Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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Table of Contents

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number: 001-33170

NETLIST, INC.

(Exact name of registrant as specified in its charter)


Delaware		95-4812784
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

111 Academy, Suite 100

Irvine, California

92617

(Address of principal executive offices)

(Zip Code)

(949) 435-0025

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 29, 2024, there were 271,844,373 outstanding shares of the registrant’s common stock.

Table of Contents

NETLIST, INC. AND SUBSIDIARIES

Form 10-Q

For the Quarter Ended September 28, 2024

TABLE OF CONTENTS

		Page
PART I. — FINANCIAL INFORMATION
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	29
PART II. — OTHER INFORMATION
Item 1	Legal Proceedings	31
Item 1A	Risk Factors	31
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3	Defaults Upon Senior Securities	60
Item 4	Mine Safety Disclosures	60
Item 5	Other Information	61
Item 6	Exhibits	62
SIGNATURES		63

Table of Contents

PART I. — FINANCIAL INFORMATION

Item 1.

Financial Statements

NETLIST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value) (Unaudited)



	September 28,		December 30,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	17,163	$	40,445
Restricted cash		12,600		12,400
Accounts receivable, net of allowances of $38 (2024) and $68 (2023)		1,660		4,562
Inventories		3,768		12,031
Prepaid expenses and other current assets		813		441
Total current assets		36,004		69,879
Property and equipment, net		605		770
Operating lease right-of-use assets		1,153		1,590
Other assets		473		560
Total assets	$	38,235	$	72,799

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	34,183	$	39,831
Revolving line of credit		1,563		3,844
Accrued payroll and related liabilities		1,352		1,346
Deferred revenue		5,914		—
Other current liabilities		2,645		2,569
Total current liabilities		45,657		47,590
Operating lease liabilities		787		1,213
Other liabilities		187		237
Total liabilities		46,631		49,040
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.001 par value—10,000 shares authorized: Series A preferred stock, $0.001 par value; 1,000 shares authorized; none issued and outstanding		—		—
Common stock, $0.001 par value—450,000 shares authorized; 258,191 (2024) and 253,593 (2023) shares issued and outstanding		259		254
Additional paid-in capital		316,319		307,328
Accumulated deficit		(324,974)		(283,823)
Total stockholders' equity (deficit)		(8,396)		23,759
Total liabilities and stockholders' equity (deficit)	$	38,235	$	72,799

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

NETLIST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended				Nine Months Ended
	September 28,		September 30,		September 28,		September 30,
	2024		2023		2024		2023
Net sales	$	40,186	$	16,725	$	112,828	$	35,772
Cost of sales		39,044		16,285		110,198		34,533
Gross profit		1,142		440		2,630		1,239
Operating expenses:
Research and development		2,177		2,268		6,987		6,824
Intellectual property legal fees		5,349		12,891		28,403		32,908
Selling, general and administrative		3,271		3,160		9,353		9,515
Total operating expenses		10,797		18,319		44,743		49,247
Operating loss		(9,655)		(17,879)		(42,113)		(48,008)
Other income, net:
Interest income, net		162		507		796		840
Other income, net		88		33		167		14
Total other income, net		250		540		963		854
Loss before provision for income taxes		(9,405)		(17,339)		(41,150)		(47,154)
Provision for income taxes		—		—		1		1
Net loss	$	(9,405)	$	(17,339)	$	(41,151)	$	(47,155)

Loss per share:
Basic and diluted	$	(0.04)	$	(0.07)	$	(0.16)	$	(0.20)
Weighted-average common shares outstanding:
Basic and diluted		258,025		247,420		256,509		240,974

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

NETLIST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands) (Unaudited)


