PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all information you should consider. Please read this entire Proxy Statement carefully before voting.
In this Proxy Statement, the terms the “Company,” “Netlist,” “we,” “us,” and “our” refer to Netlist, Inc. Information presented in this Proxy Statement is based on Netlist’s fiscal calendar.
2023 Annual Meeting of Stockholders
Wednesday, August 16, 2023
10:00 a.m., Pacific Time
UCI Research Park
5301 California
Cypress Room
Irvine, California, 92617
Only stockholders of record at the close of business on June 20, 2023 are entitled to receive notice of and to vote at our 2023 Annual Meeting of Stockholders (“Annual Meeting”).
On or about June 30, 2023, we began sending this proxy statement, the attached Notice of Annual Meeting of Stockholders and the enclosed proxy card to all stockholders entitled to vote at the Annual Meeting.
Although not part of this proxy statement, we are also sending, along with this proxy statement, our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”), which includes our financial statements for the fiscal year ended December 31, 2022 (“Fiscal 2022”).
Voting Matters and Vote Recommendations
Whether or not you plan to attend the Annual Meeting in person, please date, sign and return the enclosed proxy card in the enclosed postage prepaid envelope or submit your vote via the Internet or by telephone as promptly as possible, to ensure your shares will be voted at the Annual Meeting. Unless you instruct otherwise, any vote submitted by proxy that is not revoked will be voted at the Annual Meeting as follows:
| 1. | To elect one director to our board of directors (the “Board” or “Board of Directors”) to serve until our 2024 Annual Meeting of Stockholders and until his successor is duly elected or appointed and qualified or until his earlier resignation or removal; |
| 2. | To ratify the appointment of KMJ Corbin & Company LLP (“KMJ”) as our independent registered public accounting firm for our fiscal year ending December 30, 2023 (“Fiscal 2023”); and |
| 3. | With regard to all other matters as may properly come before the Annual Meeting, in accordance with the recommendation of the Board of Directors or, if no such recommendation is given, in the best judgment of the individuals named as proxies on the enclosed proxy card. |
Our Board of Directors recommends a vote “FOR” the director nominee in Proposal No. 1 and “FOR” the independent registered public accounting firm in Proposal No. 2.
To obtain directions to attend the Annual Meeting and vote in person, or if you have questions, please call Investor Relations at (212) 739-6729 or email nlst@theplunkettgroup.com. If you need assistance voting your shares, please call 1-800-652-VOTE.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, August 16, 2023.
Our Notice of Annual Meeting of Stockholders, Proxy Statement, form of proxy card and 2022 Annual Report are available at www.edocumentview.com/NLST. These proxy materials were first sent or made available to stockholders on June 30, 2023.
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
2023 Annual Meeting of Stockholders
Wednesday, August 16, 2023
10:00 a.m., Pacific Time
UCI Research Park
5301 California
Cypress Room
Irvine, California, 92617
The Record Date for the Annual Meeting is June 20, 2023. Only stockholders of record at the close of business on this date are entitled to vote at the Annual Meeting and any adjournment or postponement thereof.
You are invited to vote on the proposals described in this Proxy Statement because you were a Netlist shareholder on the Record Date.
Netlist is soliciting proxies for use at the Annual Meeting, including any postponements or adjournments.
Attending and Voting at the Annual Meeting
If you plan to attend the Annual Meeting and wish to vote in person, you will be given a ballot for voting at the Annual Meeting. If you elect to attend the Annual Meeting, you may be asked to present valid picture identification, such as a driver’s license or passport, to gain admission. Additionally, if you hold your shares in street name and you decide to attend and vote at the Annual Meeting in person, you will need to bring a copy of a brokerage statement reflecting your ownership of our common stock as of the Record Date, as well as a legal proxy issued in your name from your broker or other nominee that holds your shares on your behalf. Contact your broker or other nominee to obtain these items.
We encourage you to submit your proxy or voting instructions in advance of the Annual Meeting to ensure that your vote will be counted. Submitting your proxy before the Annual Meeting will not affect your right to vote in person if you decide to attend the Annual Meeting, but your presence at the Annual Meeting will not in itself revoke a submitted proxy. In order to do so, you must cast a written ballot at the Annual Meeting and your proxy will be revoked as to the matters on which the ballot is cast.
Proxy Materials
These materials were first sent or made available to stockholders on June 30, 2023, and include:
| ● | The Notice of Internet Availability of Proxy Materials |
| ● | This Proxy Statement for the Annual Meeting |
If you requested printed versions by mail, these printed proxy materials also include the proxy card or voting instruction form for the Annual Meeting. If you would like to receive our proxy materials for future annual meetings of our stockholders by e-mail or by mail, you may submit such consent by writing to the attention of our Corporate Secretary at the address of our principal executive offices or by following the instructions on the proxy card.
Eliminating Duplicate Mailings
We have adopted a procedure called “householding.” Under this procedure, we may deliver one copy of the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the 2022 Annual Report to stockholders residing at the same address, unless stockholders have notified us of their desire to receive multiple copies. This procedure reduces the environmental impact of our annual meetings and reduces our printing and mailing costs.
Once you have received notice from your broker or other nominee that it will be householding communications to your address, householding will continue until you are notified otherwise or until you provide contrary instructions. If you are a stockholder residing at the same address to which one copy of the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the 2022 Annual Report was delivered, upon receipt of a written or oral request submitted to us, by writing to our Corporate Secretary at the address of our principal executive offices or by calling Investor Relations at (212) 739-6729, we will deliver promptly, at no charge, a separate copy of all or any such materials.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of the Notice of Internet Availability of Proxy Materials, our Proxy Statement and the 2022 Annual Report, please notify your broker or other nominee or direct your written or oral request to us as described above.
Additionally, stockholders who receive multiple copies of the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the 2022 Annual Report at their shared address and would like to request householding of these materials for future annual meetings of our stockholders should contact their brokers or other nominees or direct a written or oral request to us as described above.
Quorum for the Annual Meeting
Holders of a majority of the outstanding shares of stock entitled to vote at the Annual Meeting must be present at the Annual Meeting in person or by proxy for the transaction of business. This is called a quorum. Abstentions and broker non-votes, which are explained under “Effect of Not Providing Voting Instructions; Broker Non-Votes” below, as well as shares as to which authority to vote on any proposal is withheld, are each counted as present at the Annual Meeting for purposes of determining a quorum.
Proxy Solicitation Costs
We will pay the costs of preparing, assembling, printing and mailing to our stockholders this Proxy Statement and our other proxy materials for the Annual Meeting, as well as all other costs of soliciting proxies for the Annual Meeting. We may request brokers or other nominees to solicit their customers who beneficially own shares of our common stock that are held of record by the broker or other nominee, and we will reimburse these brokers or other nominees for their reasonable out-of-pocket expenses in making these solicitations. Solicitations will be made primarily through the delivery of this Proxy Statement and our other proxy materials for the Annual Meeting to our stockholders and the availability of these materials on the Internet, and may be supplemented by telephone, facsimile, e-mail and personal solicitation by our directors, officers and other employees. No additional compensation will be paid to our directors, officers or other employees for these activities, and we have not engaged special employees for the specific purpose of undertaking these activities.
