Netlist Reports Fourth Quarter and Full Year 2019 Results

IRVINE, CA / ACCESSWIRE / March 5, 2020 / Netlist, Inc. (OTCQX:NLST) today reported financial results for the fourth quarter and full year ended December 28, 2019.

Net sales for the fourth quarter ended December 28, 2019 were $9.4 million, compared to net sales of $9.0 million for the quarter ended December 29, 2018. Gross profit for the quarter ended December 28, 2019 was $1.4 million, or 15.3% of net sales, compared to a gross profit of $0.9 million, or 9.5% of net sales, for the quarter ended December 29, 2018.

Net loss for the fourth quarter ended December 28, 2019 was ($1.8) million, or a loss per share of ($0.01), compared to a net loss in the prior year period of ($4.4) million, or a loss per share of ($0.03). These results include stock-based compensation expense of $0.2 million and $0.2 million for the quarters ended December 28, 2019 and December 29, 2018, respectively.

Net sales for the full year ended December 28, 2019 were $26.1 million, compared to net sales of $33.5 million for the full year ended December 29, 2018. Gross profit for the full year ended December 28, 2019 was $2.6 million, or 9.8% of net sales, compared to a gross profit of $2.3 million, or 6.9% of net sales, for the full year ended December 29, 2018.

Net loss for the full year ended December 28, 2019 was ($12.5) million, or a loss per share of ($0.08), compared to a net loss in the prior year period of ($17.1) million, or a loss per share of ($0.16). These results include stock-based compensation expense of $1.0 million and $0.7 million for the years ended December 28, 2019 and December 29, 2018, respectively.

As of December 28, 2019, cash, cash equivalents and restricted cash was $11.7 million, total assets were $22.1 million, working capital was $5.4 million, total debt and accrued interest, net of debt discount, was $19.2 million, and stockholders’ deficit was ($8.4) million.

Netlist’s Chief Executive Officer, C.K. Hong said, “We completed the 2019 year with progress across key strategic initiatives, providing strong momentum for 2020. Fourth quarter revenue was up by over 50% from the prior quarter, gross margins improved by 219% consecutively resulting in a 43% improvement in bottom line results. In October, we secured a favorable Initial Determination at the U.S. International Trade Commission (ITC) in our multi-year campaign to protect our intellectual property and look forward to the Commission’s final determination on April 7.”

Conference Call Information

C.K. Hong, Chief Executive Officer, and Gail Sasaki, Chief Financial Officer, will host an investor conference call today, March 5, 2020 at 12:00 p.m. Eastern Time to review Netlist’s results for the fourth quarter and full year ended December 28, 2019. The live webcast and archived replay of the call can be accessed for 90 days in the Investors section of Netlist’s website at www.netlist.com.

About Netlist

Netlist provides high-performance SSDs and modular memory subsystems to enterprise customers in diverse industries. HybriDIMM™, Netlist’s next-generation storage class memory product, addresses the growing need for real-time analytics in Big Data applications, in-memory databases, high-performance computing and advanced data storage solutions. Netlist also manufactures and provides a line of specialty and legacy memory products to storage customers, appliance customers, system builders and cloud and datacenter customers. Netlist holds a portfolio of patents, many seminal, in the areas of hybrid memory, storage class memory, rank multiplication and load reduction. To learn more, visit www.netlist.com.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical facts and often address future events or Netlist’s future performance. Forward-looking statements contained in this news release include statements about Netlist’s ability to execute on its strategic initiatives. All forward-looking statements reflect management’s present expectations regarding future events and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by any forward-looking statements. These risks, uncertainties and other factors include, among others: risks related to Netlist’s plans for its intellectual property, including its strategies for monetizing, licensing, expanding, and defending its patent portfolio; risks associated with patent infringement litigation initiated by Netlist, such as its ongoing proceedings against SK hynix Inc., or by others against Netlist, as well as the costs and unpredictability of any such litigation; risks associated with Netlist’s product sales, including the market and demand for products sold by Netlist and its ability to successfully develop and launch new products that are attractive to the market; the success of product, joint development and licensing partnerships,; the competitive landscape of Netlist’s industry; and general economic, political and market conditions. All forward-looking statements reflect management’s present assumptions, expectations and beliefs regarding future events and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by any forward-looking statements. These and other risks and uncertainties are described in Netlist’s annual report on Form 10-K for its most recently completed fiscal year filed on March 22, 2019, and the other filings it makes with the U.S. Securities and Exchange Commission from time to time, including any subsequently filed quarterly and current reports. In light of these risks, uncertainties and other factors, these forward-looking statements should not be relied on as predictions of future events. These forward-looking statements represent Netlist’s assumptions, expectations and beliefs only as of the date they are made, and except as required by law, Netlist undertakes no obligation to revise or update any forward-looking statements for any reason.