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit		Equity (Deficit)
Balance, December 30, 2023	253,593	$	254	$	307,328	$	(283,823)	$	23,759
Net loss	—		—		—		(16,968)		(16,968)
Issuance of common stock, net	1,244		1		2,130		—		2,131
Exercise of stock options	78		—		62		—		62
Stock-based compensation	—		—		1,374		—		1,374
Restricted stock units vested and distributed	678		1		(1)		—		—
Tax withholdings related to net share settlements of equity awards	(4)		—		(7)		—		(7)
Balance, March 30, 2024	255,589		256		310,886		(300,791)		10,351
Net loss	—		—		—		(14,778)		(14,778)
Issuance of common stock, net	1,962		2		3,108		—		3,110
Exercise of stock options	14		—		6		—		6
Stock-based compensation	—		—		1,128		—		1,128
Restricted stock units vested and distributed	181		—		—		—		—
Balance, June 29, 2024	257,746		258		315,128		(315,569)		(183)
Net loss	—		—		—		(9,405)		(9,405)
Exercise of stock options	101		1		61		—		62
Stock-based compensation	—		—		1,130		—		1,130
Restricted stock units vested and distributed	344		—		—		—		—
Balance, September 28, 2024	258,191	$	259	$	316,319	$	(324,974)	$	(8,396)

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

NETLIST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands) (Unaudited) (Continued)


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit		Equity
Balance, December 31, 2022	232,557	$	233	$	250,428	$	(223,425)	$	27,236
Net loss	—		—		—		(15,788)		(15,788)
Issuance of common stock, net	4,920		5		10,537		—		10,542
Exercise of stock options	381		—		264		—		264
Exercise of warrants	—		—		—		—		—
Stock-based compensation	—		—		1,077		—		1,077
Restricted stock units vested and distributed	712		1		(1)		—		—
Balance, April 1, 2023	238,570		239		262,305		(239,213)		23,331
Net loss	—		—		—		(14,028)		(14,028)
Issuance of common stock, net	2,422		2		11,008		—		11,010
Exercise of stock options	129		—		140		—		140
Stock-based compensation	—		—		1,196		—		1,196
Restricted stock units vested and distributed	186		—		—		—		—
Balance, July 1, 2023	241,307		241		274,649		(253,241)		21,649
Net loss	—		—		—		(17,339)		(17,339)
Issuance of common stock, net	11,679		13		30,493		—		30,506
Exercise of stock options	151		—		122		—		122
Stock-based compensation	—		—		1,145		—		1,145
Restricted stock units vested and distributed	394		—		—		—		—
Balance, September 30, 2023	253,531	$	254	$	306,409	$	(270,580)	$	36,083

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

NETLIST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended
	September 28,		September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(41,151)	$	(47,155)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		237		292
Non-cash lease expense		437		476
Stock-based compensation		3,632		3,418
Changes in operating assets and liabilities:
Accounts receivable		2,902		3,698
Inventories		8,263		1,511
Prepaid expenses and other assets		215		316
Accounts payable		(5,648)		(1,108)
Accrued payroll and related liabilities		6		(187)
Deferred revenue		5,914		—
Other liabilities		(311)		(1,340)
Net cash used in operating activities		(25,504)		(40,079)
Cash flows from investing activities:
Acquisition of property and equipment		(64)		—
Net cash used in investing activities		(64)		—
Cash flows from financing activities:
Net repayments under line of credit		(2,281)		(4,935)
Principal repayments under finance lease		(89)		(158)
Payments on notes payable		(500)		(447)
Proceeds from issuance of common stock, net		5,241		52,058
Proceeds from exercise of stock options and warrants		130		526
Payments for taxes related to net share settlement of equity awards		(7)		—
Net cash provided by financing activities		2,494		47,044
Effect of foreign exchange rates on cash, cash equivalents and restricted cash		(8)		—
Net change in cash, cash equivalents and restricted cash		(23,082)		6,965
Cash, cash equivalents and restricted cash at beginning of period		52,845		43,611
Cash, cash equivalents and restricted cash at end of period	$	29,763	$	50,576

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	17,163	$	43,226
Restricted cash		12,600		7,350
Cash, cash equivalents and restricted cash at end of period	$	29,763	$	50,576

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

NETLIST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1—Summary of Significant Accounting Policies

Basis of Presentation

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 30, 2023, included in our Annual Report on Form 10-K filed with the SEC on February 23, 2024.