Netlist’s Fiscal Year
Netlist’s fiscal year is the 52 or 53 week period that ends on the Saturday closest to December 31. Netlist’s 2022 and 2021 fiscal years included 52 weeks and ended on December 31, 2022 and January 1, 2022, respectively. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in January or December and the associated quarters, months and periods of those fiscal years.
Voting Matters
Each share of our common stock has one vote on each matter. Only “stockholders of record” as of the close of business on the Record Date are entitled to vote at the Annual Meeting. At the close of business on June 20, 2023, there were 241,306,750 outstanding shares of our common stock. In addition to shareholders of record of our common stock, “beneficial owners of shares held in street name” as of the Record Date can vote using the methods described below.
How to Cast or Revoke Your Vote
Stockholders of Record
If you are a stockholder of record, meaning that at the close of business on the Record Date your shares were registered directly in your name with Computershare Trust Company, N.A., our transfer agent, then you may vote your shares either by taking any one of the following actions:
| ● | Attending the Annual Meeting and voting in person; |
| ● | Submitting a proxy by mail, which can be done by completing and signing the accompanying proxy card and mailing it in the envelope provided; or |
| ● | Submitting a proxy via the Internet or by telephone, which can be done by following the instructions on the accompanying proxy card. |
Votes cast in person or by a mailed proxy must be received no later than the close of voting at the Annual Meeting to be counted, and votes cast by telephone or the Internet must be received by 1:00 a.m., Pacific Time, on August 16, 2023 to be counted. If the Annual Meeting is postponed or adjourned, a properly submitted proxy will remain valid and will be voted at the postponed or adjourned meeting unless it is revoked before it is actually voted, as described below.
If you are a stockholder of record and submit your proxy, you may revoke it at any time before it is used by taking any of the following actions (any of which will automatically revoke an earlier-provided proxy):
| ● | Voting in person at the Annual Meeting; |
| ● | Delivering a later-dated proxy to us at the address of our principal executive offices; or |
| ● | Delivering a written notice of revocation to our Corporate Secretary at the address of our principal executive offices. |
To be effective, any later-dated proxy must be received by the applicable deadline for the voting method used, and any written notice of revocation must be received no later than the close of voting at the Annual Meeting. Only your latest-dated vote that is received by the deadline applicable to the voting method used will be counted.
Beneficial Owners of Shares Held in Street Name
If you are a beneficial owner of shares of our common stock that are held in street name, then you will receive a notice from your broker or other nominee that includes instructions on how to vote your shares. Your broker or other nominee may allow you to deliver your vote via the Internet or by telephone. In addition, if you are a beneficial owner, you will receive instructions from your broker or other nominee regarding how to revoke a previously submitted proxy or otherwise change your voting instructions. As a result, beneficial owners should follow the instructions provided by their brokers or other nominees in order to vote their shares at the Annual Meeting.
If you hold your shares in street name and you wish to attend or vote in person at the Annual Meeting, then you must bring certain items with you in order to gain admission to and vote at the Annual Meeting, as described under “Attending and Voting at the Annual Meeting” above.
Effect of Not Providing Voting Instructions; Broker Non-Votes
Stockholders of Record. You are a “stockholder of record” if your shares are registered directly in your name with Computershare Trust Company, N.A., our transfer agent. If you were a stockholder of record at the close of business on the Record Date and you submit a valid proxy that does not provide voting instructions with respect to your shares, all shares represented by your proxy will be voted in accordance with the recommendation of our Board on each proposal to be presented at the Annual Meeting, as described in this Proxy Statement.
Beneficial Owners of Shares Held in Street Name. You are a beneficial owner of shares held in “street name” if your shares are not held of record in your name but are held by a broker or other nominee on your behalf as the beneficial
MANAGEMENT AND CORPORATE GOVERNANCE
Board Responsibilities and Meeting Attendance
The primary responsibilities of the Board of Directors are to provide oversight of the business and affairs of the Company, determination of the Company’s mission, our long-term strategy and objectives, and management of the Company’s risks. These functions of the Board have been carried out by the full Board and, when delegated, by the committees thereof.
In order to proactively address the economic effects of the recent coronavirus, our Board evaluated various cost-cutting measures, including review of the Board and committee structure, operations and compensation of the members thereof. As a result of its evaluation and because we are no longer subject to the Nasdaq Stock Market LLC rules, the Board determined it to be in the best interests of its stockholders to reduce the number of directors serving on the Board to one director and to dissolve all committees of the Board effective immediately after our 2020 Annual Meeting of Stockholders on August 7, 2020. We will continue to be an SEC filer and as such, will continue to have our financial results reviewed quarterly and audited annually by our independent registered public accounting firm.
Our Board of Directors held two meetings during Fiscal 2022 and our sole Director attended these meetings. Other matters requiring approval by our sole Director were handled via a unanimous written consent. We do not have a policy requiring that directors attend our annual meetings of stockholders and our sole Director did not attend our 2022 Annual Meeting of Stockholders.
Our Board of Directors
The sole member of the Board is elected annually at a meeting of our stockholders and serves 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 establishes, among other things, such executive officer’s term of office.
Director Independence and Board Committees
Our common stock was listed on The Nasdaq Capital Market (“Nasdaq”) until September 27, 2018. On September 27, 2018, our common stock began trading on the OTCQX® Best Market and on August 11, 2020, our common stock was transferred to the OTCBB®. OTCBB® does not require that a majority of the board of directors be independent. Because our Board is comprised of only our sole Director, Mr. Hong, who also serves as our Chief Executive Officer, our Board is not considered independent, and we do not maintain any standing Board committees. As the sole Director, Mr. Hong performs oversight functions that would otherwise be delegated to committees of the Board, including the following:
| ● | oversee our financial reporting process, including discussing with our independent registered public accounting firm the scope and plans for all annual audits and discussing with management and our independent registered public accounting firm the adequacy and effectiveness of our accounting and financial controls, systems to monitor and manage business risk, and legal and ethical compliance programs; |
| ● | review with management and our independent registered public accounting firm all of our audited and interim financial statements; |
| ● | review and approve in advance any transactions by us with related parties; |
| ● | appoint, terminate, replace, ensure the independence of and oversee our independent registered public accounting firm; |
| ● | pre-approve all audit services and, subject to a “de minimus” exception, all permissible non-audit services to be performed by the independent registered public accounting firm; |
Stockholder Nominations of Directors
Our Amended and Restated Bylaws, as amended (“Bylaws”) provide that any stockholder who is entitled to vote at an annual meeting of our stockholders and who complies with the notice requirements set forth in our Bylaws may nominate persons for election to our Board of Directors at the applicable annual meeting. These notice requirements provide that a stockholder desiring to nominate a director to our Board of Directors must do so by written notice delivered to or mailed and received by our Corporate Secretary at the address of our principal executive offices within a specified time period before the annual meeting of stockholders at which the director nominee is to be up for election. See “Stockholder Proposals or Director Nominations for 2024 Annual Meeting of Stockholders” in Other Matters for information about these time periods in connection with our 2024 Annual Meeting of Stockholders. The stockholder’s written notice must include, among other things as specified in our Bylaws, certain personal identification information about the stockholder and its recommended director nominee(s); the principal occupation or employment of the recommended director nominee(s); the class and number of shares of the Company that are beneficially owned by the stockholder and its recommended director nominee(s); and any other information relating to the recommended director nominee(s) that is required to be disclosed in solicitations for proxies for the election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the “Exchange Act”). A stockholder who complies in full with all of the notice provisions set forth in our Bylaws will be permitted to present the director nominee at the applicable annual meeting of our stockholders, but will not be entitled to have the nominee included in our proxy statement for such meeting unless an applicable SEC rule requires that we include the director nominee in our proxy statement. Please refer to the full text of our Bylaws for additional information about these requirements. A copy of our Bylaws may be obtained by writing to our Corporate Secretary at the address of our principal executive offices or may be accessed on our website, www.netlist.com, or through our SEC filings available at www.sec.gov.
