject in certain cases to the requirements of Rule 144 under the Securities Act of 1933, as amended, and shares issued upon the exercise or conversion of outstanding stock options, or warrants may also be eligible for sale in the public market, to the extent permitted by Rule 144 or other applicable securities laws and the provisions of the applicable stock option, and warrant agreements.

these shares are sold, or if it is perceived that they may be sold, in the public market, the trading price of our common stock could fall.

As the sole director, Chun K.

Hong has significant control over all corporate decisions that may not be in the best interest of our other stockholders.

Our President, Chief Executive Officer and the sole member of our board of directors, Chun K.

Hong, has the ability to exert substantial control over all matters requiring approval by our stockholders and our board of directors, including the election and removal of directors, any proposed merger, consolidation or sale of all or substantially all of our assets and other significant corporate transactions.

This concentration of control could be disadvantageous to other stockholders with interests different from those of Mr.

If these shares are sold, or if it is perceived that they may be sold, in the public market, the trading price of our common stock could fall.

Anti-takeover provisions under our charter documents and Delaware law, as well as our rights agreement, could delay or prevent a change of control and could also limit the market price of our common stock.

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In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock.

Further, we adopted a rights agreement that would, under certain specified circumstances and for so long as the rights issued under the rights agreement are outstanding, give the holders of our common stock the right to acquire additional shares of our capital stock, which would make it more difficult for a third party to acquire a significant percentage of our outstanding capital stock or attempt a hostile takeover of our Company.

party to acquire a significant percentage of our outstanding capital stock or attempt a hostile takeover of our Company.

These and other provisions in our certificate of incorporation and bylaws and of Delaware law, as well as the existence of our rights agreement, could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our board of directors, including a merger, tender offer, proxy contest or other change of control transaction involving our Company.

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We do not currently intend to pay dividends on our common stock, and any return to investors is expected to result, if at all, only from potential increases in the price of our common stock.

We intend to use all available funds to finance our operations.

We intend to use all available funds to finance our operations and pursuant to the 2023 SVB Credit Agreement, we are required to obtain prior written consent from SVB prior to payment of any dividends.

Accordingly, while all decisions about dividends are at the discretion of our board of directors, we have never declared or paid cash dividends on our capital stock in the past, and we have no intention of declaring or paying any such dividends in the foreseeable future.

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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-Q

Item 1A. Risk Factors