In the opinion of management, all adjustments for the fair presentation of our condensed consolidated financial statements have been made. The adjustments are of a normal recurring nature except as otherwise noted. The results of operations for the interim periods are not necessarily indicative of the results to be expected for other periods or the full fiscal year. We have evaluated events occurring subsequent to September 28, 2024 through the filing date of this Quarterly Report on Form 10-Q and concluded that there were no events that required recognition and disclosures other than those discussed elsewhere in the notes hereto.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Netlist, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year

Our fiscal year is the 52- or 53-week period that ends on the Saturday nearest to December 31. Our fiscal year 2024 will include 52 weeks and ends on December 28, 2024. Each quarter of fiscal year 2024 will be comprised of 13 weeks. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in December and the associated quarters, months and periods of those fiscal years.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Significant items subject to such estimates and assumptions made by management include, but not limited to, the determination of inventory reserves, allowance for doubtful accounts, and the discount rate used for lease obligation. Actual results may differ materially from those estimates.

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Note 2—Supplemental Financial Information

Inventories

Inventories consisted of the following (in thousands):


	September 28,		December 30,
	2024		2023
Raw materials	$	673	$	4,133
Work in process		23		274
Finished goods		3,072		7,624
	$	3,768	$	12,031

Loss Per Share

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


	Three Months Ended				Nine Months Ended
	September 28,		September 30,		September 28,		September 30,
	2024		2023		2024		2023
Numerator: Net loss	$	(9,405)	$	(17,339)	$	(41,151)	$	(47,155)
Denominator: Weighted-average basic shares outstanding - basic and diluted		258,025		247,420		256,509		240,974
Net loss per share - basic and diluted	$	(0.04)	$	(0.07)	$	(0.16)	$	(0.20)

The table below shows potentially dilutive weighted average common share equivalents, consisting of shares issuable upon the exercise of outstanding stock options and warrants using the treasury stock method and the shares vesting of issuable upon the restricted stock units (“RSUs”). These potential weighted average common share equivalents have been excluded from the diluted net loss per share calculations above as their effect would be anti-dilutive (in thousands):

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

2024

2023

2024

2023

Weighted average common share equivalents

1,478

2,860

1,822

3,377

Disaggregation of Net Sales

The following table shows disaggregated net sales by major source (in thousands):


	Three Months Ended				Nine Months Ended
	September 28,		September 30,		September 28,		September 30,
	2024		2023		2024		2023
Resales of third-party products	$	37,691	$	13,688	$	102,295	$	29,186
Sale of our modular memory subsystems		2,495		3,037		10,533		6,586
Total net sales	$	40,186	$	16,725	$	112,828	$	35,772

Total net sales include $17.6 million of revenue recognized in the three months ended September 28, 2024

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that was included in deferred revenue as of June 29, 2024. No deferred revenue was recorded prior to June 29, 2024. As of September 28, 2024, we had deferred revenue of $5.9 million. These deferred revenues relate to advance payments received during the quarter on orders shipped subsequent to the end of quarter.

Major Customers and Products

Our net product sales have historically been concentrated in a small number of customers. The following table sets forth the percentage of net product sales made to customers that each comprise 10% or more of total product sales:


	Three Months Ended		Nine Months Ended
	September 28,	September 30,	September 28,	September 30,
	2024	2023	2024	2023
Customer A	40%	19%	38%	31%
Customer B	26%	*	19%	*
Customer C	*	25%	*	13%

Less than 10% of net sales during the period.

As of September 28, 2024, two customers represented approximately 33% and 14% of aggregated gross accounts receivables, respectively. As of December 30, 2023, two customers represented approximately 60% and 10%, respectively, of aggregate gross accounts receivables. The loss of a major customer or a reduction in sales to or difficulties collecting payments from these customers could significantly reduce our net sales and adversely affect its operating results. We mitigate risks associated with foreign and domestic receivables by purchasing comprehensive credit insurance.