Corporate Governance Guidelines
We withdrew our Corporate Governance Guidelines effective as of the 2020 Annual Meeting of Stockholders. We do not have a hedging policy for our employees, officers and directors at this time.
Compensation Committee Interlocks and Insider Participation
The Board of Directors does not have a compensation committee. It is the view of the Board of Directors that the Board need not have a compensation committee because the Company’s sole Director, who also serves as our Chief Executive Officer, has sufficient information, experience and alignment with stockholder interests to perform the functions relative to executive compensation.
In addition, the Board has from time to time engaged the services of outside consultants to assist in making decisions regarding the establishment of Netlist’s compensation philosophy and programs. In Fiscal 2022, our Board did not engage the services of any compensation consultants.
Board Leadership Structure and Role in Risk Oversight
Both the sole Director of the Board and the Chief Executive Officer positions are currently held by Mr. Hong. As one of our founders and due to his involvement in our day-to-day operations, he possesses in-depth knowledge of the issues, opportunities and challenges facing the Company. The Board believes Mr. Hong’s combined role, along with his ownership in the Company, increases accountability and promotes strategy development and execution, all of which our Board believes are essential to the effective governance of our Company. The sole Director is responsible for risk oversight of our Company.
Stockholder Communications with the Board of Directors
Any stockholder who desires to contact our Board of Directors or any member of our Board of Directors may do so by writing to our Board of Directors, care of our Corporate Secretary, at the address of our principal executive offices. Copies of any such written communication received by the Corporate Secretary will be provided to our full Board of Directors or the identified Board member(s), unless the communication is considered, in the reasonable judgment of the Corporate Secretary, to be improper for submission to the intended recipient(s).
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion and analysis of compensation arrangements of our named executive officers for Fiscal 2022 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations, expectations and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from current or planned programs as summarized in this discussion.
The following discussion and analysis relates to the compensation arrangements for Fiscal 2022 of (i) our principal executive officer, (ii) our principal financial officer and (iii) the most highly compensated person, other than our principal executive officer and principal financial officer, who was serving as an executive officer at the end of Fiscal 2022 (our “named executive officers”). We had no other executive officers serving at the end of Fiscal 2022. Our named executive officers for Fiscal 2022 were:
| | | | |
Name | | Age | | Position(s) |
Chun K. Hong | | 62 | | President, Chief Executive Officer and Sole Director |
Gail Sasaki | | 66 | | Executive Vice President, Chief Financial Officer and Corporate Secretary |
Compensation Philosophy
Our compensation programs are intended to attract and retain employees with skills necessary to enable us to achieve our financial and strategic objectives and to motivate them through the use of appropriate incentives tied to our performance and market value to achieve those objectives. We recognize that the goals of employee attraction, retention and motivation must be balanced against the necessity of controlling compensation expense, with the ultimate objective of building shareholder value. With respect to the compensation of our named executive officers, our President, Chief Executive Officer and Sole Director, who has the responsibility to design a compensation program and set levels of compensation that attempt to achieve the optimal balance between employee attraction, retention and motivation, adjusted the executive officers’ compensation for Fiscal 2022.
Key Factors in Determining Executive Compensation
Role of Compensation Consultants
Our sole Director has from time to time engaged the services of outside consultants to assist in making decisions regarding the establishment of Netlist’s compensation philosophy and programs. In Fiscal 2022, our Board did not engage the services of any compensation consultants.
Role of Executive Officers in Compensation Decisions
Our sole Director has overall responsibility for the compensation of our Chief Executive Officer and Chief Financial Officer. Our sole Director considered the executive officers’ responsibilities, performance, compensation, and the compensation program’s ability to attract, retain and motivate executive talent. These considerations reflected compensation levels that our sole Director believed were qualitatively commensurate with executive officers’ individual qualifications, experience, responsibility level, functional role, knowledge, skills and individual performance, as well as Netlist’s performance.
Role of Stockholder Say-on-Pay Votes
At each annual meeting held every three years since, including most recently in 2022, we held triennial stockholder advisory “say-on-pay” votes on the compensation of our named executive officers for the immediately preceding fiscal years. At the 2022 Annual Meeting of stockholders (the “2022 Annual Meeting”), our stockholders overwhelmingly approved the compensation of our named executive officers, with over 85% of our stockholders present and entitled to vote at the meeting voting in favor of our compensation policies for our named executive officers. Given this result, and following consideration of them, the former compensation committee had decided to retain our overall approach to executive compensation while continuing to evaluate our practices frequently, including in response to future say-on-pay votes. Moreover, we are required to hold a vote at least every six years regarding how often to hold a stockholder advisory vote on the compensation of our named executive officers. We held our most recent such vote at
the 2022 Annual Meeting, at which our stockholders indicated a preference for a triennial vote. Consequently, the Board determined that we will hold a triennial stockholder advisory vote on the compensation of our named executive officers until they consider the results of our next say-on-pay frequency vote, which will be held at the 2025 Annual Meeting of stockholders.
Current Elements of Named Executive Officer Compensation
Overview and Fiscal Year 2022 Highlights
Our current executive compensation program generally consists of base salary, annual cash incentive compensation, equity-based incentives and other benefits. We combine these elements in order to formulate compensation packages that provide competitive pay and align the interests of our named executive officers with long-term stockholder interests by rewarding the achievement of financial, operational and strategic objectives. In Fiscal 2022, our full-year accomplishments under our executive leadership included the following:
| ● | Total net product sales of $161.6 million, representing an increase of $59.3 million compared to the prior year; and |
| ● | Total product gross profit of $11.9 million, representing an increase of $3.0 million compared to the prior year. |
Base Salary
The following table sets forth information regarding the annualized base salary rates at the end of Fiscal 2022 for our named executive officers:
| | |
| | Fiscal Year 2022 |
Name | | Base Salary ($) |
Chun K. Hong | | 450,000 |
Gail Sasaki | | 275,000 |
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 our named executive officers both 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. In addition, the vesting features of our equity awards contribute to executive retention because these features provide an incentive to our named executive officers to remain in our employment during the scheduled vesting periods or until the achievement of the applicable performance milestones, which are expected to be achieved over the medium- to long-term. 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.
