Netlist Inc 10-Q for FY2020 Q1

Netlist Inc (NLST)

10-Q 2020-05-08 For: 2020-03-28

Added on April 12, 2026

About this 10-Q

Netlist Inc filed this 10-Q on May 8, 2020, covering the quarter ended March 28, 2020 (FY2020 Q1).

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.


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


			Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements	3

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	37

	Item 1A.	Risk Factors	37

	Item 6.	Exhibits	61

SIGNATURES			63


	(unaudited)
	March 28,		December 28,
	2020		2019
ASSETS
Current Assets:
Cash and cash equivalents	$	5,713	$	8,966
Restricted cash		2,900		2,750
Accounts receivable, net of allowances of $96 (2020) and $61 (2019)		5,116		3,672
Inventories		5,974		3,496
Prepaid expenses and other current assets		663		627
Total current assets		20,366		19,511
Property and equipment, net		259		286
Operating lease right-of-use assets		832		968
Other assets		1,377		1,376
Total assets	$	22,834	$	22,141

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable	$	9,757	$	9,134
Revolving line of credit		4,449		2,990
Accrued payroll and related liabilities		837		740
Accrued expenses and other current liabilities		790		793
Note payable		285		412
Total current liabilities		16,118		14,069
Convertible promissory note and accrued interest, net		15,921		15,793
Operating lease liabilities		383		498
Other liabilities		143		144
Total liabilities		32,565		30,504
Commitments and contingencies
Stockholders' 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—300,000 shares authorized; 171,295 (2020) and 169,539 (2019) shares issued and outstanding		171		169
Additional paid-in capital		179,258		179,086
Accumulated deficit		(189,160)		(187,618)
Total stockholders' deficit		(9,731)		(8,363)
Total liabilities and stockholders' deficit	$	22,834	$	22,141


	Three Months Ended
	March 28,		March 30,
	2020		2019
Net sales	$	14,631	$	5,105
Cost of sales		12,522		4,826
Gross profit		2,109		279
Operating expenses:
Research and development		654		590
Intellectual property legal fees		625		1,495
Selling, general and administrative		2,221		1,973
Total operating expenses		3,500		4,058
Operating loss		(1,391)		(3,779)
Other expense, net:
Interest expense, net		(148)		(272)
Other (expense) income, net		(3)		1
Total other expense, net		(151)		(271)
Loss before provision for income taxes		(1,542)		(4,050)
Provision for income taxes		—		—
Net loss	$	(1,542)	$	(4,050)

Net loss per common share:
Basic and diluted	$	(0.01)	$	(0.03)
Weighted-average common shares outstanding:
Basic and diluted		169,719		139,039


	Series A						Additional				Total
	Preferred Stock			Common Stock			Paid-in		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Deficit		Deficit
Balance, December 28, 2019	—	$	—	169,539	$	169	$	179,086	$	(187,618)	$	(8,363)
Stock-based compensation	—		—	—		—		206		—		206
Restricted stock units vested and distributed	—		—	362		—		—		—		—
Tax withholdings related to net share settlements of equity awards	—		—	(135)		—		(32)		—		(32)
Issuance of commitment shares	—		—	1,529		2		(2)		—		—
Net loss	—		—	—		—		—		(1,542)		(1,542)
Balance, March 28, 2020	—	$	—	171,295	$	171	$	179,258	$	(189,160)	$	(9,731)

	Series A						Additional				Total
	Preferred Stock			Common Stock			Paid-in		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Deficit		Deficit
Balance, December 29, 2018	—	$	—	139,283	$	139	$	169,355	$	(175,166)	$	(5,672)
Stock-based compensation	—		—	—		—		342		—		342
Exercise of stock options	—		—	43		—		16		—		16
Restricted stock units vested and distributed	—		—	340		—		—		—		—
Common stock issued on conversion of Iliad Note	—		—	1,042		1		374		—		375
Net loss	—		—	—		—		—		(4,050)		(4,050)
Balance, March 30, 2019	—	$	—	140,708	$	140	$	170,087	$	(179,216)	$	(8,989)


	March 28,		December 28,
(in thousands)	2020		2019
Operating Leases
Operating lease right-of-use assets	$	832	$	968
Accrued expenses and other current liabilities	$	494		511
Operating lease liabilities		383		498
Total operating lease liabilities	$	877	$	1,009

Finance Leases
Property and equipment, at cost	$	96	$	96
Accumulated depreciation		(19)		(14)
Property and equipment, net	$	77	$	82
Accrued expenses and other current liabilities	$	18	$	18
Other long-term liabilities		61		65
Total finance lease liabilities	$	79	$	83


Weighted Average Remaining Lease Term (in years)
Operating lease	1.9	2.1
Finance lease	4.0	4.3

Weighted Average Discount Rate
Operating lease	7.9%	7.9%
Finance lease	5.1%	5.1%


		Filed	Incorporated by Reference
Exhibit No.	Exhibit Description	Herewith	Form	File No.	Filing Date
3.1	Restated Certificate of Incorporation of Netlist, Inc.		10-Q	001-33170	08/15/2017
3.1.1	Certificate of Amendment to the Restated Certificate of Incorporation of Netlist, Inc.		8-K	001-33170	08/17/2018
3.1.2	Certificate of Designation of the Series A Preferred Stock of Netlist, Inc.		10-Q	001-33170	08/15/2017
3.2	Amended and Restated Bylaws of Netlist, Inc.		8-K	001-33170	12/20/2012
4.1	Form of Warrant Agreement to Purchase Common Stock.		8-K	001-33170	09/14/2018
10.1§	First Amendment to Investment Agreement, dated January 23, 2020, by and between Netlist, Inc. and TR Global Funding V, LLC	X
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X


Date: May 8, 2020	Netlist, Inc.


	By:	/s/ Chun K. Hong
		Chun K. Hong
		President, Chief Executive Officer and Chairman of the Board
		(Principal Executive Officer)

	By:	/s/ Gail Sasaki
		Gail Sasaki
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

ugust
Date: May 8, 2020	/s/ Chun K. Hong
	Chun K. Hong
	President, Chief Executive Officer and Chairman of the Board
	(Principal Executive Officer)


Date: May 8, 2020	/s/ Gail Sasaki
	Gail Sasaki
	Vice President and Chief Financial Officer
	(Principal Financial Officer)


	March 28,		December 28,
	2020		2019
Secured convertible note, due December 2021, including accrued interest of $1,308 (2020) and $1,233 (2019), respectively	$	16,308	$	16,233
Note payable		285		412
Unamortized debt discounts and issuance costs		(387)		(440)
		16,206		16,205
Less: current portion		(285)		(412)
	$	15,921	$	15,793