We resell certain component products to end-customers that are not reached in the distribution models of the component manufacturers, including storage customers, appliance customers, system builders and cloud and datacenter customers. For the three and nine months ended September 28, 2024, resales of these products represented approximately 94% and 91% of net sales, respectively. For both the three and nine months ended September 30, 2023, resales of these products each represented approximately 82% of net sales.

Note 3—Financing Arrangements

On November 7, 2023, we entered into a loan and security agreement (the “2023 SVB Credit Agreement”) with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (“SVB”), which provides for a revolving line of credit up to $10.0 million. The borrowing base is limited to 85% of eligible accounts receivable, subject to certain adjustments. Borrowings accrue interest on advance at a per annum rate equal to the greater of 8.50% and the Prime Rate. The maturity date is November 7, 2025.

As of September 28, 2024, all obligations under the 2023 SVB Credit Agreement were secured by a first priority security interest in our tangible and intangible assets. The 2023 SVB Credit Agreement subjects us to certain affirmative and negative covenants, including financial covenants with respect to our liquidity and restrictions on the payment of dividends. As of September 28, 2024, we were in compliance with our covenants under the 2023 SVB Credit Agreement.

We have letters of credit issued by SVB under the 2023 SVB Credit Agreement and Citibank, N.A., which are secured by cash and are classified as restricted cash in the condensed consolidated balance sheets. As of September 28, 2024 and December 30, 2023, (i) outstanding letters of credit were $12.4 million and $12.4 million, respectively, (ii) outstanding borrowings were $1.6 million and $3.8 million, respectively, and (iii) availability under the revolving line of credit was $0 and $0, respectively.

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Note 4—Leases

We have operating and finance leases primarily associated with office and manufacturing facilities and certain equipment. The determination of which discount rate to use when measuring the lease obligation was deemed a significant judgment.

Lease cost and supplemental condensed consolidated cash flow information related to operating and finance leases were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 28,		September 30,		September 28,		September 30,
	2024		2023		2024		2023
Lease cost:
Operating lease cost	$	138	$	192	$	503	$	581
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	153	$	166	$	548	$	504

For the nine months ended September 28, 2024 and September 30, 2023, finance lease costs and cash flows from finance leases were immaterial.

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


	September 28,		December 30,
	2024		2023
Operating Leases
Operating lease right-of-use assets	$	1,153	$	1,590
Other current liabilities	$	563	$	617
Operating lease liabilities		787		1,213
Total operating lease liabilities	$	1,350	$	1,830

Finance Leases
Property and equipment, at cost	$	488	$	488
Accumulated depreciation		(282)		(219)
Property and equipment, net	$	206	$	269
Other current liabilities	$	4	$	90
Other liabilities		4		7
Total finance lease liabilities	$	8	$	97

The following table includes supplemental information:


	September 28,		December 30,
	2024		2023
Weighted Average Remaining Lease Term (in years)
Operating leases		2.3		2.9
Finance leases		1.8		0.7

Weighted Average Discount Rate
Operating leases		5.5%		5.6%
Finance leases		5.5%		4.4%

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Maturities of lease liabilities as of September 28, 2024, were as follows (in thousands):


	Operating		Finance
Fiscal Year	Leases		Leases
2024 (remainder of the year)	$	154	$	1
2025		624		5
2026		639		3
2027		23		—
Total lease payments		1,440		9
Less: imputed interest		(90)		(1)
Total	$	1,350	$	8

Note 5—Commitments and Contingencies

Contingent Legal Expenses

We may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with our licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid on a scaled percentage of any negotiated fee, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained.

Litigation and Patent Reexaminations

We are, from time to time, a party to litigation that arises in the normal course of our business operations. We own numerous patents and continue to seek to grow and strengthen our patent portfolio, which covers various aspects of our innovations and includes various claim scopes. We plan to pursue avenues to monetize our intellectual property portfolio, in which we would generate revenue by selling or licensing our technology, and we intend to vigorously enforce our patent rights against alleged infringers of such rights. We dedicate substantial resources to protecting and enforcing our intellectual property rights, including with patent infringement proceedings we file against third parties and defense of our patents against challenges made by way of reexamination and review proceedings at the U.S. Patent and Trademark Office (“USPTO”) and Patent Trial and Appeal Board (“PTAB” or the “Board”). We expect these activities to continue for the foreseeable future, with no guarantee that any ongoing or future patent protection or litigation activities will be successful, or that we will be able to monetize our intellectual property portfolio.