Bonus
Our bonuses are discretionary with substantial weight given to financial performance during the year and the enhancement of long-term stockholder value.
Perquisites
Generally, we do not provide any perquisites or other personal benefits to our named executive officers except in certain limited circumstances and as provided in employment agreements.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
The table below provides information about the compensation awarded to, earned by or paid to each of the following individuals, which we refer to collectively as our “named executive officers,” for Fiscal 2022, Fiscal 2021, and our fiscal year ended January 2, 2021 (“Fiscal 2020”); each person serving at any time during Fiscal 2022 as our principal executive officer (our President and Chief Executive Officer, Mr. Hong); and our only other executive officer serving as such at any time during Fiscal 2022 (our Executive Vice President, Chief Financial Officer and Corporate Secretary, Ms. Sasaki).
Summary Compensation Table
The table below provides information about the compensation awarded to, earned by or paid to each of our named executive officers for each of the last three fiscal years.
| | | | | | | | | | | | | | |
| | | | Base | | | | Stock | | Option | | All Other | | |
Name and Principal Position | | Year | | Salary($) | | Bonus($) | | Awards($)(1) | | Awards($)(2) | | Compensation($)(3) | | Total($) |
Chun K. Hong(4) | | 2022 | | 450,000 | | — | | 2,696,000 | | — | | 58,888 | | 3,204,888 |
President, Chief Executive | | 2021 | | 450,000 | | 665,000 | | — | | 627,060 | | 58,215 | | 1,800,275 |
Officer and Sole Director | | 2020 | | 450,000 | | 180,000 | | 94,290 | | — | | 62,092 | | 786,382 |
Gail Sasaki | | 2022 | | 275,000 | | — | | 674,000 | | — | | 3,855 | | 952,855 |
Executive Vice President, Chief Financial Officer | | 2021 | | 275,000 | | 205,000 | | 72,400 | | — | | 25,007 | | 577,407 |
and Corporate Secretary | | 2020 | | 275,000 | | 103,125 | | 23,573 | | — | | 22,254 | | 423,952 |
(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) | Represents the grant date fair value of the option awards granted during the year calculated in accordance with ASC 718. The assumptions used in the calculations for these amounts are described in Note 1 — Summary of Significant Accounting Policies — Stock-Based Compensation and Note 9 — Benefit Plans to our consolidated financial statements included in our Annual Report on Form 10-K for Fiscal 2022. The material terms of each stock option award granted in 2022 are described below under “Outstanding Equity Awards at Fiscal Year End.” |
(3) | For 2022, the amount consists of (a) for Mr. Hong, $11,860 for automobile rental payments, $2,414 for other vehicle-related costs, $35,083 for a country club membership, $826 for a health club membership, and $8,705 for income tax and estate planning costs incurred on Mr. Hong’s behalf and (b) for Ms. Sasaki, $855 for a health club membership and $3,000 for matching contribution for a savings plan that qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code (the “Code”). |
For 2021, the amount consists of (a) for Mr. Hong, $10,816 for automobile rental payments, $7,527 for other vehicle-related costs, $26,027 for a country club membership, $5,480 for a health club membership, and $8,365 for income tax and estate planning costs incurred on Mr. Hong’s behalf and (b) for Ms. Sasaki, $22,007 for a health club membership and $3,000 for matching contribution for a savings plan that qualifies as a defined contribution plan under Section 401(k) of the Code.
For 2020, the amount consists of (a) for Mr. Hong, $10,936 for automobile rental payments, $7,509 for other vehicle-related costs, $24,600 for a country club membership, $14,769 for a health club membership, and $4,278 for income tax and estate planning costs incurred on Mr. Hong’s behalf, and (b) for Ms. Sasaki, the amount is for weekly fitness training.
(4) | Mr. Hong received no additional compensation for his service as a director. |
EQUITY COMPENSATION PLAN INFORMATION
We currently maintain one equity incentive plan, the Equity Plan. The Equity Plan initially became effective in 2006, and was amended and restated in 2010, 2016 and 2019. Our Board and our stockholders have previously approved the Equity Plan, including all amendments and restatements of such plan. The following table provides information as of December 31, 2022, about compensation plans under which our equity securities are authorized for issuance:
| | | | | | | |
| | Equity Compensation Plan Information | |
| | | | | | (c) Number of | |
| | (a) Number of | | | | securities | |
| | securities to be | | (b) Weighted-average | | remaining available | |
| | issued upon | | exercise price of | | for future equity | |
| | exercise of | | outstanding options, | | compensation plans | |
| | outstanding options, | | warrants and | | (excluding securities | |
Plan Category | | warrants and rights | | rights($)(1) | | reflected in column (a)) | |
Equity compensation plans approved by security holders | | 7,523,367 | (2) | 0.93 | | 240,982 | (3) |
Equity compensation plans not approved by security holders | | 784,833 | (4) | 4.71 | | — | |
Total | | 8,308,200 | | 1.28 | | 240,982 | |
(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 Equity Plan: 4,866,239 shares subject to outstanding stock options and 2,657,128 shares subject to outstanding RSUs. |
(3) | Subject to certain adjustments, as of December 31, 2022, we were authorized to issue a maximum of 17,405,566 shares of our common stock pursuant to awards granted under the Equity Plan. |
(4) | Consists of 784,833 RSUs outstanding as of December 31, 2022. |
Share Reserve and Share Limits
Each January 1, the number of shares reserved for issuance under the Equity Plan will continue to be automatically increased by the lesser of (i) 2.5% of the shares then issued and outstanding, or (ii) 1,200,000 shares. As of June 20, 2023, there were 18,605,566 total shares reserved for issuance under the Equity Plan, including 7,580,586 shares subject to outstanding equity awards granted under this plan.
Any shares subject to an award or portion of an award which is forfeited, canceled or expires shall be deemed not to have been issued for purposes of determining the maximum aggregate number of shares which may be issued under the Equity Plan. Shares that have been issued under the Equity Plan pursuant to an award generally shall not be returned to the reserve under the Equity Plan and shall not become available for future issuance under the Equity Plan, except that if unvested shares are forfeited, or repurchased by us at the lower of their original purchase price or their fair market value at the time of repurchase, such shares shall become available for future grant under the Equity Plan. Shares tendered or withheld in payment of an option exercise price shall not be returned to or become available for future issuance under the Equity Plan.
The maximum number of shares with respect to which options and stock appreciation rights may be granted to a participant during a calendar year is 1,000,000 shares (with an additional 1,000,000 shares of stock in connection with the participant’s initial employment). For awards of restricted stock, RSUs, and performance units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares granted to a participant during a calendar year is 1,000,000 shares.