(Tables Follow)

For more information, please contact:

The Plunkett Group
Mike Smargiassi/Sharon Oh
NLST@theplunkettgroup.com
(212) 739-6729

Netlist, Inc.
Gail M. Sasaki
Chief Financial Officer
(949) 435-0025

Netlist, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
 
  December 28,     December 29,  
 
  2019     2018  
ASSETS
  (unaudited)     (audited)  
Current assets:
           
Cash and cash equivalents
  8,966     14,802  
Restricted cash
    2,750       1,850  
Accounts receivable, net
    3,672       2,917  
Inventories
    3,496       2,946  
Prepaid expenses and other current assets
    627       677  
Total current assets
    19,511       23,192  
 
               
Property and equipment, net
    286       279  
Operating lease right-of-use assets
    968        
Other assets
    1,376       1,394  
Total assets
  22,141     24,865  
 
               
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
Current liabilities:
               
Accounts payable
  9,134     9,497  
Revolving line of credit
    2,990       2,293  
Accrued payroll and related liabilities
    740       604  
Accrued expenses and other current liabilities
    793       343  
Note payable
    412       376  
Total current liabilities
    14,069       13,113  
Convertible promissory notes and accrued interest, net of debt discounts
    15,793       17,346  
Operating lease liabilities
    498        
Other liabilities
    144       78  
Total liabilities
    30,504       30,537  
 
               
Commitments and contingencies
               
 
               
Stockholders’ deficit:
               
Preferred stock
           
Common stock
    169       139  
Additional paid-in capital
    179,086       169,355  
Accumulated deficit
    (187,618 )     (175,166 )
Total stockholders’ deficit
    (8,363 )     (5,672 )
Total liabilities and stockholders’ deficit
  22,141     24,865  
Netlist, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share amounts)
 
  Three Months Ended     Year Ended  
 
  December 28,     December 29,     December 28,     December 29,  
 
  2019     2018     2019     2018  
 
                       
Net sales
  9,370     9,021     26,103     33,529  
Cost of sales(1)
    7,933       8,167       23,533       31,228  
Gross profit
    1,437       854       2,570       2,301  
Operating expenses:
                               
Research and development(1)
    645       573       2,383       2,899  
Intellectual property legal fees
    564       2,559       4,131       8,918  
Selling, general and administrative(1)
    1,822       1,835       7,546       6,856  
Total operating expenses
    3,031       4,967       14,060       18,673  
Operating loss
    (1,594 )     (4,113 )     (11,490 )     (16,372 )
Other income (expense):
                               
Interest expense, net
    (170 )     (276 )     (945 )     (739 )
Other income (expense), net
    1       1       (4 )     (11 )
Total other expense, net
    (169 )     (275 )     (949 )     (750 )
Loss before provision (benefit) for income taxes
    (1,763 )     (4,388 )     (12,439 )     (17,122 )
Provision (benefit) for income taxes
    12       (2 )     13       (2 )
Net loss
  (1,775 )   (4,386 )   (12,452 )   (17,120 )
Net loss per common share:
                               
Basic and diluted
  (0.01 )   (0.03 )   (0.08 )   (0.16 )
Weighted-average common shares outstanding:
                               
Basic and diluted
    164,658       138,737       148,132       107,071  
 
                               
 
                               
(1) Amounts include stock-based compensation expense as follows:
                               
 
                               
Cost of sales
  6     7     26     26  
Research and development
    50       54       213       236  
Selling, general and administrative
    151       105       750       475  
Total stock-based compensation
  207     166     989     737  

SOURCE: Netlist, Inc.

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