Any litigation, regardless of its outcome, is inherently uncertain, involves a significant dedication of resources, including time and capital, and diverts management’s attention from our other activities. As a result, any current or future claims, allegations, or challenges by or against third parties, whether eventually decided in our favor or settled, could materially adversely affect our business, financial condition and results of operations. Additionally, the outcome of pending or future litigation and/or related patent reviews and reexaminations, as well as any delay in their resolution, could affect our ability to continue to sell our products, protect against competition in the current and expected markets for our products or license or otherwise monetize our intellectual property rights in the future.

Google Litigations

On December 4, 2009, Netlist filed a patent infringement lawsuit against Google Inc. (“Google”) in the U.S. District Court for the Northern District of California (the “NDCA”), seeking damages and injunctive relief based on Google’s alleged infringement of our U.S. Patent No. 7,619,912 (the “‘912 Patent”). The current judge assigned to the case, Hon. Chief Judge Seeborg, entered an order via stipulation on October 17, 2022 staying the NDCA Google case until the resolution of a pending case filed by Netlist, Inc. against Samsung Electronics Co., Ltd. (“SECL”), Samsung Semiconductor Inc. (“SSI”), and Samsung Electronics America Inc. (collectively, “Samsung”) in the United States District Court for the Eastern District of Texas (“EDTX”) (Netlist, Inc. v. Samsung Elecs. Co., Ltd. et al., Case No. 2:22-cv-00293-JRG).

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On July 26, 2022, Netlist filed patent infringement claims against Google Cloud EMEA Limited, Google Germany GmbH, Redtec Computing GmbH, and Google LLC (the “German Google Defendants”), seeking damages based on those defendants’ infringement of European Patents EP 2,454,735 (“EP735”) and EP 3,404,660 (“EP660”), which both generally relate to load reduced dual in line memory modules (“LRDIMM”) technologies. As of the reporting date, the German Google Defendants have submitted statements of defense. As of the reporting date, the German Federal patent Court has issued its order finding the EP735 null, and the proceedings before the Dusseldorf Court are currently stayed pending the outcome of the nullity reviews of the asserted EP patents.

On October 15, 2021, SECL and SSI initiated a declaratory judgement action against Netlist in the U.S. District Court for the District of Delaware (“DDE”) (Samsung Elecs. Co., Ltd., et. al. v. Netlist, Inc., Case No. 1:21-cv-01453-RGA). On September 12, 2022, Netlist amended its Counterclaims to include counterclaims against Google LLC and Alphabet, Inc (together, “Google Delaware Defendants”). On November 15, 2022, the Google Delaware Defendants responded to Netlist’s Counterclaims by filing a Motion to Dismiss or alternatively to sever and stay the counterclaims. As of the reporting date, the Court heard oral arguments for the Google Delaware Defendants’ Motion to Dismiss or alternatively, Sever and Stay and Dismiss Willfulness and Indirect Infringement Allegations. On October 10, 2023, the DDE Court entered an order granting-in-part and denying-in-part SECL and SSI’s prior motion to stay the matter in light of pending Inter Partes Reviews (“IPRs”) and a Ninth Circuit appeal, in effect staying claims with respect to Netlist’s U.S. Patent Nos. 9,858,218 (the “‘218 Patent”) and 10,474,595 (the “‘595 Patent”), while allowing claims under Netlist’s U.S. Patent No. 10,217,523 (the “‘523 Patent”) to proceed. On October 20, 2023, the Court held a claim construction hearing involving all parties. As part of the hearing, the Court also sought feedback from parties as to the issue of whether the matter should be stayed pending review of the Ninth Circuit’s recent unpublished decision on the underlying Central District of California action. On December 1, 2023, the Court entered an Oral Order staying the matter until the development of any action by any other court pertaining to Samsung’s and Netlist’s rights under the JDLA that may merit lifting the stay. As of the reporting date, the case remains stayed.