Administration
The Equity Plan is administered, with respect to grants of awards to employees, directors, officers, and consultants, by the administrator, which is defined as the Board or one or more committees designated by the Board. With respect to
grants to officers and directors, the committee shall be constituted in such a manner as to satisfy applicable laws, including Rule 16b-3 under the Exchange Act and Section 162(m) of the Code. The Equity Plan was administered by the compensation committee of our Board until August 2020 and thereafter by the Board.
Eligibility
Persons eligible to receive awards under the Equity Plan include directors, officers and other employees of and consultants and advisors to our Company or any of our subsidiaries. As of June 20, 2023, approximately 100 officers and other employees of our Company and our subsidiaries (including all of the named executive officers) are eligible to receive awards under the Equity Plan.
Vesting
Although the Equity Plan provides the administrator with the discretion to determine the vesting schedule of any awards granted under the Equity Plan, stock option awards granted to employees under the Equity Plan typically vest over four years in either 16 equal quarterly installments or one installment of 25% of the shares subject to the award on the one-year anniversary of the grant date and 12 equal quarterly installments thereafter, subject to continued service on each vesting date. RSUs granted for employees and consultants under the Equity Plan typically vest semi-annually from the grant date over a four-year term, subject to continued service on each vesting date.
Adjustments Upon Corporate Transactions
The Equity Plan provides that, in the event of an “acquisition,” as defined in the Equity Plan, the administrator may provide for the termination of outstanding awards under the Equity Plan, unless awards are assumed or replaced by the successor entity in the acquisition. Except as provided in an individual award agreement, for the portion of each award that is not assumed or replaced by the successor entity, such portion of the award may be vested and become exercisable in full or be released from any repurchase or forfeiture rights before the effective date of the acquisition, provided that the participant’s continuous service has not terminated before such date.
Amendment, Suspension and Termination
The Equity Plan will be for a term of 10 years from its 2016 amendment and restatement, unless sooner terminated by the Board. The Board may at any time amend, suspend or terminate the Equity Plan, subject to obtaining stockholder approval for any amendment to the extent necessary to comply with applicable laws and rules.
U.S. Federal Income Tax Consequences Relating to Awards Granted under the Equity Plan
The following summary of the federal income tax consequences of the awards granted under the Equity Plan does not purport to be complete, and does not discuss non-U.S., state or local tax consequences or additional guidance that is expected to be issued by the Treasury Department under Section 409A of the Code.
The grant of a non-qualified stock option under the Equity Plan will not result in any federal income tax consequences to the option holder or to the Company. Upon exercise of a non-qualified stock option, the option holder is subject to income taxes at the rate applicable to ordinary compensation income on the difference between the option exercise price and the fair market value of the shares on the date of exercise. This income is subject to withholding for federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the income recognized by the option holder, subject to possible limitations imposed by Section 162(m) of the Code and so long as the Company withholds the appropriate taxes with respect to such income (if required) and the option holder’s total compensation is deemed reasonable in amount. Any gain or loss on the option holder’s subsequent disposition of the shares of common stock will receive long or short-term capital gain or loss treatment, depending on whether the shares are held for more than one year following exercise. The Company does not receive a tax deduction for any such gain.
The grant of an incentive stock option under the Equity Plan will not result in any federal income tax consequences to the option holder or to the Company. An option holder recognizes no federal taxable income upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and the Company receives no deduction at the time of exercise. In the event of a disposition of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the option holder has held the shares of common stock. If the option
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Related Party Transactions
Except as described below and except for employment arrangements and compensation for Board service, which are described in “Director Compensation,” since December 30, 2018, 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 completed fiscal year, 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 (formally, 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 2022, Mr. P. K. Hong earned a cash salary of $182,500. He received $34,067 for weekly fitness training and $3,000 for matching contribution for a savings plan that qualifies as a defined contribution plan under Section 401(k) of the Code. He was also granted 200,000 shares of RSUs with the grant date fair value of $674,000 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 directors and executive officers. In general, these agreements require us to indemnify each such individual to the fullest extent permitted under 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.
Policies and Procedures for Review and Approval of Related Person Transactions
The sole Director is responsible for reviewing and approving in advance any transactions with a related party. To the extent any such transactions arise between the sole Director and our Company, we will seek stockholder approval.
Proposal No. 1 — Election of Director
Our Board of Directors has nominated Chun K. Hong for re-election as our director at the Annual Meeting. He is currently the sole member of our Board of Directors. If he is elected, he will serve until the 2024 Annual Meeting of Stockholders and until his successor is duly elected or appointed and qualified or until his earlier resignation or removal.
The director nominee named in this Proxy Statement has consented to being named as a nominee and has agreed to serve as a director, if elected. The persons named as proxies in the accompanying proxy card will vote the shares covered by any properly submitted proxy card for the election of each of the director nominees named in this Proxy Statement, unless the proxy card indicates otherwise. The accompanying proxy card contains a discretionary grant of authority with respect to this proposal, so that if one or more of the named director nominees becomes unable or unwilling to serve, the persons named as proxies may vote for the election of any substitute nominees that our Board of Directors may propose. However, the persons named as proxies may not vote for a greater number of persons than the total number of directors to be elected at the Annual Meeting, which is one.
There is no arrangement or understanding between our director or director nominee and any other person or persons pursuant to which any such individual was or is to be selected as a director or director nominee of the Company. There are no family relationships between our director, director nominee or executive officers.
Director Nominee
Chun K. Hong, 62, is one of the founders of Netlist and has been our President and Chief Executive Officer 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 a sole member of the Board of Directors in August 2020. Prior to his tenure at Netlist, Mr. Hong had 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 Chief Executive Officer, Mr. Hong brings to the Board extensive knowledge of our organization and our market.
Unless authority to vote for the nominee is withheld, the shares represented by the enclosed proxy will be voted FOR the election of Chun K. Hong as director. In the event that the nominee becomes unable or unwilling to serve, the shares represented by the enclosed proxy will be voted for the election of such other person as the Board of Directors may recommend in such nominee’s place. We have no reason to believe that the nominee will be unable or unwilling to serve as a director.
A plurality of the votes cast “FOR” the nominee at the Annual Meeting is required to elect the nominee as a director.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF CHUN K. HONG AS DIRECTOR, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
Proposal No. 2 — Ratification of Appointment of Independent Registered Public Accounting Firm
Our sole Director has appointed KMJ as our independent registered public accounting firm for Fiscal 2023. Representatives of KMJ are expected to be available in person or via teleconference at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire to do so.
In appointing KMJ as our independent registered public accounting firm, our sole Director considered KMJ’s independence with respect to the services to be performed and other factors our sole Director believed to be relevant and in the best interests of our stockholders. Stockholder ratification of the appointment of our independent registered public accounting firm is not required by our Bylaws or otherwise; however, as a matter of good corporate governance, our sole Director has decided to submit the appointment to stockholders for ratification. If our stockholders fail to ratify the appointment, our sole Director will reconsider whether or not to retain the firm. Even if the appointment is ratified, our sole Director, in his discretion, may direct the appointment of a different independent registered public accounting firm at any time if it determines such a change would be in the best interests of the Company and its stockholders. In addition, if KMJ declines to act or otherwise becomes incapable of acting as our independent registered public accounting firm or if KMJ’s engagement is otherwise discontinued for any reason, our sole Director will appoint another firm to serve as our independent registered public accounting firm for Fiscal 2023.
Fees Paid to Independent Registered Public Accounting Firm
The following table presents the aggregate fees billed to us by KMJ for the indicated services performed during Fiscal 2022 and Fiscal 2021:
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| | Fiscal 2022($) | | Fiscal 2021($) |
Audit Fees(1) | | $ | 218,750 | | $ | 202,650 |
Audit-Related Fees(2) | | | — | | | — |
Tax Fees(2) | | | — | | | — |
All Other Fees(2) | | | — | | | — |
Total Fees | | $ | 218,750 | | $ | 202,650 |
(1) | Audit fees consist of fees 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 of the Sarbanes-Oxley Act of 2002. 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 did not bill to us any audit-related fees, tax fees or other fees in Fiscal 2022 or Fiscal 2021. |
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 in Fiscal 2022.
In the event the stockholders do not ratify the appointment of KMJ as our independent registered public accounting firm, the Board will reconsider its appointment.
The affirmative vote of a majority of the votes cast affirmatively or negatively at the Annual Meeting is required to ratify the appointment of the independent registered public accounting firm.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KMJ CORBIN & COMPANY LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN
FAVOR OF SUCH RATIFICATION UNLESS A STOCKHOLDER INDICATES OTHERWISE ON THE PROXY.
OTHER MATTERS
Stockholder Proposals or Director Nominations for 2024 Annual Meeting of Stockholders
The submission deadline for stockholder proposals to be included in our proxy materials for our 2024 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act is March 2, 2024 if the meeting is held between July 17, 2024 and September 15, 2024 or, if the meeting is not held within these dates, a reasonable time before we begin to print and send our proxy materials for the meeting. All such proposals must be in writing and sent to our Corporate Secretary at the address of our principal executive offices and must otherwise comply with Rule 14a-8 in all respects.
In accordance with our Bylaws, any stockholder who intends to submit one or more director nominees or any other proposal for consideration at our 2024 Annual Meeting of Stockholders outside the processes of Rule 14a-8 must, in addition to complying with all other requirements set forth in our Bylaws, (i) in the case of a stockholder seeking inclusion of a director nominee or other proposal in our proxy materials, deliver written notice to us between January 2, 2024 and March 2, 2024 if the meeting is held between July 17, 2024 and September 15, 2024 or, if the meeting is not held within these dates, no later than the 90th day before the date of the meeting or the 15th day after our first public announcement of the date of the meeting, whichever is later; provided, however, that a stockholder who complies with these notice procedures for a director nominee will be permitted to present the nominee at the meeting but will not be entitled to have the nominee included in our proxy materials in the absence of an applicable SEC rule requiring us to do so, and (ii) in the case of a stockholder not seeking inclusion of a director nominee or other proposal in our proxy materials, deliver written notice to us not less than the 90th day before the date of the meeting. Any such notice must be delivered or mailed and received by our Corporate Secretary at the address of our principal executive offices and must contain all of the information required by our Bylaws. We will not entertain any director nominations or other proposal at the Annual Meeting or at our 2024 Annual Meeting of Stockholders that do not meet the requirements set forth in our Bylaws. Please refer to the full text of our Bylaws for additional information about these requirements. A copy of our Bylaws may be obtained by writing to our Corporate Secretary at the address of our principal executive offices or may be accessed on our website, www.netlist.com, or through our SEC filings available at www.sec.gov. Further, if we comply and the stockholder does not comply with the requirements of Rule 14a-4(c)(2) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such stockholder proposal or nomination.
Other Business at the Annual Meeting
Our Board of Directors does not know of any other matters to be presented at the Annual Meeting. If other matters do properly come before the Annual Meeting, the individuals we have designated as proxies for the Annual Meeting, who are named in the accompanying proxy card, will have discretionary authority to vote for or against any such matter. It is the intention of such individuals to vote on such matters in accordance with the recommendation of the Board of Directors or, if no such recommendation is given, in their best judgment.
More Information About the Company and the Annual Meeting
For more information about the Company, please see our Annual Report, which accompanies this Proxy Statement and is available on our website, www.netlist.com. Our 2022 Annual Report was filed with the SEC on February 28, 2023 and is also available on our website or through our SEC filings available at www.sec.gov.
Pay vs Performance Disclosure - USD ($)
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12 Months Ended |
Dec. 31, 2022 |
Jan. 01, 2022 |
Jan. 02, 2021 |
Pay vs Performance Disclosure [Table] |
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Pay vs Performance [Table Text Block] |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary | | | | | Value of Initial Fixed | | | | | Company | | | | | | | | | Compensation | | Compensation | | $100 Investment Based On: | | | | | Selected | | | Summary | | | | | Table | | Actually | | | | | Peer Group | | | | | Measure: | | | Compensation | | Compensation | | Total for | | Paid to | | Total | | Total | | Net Income | | Market | | | Table Total | | Actually | | Non-PEO | | Non-PEO | | Shareholder | | Shareholder | | (Loss) | | Capitalization | Year | | for PEO | | Paid to PEO | | NEO | | NEO | | Return | | Return | | (in thousands) | | (in millions) | (a) | | (b)(1) | | (c)(2) | | (d)(3) | | (e)(4) | | (f)(5) | | (g)(6) | | (h)(7) | | (i)(8) | 2022 | | $ | 3,204,888 | | $ | (3,634,867) | | $ | 952,855 | | $ | (555,004) | | $ | 361 | | $ | 119 | | $ | (33,370) | | $ | 261 | 2021 | | $ | 1,800,275 | | $ | 10,716,000 | | $ | 577,407 | | $ | 2,687,160 | | $ | 2,024 | | $ | 147 | | $ | 4,831 | | $ | 1,451 | 2020 | | $ | 786,382 | | $ | 1,006,619 | | $ | 423,952 | | $ | 516,069 | | $ | 189 | | $ | 116 | | $ | (7,268) | | $ | 113 |