Micron Litigations

On April 28, 2021, Netlist filed a complaint for patent infringement against Micron Technology, Inc. (“Micron”) in the U.S. District Court for the Western District of Texas (“WDTX”), Waco Division (Case No. 6:21-cv00431 & Case No. 6:21-cv-00430). These proceedings are based on the alleged infringement by Micron’s LRDIMM and Micron’s non-volatile dual in line memory modules (“NVDIMM”) enterprise memory modules under four U.S. patents – U.S. Patent Nos. 10,489,314 (the “‘314 Patent”), 9,824,035 (the “‘035 Patent”), 10,268,608 (the “‘608 Patent”), and 8,301,833 (the “‘833 Patent”). The consolidated case was assigned to Hon. Judge Lee Yeakel (new Case No. 1:22-cv-00134, and 1:22-cv-00136), and the parties have completed briefing on their claim construction arguments. On May 11, 2022, Judge Yeakel entered a stay of the case pending the resolution of Micron’s requested IPR proceedings against the four patents asserted by Netlist in these consolidated cases (the ‘833, ‘035, ‘608, and ‘314 Patents). On May 4, 2023, the consolidated cases were reassigned to Docket II in the WDTX Austin Division, given Hon. Judge Yeakel’s retirement. On February 21, 2024, the parties have filed a status report with Austin District Court Judge Robert Pitman. On April 19, 2024, Netlist filed a motion to transfer the matter to the Eastern District of Texas, Marshall Division. This motion was denied, and the matter remains assigned to Judicial Docket II of the WDTX, Austin Division Court.

As noted above, Micron filed requests to bring IPR proceedings against Netlist’s ‘314, ‘035, ‘608, and ‘833 Patents. The PTAB granted Micron’s request for the ‘035, ‘833, and ‘314 Patents, but denied its request for instituting an IPR of the ‘608 Patent. The PTAB further denied Micron’s request for rehearing on the ‘608 Patent’s institution denial. Oral arguments were presented for the ‘035 Patent IPR on April 19, 2023, with the PTAB finding claims 2, 6, and 22 of the ‘035 Patent not unpatentable. On August 28, 2023, the PTAB determined that all challenged claims of the ‘833 Patent were unpatentable. On October 30, 2023, the PTAB determined that all challenged claims of the ‘314 Patent were not unpatentable. On December 29, 2023,

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Micron filed a Notice of Appeal for the ‘314 Patent IPR decisions, indicating its intent to challenge the PTAB’s findings at the United States Court of Appeals for the Federal Circuit.

On March 31, 2022, Netlist filed patent infringement claims against Micron in Dusseldorf, Germany (“Micron Dusseldorf Action”), seeking damages based on their infringement of EP735 and EP660. On June 24, 2022, Netlist requested injunctive relief. Micron initiated a nullity proceeding against the asserted EP patents in this action, making Netlist’s response to the same as November 19, 2022. Primary briefing in the Micron Dusseldorf Action has concluded, while the German Federal Patent Court entered a preliminary opinion on EP735 and EP660 in a related invalidity proceedings that have been consolidated as of the reporting date. As of the reporting date, the German Federal Patent Court has issued its order finding the EP735 null, and the Micron Dusseldorf Action has been stayed pending the outcome of the nullity reviews of the asserted EP patents. The Federal Patent Court has scheduled a hearing for EP660 on November 7, 2024.

On June 10, 2022, Netlist filed a complaint for patent infringement against Micron in the EDTX, Marshall Division (Case No. 2:22-cv-00203-JRG-RSP). These proceedings are based on the alleged infringement by Micron for the sale of its LRDIMMs, its memory modules utilizing on-board power management (“PMIC”), and its high bandwidth memory (“HBM”) components, under six U.S. Netlist patents: U.S. Patent Nos. 8,787,060 (the “‘060 Patent”), 9,318,160 (the “‘160 Patent), 10,860,506 (the “‘506 Patent”), 10,949,339 (the “‘339 Patent”), 11,016,918 (the “‘918 Patent”), and 11,232,054 (the “‘054 Patent”). The claim construction hearing took place before Hon. Magistrate Judge Roy Payne on July 26, 2023, and on October 30, 3023 the Court entered an Order confirming the Claim Construction outcome. The Jury Trial was initially scheduled to begin on January 22, 2024, but as of the reporting date, the Court has stayed the matter.