(1) The dollar amounts reported in column (b) represent the amounts of total compensation reported for Mr. Hong, our PEO, for each corresponding fiscal year in the “Total” column of the Summary Compensation Table. (2) The dollar amounts reported in column (c) represent the amount of compensation actually paid (“CAP”) to Mr. Hong as computed in accordance with Item 402(v) of Regulation S-K, for each covered fiscal year. The dollar amounts do not reflect the actual amounts of compensation earned or received by or paid to Mr. Hong during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Hong’s total compensation for each covered fiscal year to determine CAP. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in | | | | | | | | | | | | | | | | | | | | | Fair Value as | | | | | | | | | | | | | | | | | | | | | of Vesting Date | | | | | | | | | | | | | | | | | | | | | of Stock Awards | | | | | | | | | | | | | | | | | | | | | and Option Awards | | | | | | | | | | | | Fair Value at | | Change in | | Fair Value at | | Granted in | | | | | | | | | | | | Fiscal Year End | | Fair Value of | | Vesting of Stock | | Prior Fiscal Years | | | | | | | | | Deduction of | | of Outstanding and | | Outstanding and | | Awards and Option | | For Which | | | | | | Summary | | Stock Awards | | Unvested Stock | | Unvested Stock Awards | | Awards Granted | | Applicable Vesting | | | | | | Compensation | | and Option | | Awards and Option | | and Option Awards | | in Fiscal Year | | Conditions Were | | | | | | Table Total | | Awards | | Awards Granted | | Granted in Prior | | That Vested | | Satisfied During | | Compensation | Year | | for PEO | | for PEO | | in Fiscal Year | | Fiscal Years | | During Fiscal Year | | Fiscal Year | | Actually Paid | 2022 | | $ | 3,204,888 | | $ | (2,696,000) | | $ | 805,000 | | $ | (4,006,402) | | $ | 315,000 | | $ | (1,257,353) | | $ | (3,634,867) | 2021 | | $ | 1,800,275 | | $ | (627,060) | | $ | 5,062,532 | | $ | 2,724,328 | | $ | 886,629 | | $ | 869,296 | | $ | 10,716,000 | 2020 | | $ | 786,382 | | $ | (94,290) | | $ | 158,288 | | $ | 136,678 | | $ | 17,246 | | $ | 2,315 | | $ | 1,006,619 |
(3) The dollar amounts reported in column (d) represent the amounts of total compensation reported for our only Non-PEO NEO, Ms. Sasaki, for each covered fiscal year in the “Total” column of the Summary Compensation Table for each applicable year. (4) The dollar amounts reported in column (e) represent the amounts of CAP to Ms. Sasaki, as computed in accordance with Item 402(v) of Regulation S-K, for each covered fiscal year. The dollar amounts do not reflect the actual amount of compensation earned or received by or paid to Ms. Sasaki during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Ms. Sasaki’s total compensation for each covered fiscal year to determine CAP. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in | | | | | | | | | | | | | | | | | | | | | Fair Value as | | | | | | | | | | | | | | | | | | | | | of Vesting Date | | | | | | | | | | | | | | | | | | | | | of Stock Awards | | | | | | | | | | | | | | | | | | | | | and Option Awards | | | | | | | | | | | | Fair Value at | | Change in | | Fair Value at | | Granted in | | | | | | | | | Deduction of | | Fiscal Year End | | Fair Value of | | Vesting of Stock | | Prior Fiscal Years | | | | | | Summary | | Stock Awards | | of Outstanding and | | Outstanding and | | Awards and Option | | For Which | | | | | | Compensation | | and Option | | Unvested Stock | | Unvested Stock Awards | | Awards Granted | | Applicable Vesting | | | | | | Table Total | | Awards | | Awards and Option | | and Option Awards | | in Fiscal Year | | Conditions Were | | | | | | for Non-PEO | | for Non-PEO | | Awards Granted | | Granted in Prior | | That Vested | | Satisfied During | | Compensation | Year | | NEO | | NEO | | in Fiscal Year | | Fiscal Years | | During Fiscal Year | | Fiscal Year | | Actually Paid | 2022 | | $ | 952,855 | | $ | (674,000) | | $ | 201,250 | | $ | (753,093) | | $ | 78,750 | | $ | (360,766) | | $ | (555,004) | 2021 | | $ | 577,407 | | $ | (72,400) | | $ | 564,375 | | $ | 1,176,884 | | $ | 86,750 | | $ | 354,144 | | $ | 2,687,160 | 2020 | | $ | 423,952 | | $ | (23,573) | | $ | 39,572 | | $ | 74,335 | | $ | 4,312 | | $ | (2,529) | | $ | 516,069 |
(5) The cumulative Company total shareholder return (“TSR”) amounts reported in column (f) are calculated by dividing the sum of the cumulative amount of dividends for the period starting at the market close on the last trading day before the Company’s earliest fiscal year in the table through and including the end of the fiscal year for which the TSR amount is being calculated (the “measurement period”), assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. The comparison assumes $100 was invested in the Company for the measurement period. Historical stock performance is not necessarily indicative of future stock performance. (6) The cumulative Peer Group TSR amounts reported in column (g) utilizes the S&P 500 Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our 2022 Annual Report. The comparison assumes $100 was invested in the S&P 500 Index for the measurement period. Historical stock performance is not necessarily indicative of future stock performance. (7) The dollar amounts reported in column (h) represent the amounts of net income (loss), in thousands, reflected in our audited financial statements for each covered fiscal year. (8) While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, we determined that market capitalization at each fiscal year-end, as reported in column (i), to be the most important financial performance measure (that is not otherwise required to be disclosed in the table) used to link the Company’s performance to CAP to our PEO and Non-PEO NEO, which we believe is a strong driver in determining the Company’s performance. The Company’s market capitalization is calculated as the product of (i) the total number of outstanding shares of the Company’s voting and non-voting common stock held by non-affiliates of the Company as of the close of market on the last trading day of the Company’s completed fiscal year and (ii) the last reported sales price of the Company’s common stock as of the close of market on such trading day, as reported on the OTCQB® marketplace.
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Company Selected Measure Name |
market capitalization
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Named Executive Officers, Footnote [Text Block] |
(1) The dollar amounts reported in column (b) represent the amounts of total compensation reported for Mr. Hong, our PEO, for each corresponding fiscal year in the “Total” column of the Summary Compensation Table. (3) The dollar amounts reported in column (d) represent the amounts of total compensation reported for our only Non-PEO NEO, Ms. Sasaki, for each covered fiscal year in the “Total” column of the Summary Compensation Table for each applicable year.
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Peer Group Issuers, Footnote [Text Block] |
(6) The cumulative Peer Group TSR amounts reported in column (g) utilizes the S&P 500 Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our 2022 Annual Report. The comparison assumes $100 was invested in the S&P 500 Index for the measurement period. Historical stock performance is not necessarily indicative of future stock performance.
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PEO Total Compensation Amount |
$ 3,204,888
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$ 1,800,275
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$ 786,382
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PEO Actually Paid Compensation Amount |
$ (3,634,867)
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10,716,000
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1,006,619
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Adjustment To PEO Compensation, Footnote [Text Block] |
(2) The dollar amounts reported in column (c) represent the amount of compensation actually paid (“CAP”) to Mr. Hong as computed in accordance with Item 402(v) of Regulation S-K, for each covered fiscal year. The dollar amounts do not reflect the actual amounts of compensation earned or received by or paid to Mr. Hong during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Hong’s total compensation for each covered fiscal year to determine CAP. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in | | | | | | | | | | | | | | | | | | | | | Fair Value as | | | | | | | | | | | | | | | | | | | | | of Vesting Date | | | | | | | | | | | | | | | | | | | | | of Stock Awards | | | | | | | | | | | | | | | | | | | | | and Option Awards | | | | | | | | | | | | Fair Value at | | Change in | | Fair Value at | | Granted in | | | | | | | | | | | | Fiscal Year End | | Fair Value of | | Vesting of Stock | | Prior Fiscal Years | | | | | | | | | Deduction of | | of Outstanding and | | Outstanding and | | Awards and Option | | For Which | | | | | | Summary | | Stock Awards | | Unvested Stock | | Unvested Stock Awards | | Awards Granted | | Applicable Vesting | | | | | | Compensation | | and Option | | Awards and Option | | and Option Awards | | in Fiscal Year | | Conditions Were | | | | | | Table Total | | Awards | | Awards Granted | | Granted in Prior | | That Vested | | Satisfied During | | Compensation | Year | | for PEO | | for PEO | | in Fiscal Year | | Fiscal Years | | During Fiscal Year | | Fiscal Year | | Actually Paid | 2022 | | $ | 3,204,888 | | $ | (2,696,000) | | $ | 805,000 | | $ | (4,006,402) | | $ | 315,000 | | $ | (1,257,353) | | $ | (3,634,867) | 2021 | | $ | 1,800,275 | | $ | (627,060) | | $ | 5,062,532 | | $ | 2,724,328 | | $ | 886,629 | | $ | 869,296 | | $ | 10,716,000 | 2020 | | $ | 786,382 | | $ | (94,290) | | $ | 158,288 | | $ | 136,678 | | $ | 17,246 | | $ | 2,315 | | $ | 1,006,619 |
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Non-PEO NEO Average Total Compensation Amount |
$ 952,855
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577,407
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423,952
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Non-PEO NEO Average Compensation Actually Paid Amount |
$ (555,004)
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2,687,160
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516,069
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Adjustment to Non-PEO NEO Compensation Footnote [Text Block] |
(4) The dollar amounts reported in column (e) represent the amounts of CAP to Ms. Sasaki, as computed in accordance with Item 402(v) of Regulation S-K, for each covered fiscal year. The dollar amounts do not reflect the actual amount of compensation earned or received by or paid to Ms. Sasaki during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Ms. Sasaki’s total compensation for each covered fiscal year to determine CAP. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in | | | | | | | | | | | | | | | | | | | | | Fair Value as | | | | | | | | | | | | | | | | | | | | | of Vesting Date | | | | | | | | | | | | | | | | | | | | | of Stock Awards | | | | | | | | | | | | | | | | | | | | | and Option Awards | | | | | | | | | | | | Fair Value at | | Change in | | Fair Value at | | Granted in | | | | | | | | | Deduction of | | Fiscal Year End | | Fair Value of | | Vesting of Stock | | Prior Fiscal Years | | | | | | Summary | | Stock Awards | | of Outstanding and | | Outstanding and | | Awards and Option | | For Which | | | | | | Compensation | | and Option | | Unvested Stock | | Unvested Stock Awards | | Awards Granted | | Applicable Vesting | | | | | | Table Total | | Awards | | Awards and Option | | and Option Awards | | in Fiscal Year | | Conditions Were | | | | | | for Non-PEO | | for Non-PEO | | Awards Granted | | Granted in Prior | | That Vested | | Satisfied During | | Compensation | Year | | NEO | | NEO | | in Fiscal Year | | Fiscal Years | | During Fiscal Year | | Fiscal Year | | Actually Paid | 2022 | | $ | 952,855 | | $ | (674,000) | | $ | 201,250 | | $ | (753,093) | | $ | 78,750 | | $ | (360,766) | | $ | (555,004) | 2021 | | $ | 577,407 | | $ | (72,400) | | $ | 564,375 | | $ | 1,176,884 | | $ | 86,750 | | $ | 354,144 | | $ | 2,687,160 | 2020 | | $ | 423,952 | | $ | (23,573) | | $ | 39,572 | | $ | 74,335 | | $ | 4,312 | | $ | (2,529) | | $ | 516,069 |
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Compensation Actually Paid vs. Total Shareholder Return [Text Block] |
The following graph displays our CAP vs. Company TSR and Peer Group TSR over the three most recently completed fiscal years. As demonstrated by the following graph, the amount of CAP to our PEO and Non-PEO NEO is not directly correlated to Company TSR during the identified period.
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Compensation Actually Paid vs. Net Income [Text Block] |
The following graph displays our CAP vs. net income (loss) over the three most recently completed fiscal years.
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Compensation Actually Paid vs. Company Selected Measure [Text Block] |
The following graph displays our CAP vs. market capitalization over the three most recently completed fiscal years.
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Tabular List [Table Text Block] |
Financial Performance Measures The financial performance measures that the Company considers to have been the most important in linking CAP to our PEO and Non-PEO NEO, for Fiscal 2022, to the Company’s performance are as follows:
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Total Shareholder Return Amount |
$ 361
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2,024
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189
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Peer Group Total Shareholder Return Amount |
119
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147
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116
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Net Income (Loss) |
$ (33,370,000)
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$ 4,831,000
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$ (7,268,000)
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Company Selected Measure Amount |
261,000,000
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1,451,000,000
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113,000,000
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PEO Name |
Mr. Hong
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Measure [Axis]: 1 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Market Capitalization
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Non-GAAP Measure Description [Text Block] |
(8) While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, we determined that market capitalization at each fiscal year-end, as reported in column (i), to be the most important financial performance measure (that is not otherwise required to be disclosed in the table) used to link the Company’s performance to CAP to our PEO and Non-PEO NEO, which we believe is a strong driver in determining the Company’s performance. The Company’s market capitalization is calculated as the product of (i) the total number of outstanding shares of the Company’s voting and non-voting common stock held by non-affiliates of the Company as of the close of market on the last trading day of the Company’s completed fiscal year and (ii) the last reported sales price of the Company’s common stock as of the close of market on such trading day, as reported on the OTCQB® marketplace.
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Measure [Axis]: 2 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Revenue
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Measure [Axis]: 3 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
EBITDA
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PEO [Member] | Deduction of Stock Awards and Option Awards |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
$ (2,696,000)
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$ (627,060)
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$ (94,290)
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PEO [Member] | Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option Awards Granted in Fiscal Year |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
805,000
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5,062,532
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158,288
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PEO [Member] | Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards Granted in Prior Fiscal Years |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(4,006,402)
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2,724,328
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136,678
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PEO [Member] | Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That Vested During Fiscal Year |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
315,000
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886,629
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17,246
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PEO [Member] | Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(1,257,353)
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869,296
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2,315
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Non-PEO NEO [Member] | Deduction of Stock Awards and Option Awards |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(674,000)
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(72,400)
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(23,573)
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Non-PEO NEO [Member] | Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option Awards Granted in Fiscal Year |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
201,250
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564,375
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39,572
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Non-PEO NEO [Member] | Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards Granted in Prior Fiscal Years |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(753,093)
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1,176,884
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74,335
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Non-PEO NEO [Member] | Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That Vested During Fiscal Year |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
78,750
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86,750
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4,312
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Non-PEO NEO [Member] | Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
$ (360,766)
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$ 354,144
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$ (2,529)
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