On August 1, 2022, Netlist filed a complaint for patent infringement against Micron in the EDTX (Case No. 2:22-cv-00294) under the ‘912 Patent, for Micron’s alleged infringement by the sale of its LRDIMMs and RDIMMs. On August 15, 2022, Netlist filed its first amended complaint, further addressing Micron’s infringement of U.S. Patent Nos. 9,858,215 (the “‘215 Patent”) and 11,093,417 (the “‘417 Patent”). On October 21, 2022, Hon. Chief Judge Gilstrap ordered that this Micron action and a parallel action by Netlist against defendants Samsung on the same patents (Case No. 2:22-cv-00293-JRG) be consolidated and set for a joint scheduling conference on November 17, 2022, further instructing that the Samsung action be considered the “LEAD CASE” and that any further filings from either action be submitted in that case for all pretrial matters. The claim construction hearing was advanced and took place before Hon. Chief Judge Gilstrap on September 26, 2023. On November 21, 2023, the Court entered its Claim Construction Order. The Court held the final pretrial conference for the consolidated case on March 6, 2024. This case went to trial in May 2024 and the jury awarded Netlist $445 million for Micron’s infringement.

On November 18, 2022, Micron filed IPR requests contesting the patentability of the ‘912, ‘339, and ‘506 Patents, along with motions requesting joinder to the pending Samsung IPRs related to the same patents (see below). As of the reporting date, Micron’s ‘912, ‘339, and ‘506 Patent IPRs have been joined with the respective Samsung IPR proceedings for the same three patents. Oral hearings for the joined Samsung ‘339 and ‘506 Patents IPRs were held on July 19, 2023 and July 20, 2023, respectively. On June 30, 2023, the PTAB resumed the trial on the Samsung ‘912 Patent IPR (which included Micron’s claims via joinder) following USPTO Director Katherine Vidal’s sua sponte Director Review and scheduled the ‘912 Patent IPR for an oral hearing on January 31, 2024. On October 17, 2023 and October 18, 2023, the PTAB issued final written decisions stating that all challenged claims of the ‘506 and ‘339 Patents were unpatentable, respectively. Netlist filed Requests for Rehearing of the ‘506 and ‘339 Patent IPRs final written decisions on November 16, 2023 and November 17, 2023, respectively. On December 20, 2023, the Board denied Netlist’s Request for Rehearing on the ‘506 Patent IPR result. Netlist filed a Notice of Appeal to challenge the Board’s final written decision on the ‘506 Patent before the Federal Court of Appeals for the Federal Circuit (“CAFC”), Case No. 24-1521). On February 9, 2024, the PTAB denied Netlist’s Request for Rehearing on the ‘339 Patent IPR result. Netlist filed its Notice of Appeal to challenge the Board’s final written decision on the ‘339 Patent before the CAFC, Case No. 24-1707. On January 31, 2024, an oral hearing was conducted for the Samsung ‘912 Patent IPR proceeding joined by Micron. On April 17, 2024, the PTAB entered its final written decision for the ‘912 Patent IPR, finding the challenged claim 16 unpatentable. On September 11, 2024,

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Netlist filed a Notice of Appeal to challenge the Board’s final written decision on the ’912 Patent before the CAFC, Case No. 24-2304. As of the reporting date, all three appeals challenging the Board’s respective decisions on the ’912, ’339, and ’506 Patents are pending.

On January 6, 2023, Micron filed IPR requests contesting the patentability of the ‘918 and ‘054 Patents, along with motions requesting joinder to the pending Samsung IPRs related to the same patents (see below). On June 23, 2023, the matters were joined with the corresponding Samsung IPRs on the same patents. On September 5, 2023, oral hearings for the ‘918 and ‘054 Patent IPRs were held. On December 5, 2023 and December 6, 2023, the PTAB entered final written decisions for the ‘918 and ‘054 Patent IPRs, respectively, finding in both instances that all challenged claims were unpatentable. On January 5, 2024 and January 6, 2024, Netlist filed requests for USPTO Director Review of the ‘918 and ‘054 Patents final written decisions, respectively. On March 18, 2024, the USPTO denied Netlist’s request for Director Review of the ‘918 and ‘054 Patent IPRs. On May 24, 2024, Netlist filed a notice of appeal challenging the Board’s final written decision for the ‘918 and ‘054 Patent IPRs, CAFC case no. 24-1859.

On May 8, 2023, Micron filed IPR requests contesting the patentability of the ‘060 and ‘160 Patents, along with motions requesting joinder to the pending Samsung IPRs related to the same patents (see below). On October 26, 2023, the PTAB instituted the Micron ‘060 and ‘160 Patent IPRs and joined them with the earlier-filed ‘060 and ‘160 Patent IPRs. An oral hearing was held on January 11, 2024, and on April 1, 2024, the PTAB issued its final written decisions finding all challenged claims of the ‘060 and ‘160 Patents unpatentable. On May 1, 2024, Netlist requested a director review of the final written decisions. The Director Review was denied on June 17, 2024. On August 20, 2024, Netlist a Notice of Appeal to challenge the Board’s final written decision on the ’060 and ’160 Patents before the CAFC, Case No. 24-2304.

On July 28, 2023, Micron filed two IPR petitions contesting the patentability of the ‘215 and ‘417 Patents. On January 3, 2024, the PTAB granted institution and joinder to Samsung’s earlier-filed IPRs for the same two patents. The parties completed briefing on the Samsung ‘417 and ‘215 Patent IPRs that Micron had joined and held oral arguments on May 3, 2024. The PTAB issued its final written decision on July 30, 2024, determining all challenged claims unpatentable. On August 29, 2024, Netlist filed Requests for Director Review of the Board’s final written decisions on the ’215 and ’417 Patents.

On December 11, 2023, Micron filed a complaint in the District Court for the Fourth Judicial District of the State of Idaho alleging Netlist violated Idaho Code § 48-1703 through its assertion of the ‘833 Patent in the WDTX (the “First Idaho Complaint”). Netlist removed the matter to the Federal District Court for the District of Idaho on January 2, 2024. On January 18, 2024, the matter was assigned to Judge David C. Nye for all proceedings, and Micron filed a Motion to remand the case to the Idaho state court. On February 7, 2024, Netlist moved to dismiss Micron’s First Idaho Complaint or alternatively transfer the case, and on February 8, 2024, responded to Micron’s Motion to Remand. On February 22, 2024, Micron filed its reply in support of its remand motion. On February 28, 2024, Micron filed its response to Netlist’s Motion to Dismiss or Transfer the case. On March 13, 2024, Netlist filed its reply in support of its Motion to Dismiss or Transfer the case. On August 16, 2024, the case was remanded to the Idaho state court. On September 17-18, 2024, Netlist filed a motion to dismiss the case for lack of personal jurisdiction and failure to state a claim.

On December 22, 2023, Netlist filed a Declaratory Judgment action in the Federal District Court for the EDTX, Marshall Division, seeking confirmation from the Court that Netlist has not made a bad-faith assertion of patent infringement against Micron. On January 19, 2024, Micron filed a Motion to Dismiss. On February 7, 2024, Netlist amended its complaint, and on March 6, 2024, Micron filed its Answer to Netlist’s First Amended Complaint. On April 23, 2024, the Court held a scheduling conference, and on April 24, 2024, the Court entered its docket control order setting the matter for a jury trial on July 7, 2025.

On January 10, 2024, Micron filed an IPR petition, again contesting the patentability of the ‘608 Patent, along with a motion to join Samsung’s instituted parallel IPR proceeding. On July 23, 2024, the PTAB denied institution of Micron’s petition.

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