Quarterly Report for Quarter Ending September 26, 2026 (Form 10-Q)

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Note Regarding Forward-Looking Statements

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This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and other parts of this report include "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 our future performance. Words such as "anticipate," "estimate," "expect," "project," "intend," "may," "will," "might," "plan," "predict," "believe," "should," "could" and similar words or expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

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Forward-looking statements contained in this MD&A and the condensed consolidated financial statements and the related notes included in Part I, Item 1 of this report include statements about, among other things:

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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 risks and uncertainties include those described under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 19, 2026 (the "Annual Report") and our Quarterly Report on Form 10-Q filed with the SEC on August 11, 2026. In light of these risks and uncertainties, our forward-looking statements should not be relied on as predictions of future events. All forward-looking statements reflect our assumptions, expectations and beliefs only as of the date they are made, and except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.

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The following MD&A should be read in conjunction with our condensed consolidated financial statements and the related notes included in Part I, Item 1 of this report, as well as our Annual Report. All information presented herein is based on our fiscal calendar, and references to particular years, quarters, months or periods refer to our fiscal years ended in January or December and the associated quarters, months and periods of those fiscal years. Each of the terms the "Company," "Netlist," "we," "us," or "our" as used herein refers collectively to Netlist, Inc. and its consolidated subsidiaries, unless otherwise stated.

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Overview

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We are a leading innovator in advanced memory and storage solutions. With a rich portfolio of patented technologies, our inventions are foundational to the advancement of artificial intelligence ("AI") computing. During the third quarter of 2026, we recorded net sales of $105.1 million, including $44.9 million of license fee revenue under the Samsung License Agreement, gross profit of $68.9 million and a net income of $85.4 million, which reflects an income tax benefit of $44.0 million. During and after the quarter, we resolved our patent litigation with Samsung and Micron through the license and settlement arrangements described under "Recent Developments" below.

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Recent Developments

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Micron Settlement, Securities Purchase Agreement, and License Agreements

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On October 5, 2026, we entered into a Patent License Agreement (the "Micron License Agreement"), Settlement and Release Agreement (the "Micron Settlement Agreement"), Securities Purchase Agreement (the "Micron Purchase Agreement") and a Lock-Up and Release Agreement (the "Micron Lock-Up and Release Agreement") with Micron Technology, Inc. ("Micron"). Pursuant to the Micron License Agreement, we granted Micron a worldwide, non-exclusive, non-transferable, non-sublicensable five-year term license to our entire worldwide patent portfolio. Under the Micron License Agreement, Micron agreed to pay us quarterly license fees of $30 million for each of the twenty calendar quarters from the fourth calendar quarter of 2026 through the third calendar quarter of 2031, for a total value of $600 million during the five-year term of the Micron License Agreement.

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In conjunction with the Micron License Agreement, Micron purchased 10 million shares of our common stock (the "Micron Shares") for an aggregate cash purchase price of $1 million pursuant to the Micron Purchase Agreement. The shares are subject to transfer restrictions that lapse over a five-year period. We accounted for the issuance of the Micron Shares as consideration payable to a customer, resulting in a reduction of license revenue of $2.0 million per quarter over the five-year license term. The excess of the fair value of the shares over the purchase price, totaling $39.2 million, was accounted for as consideration payable to a customer and will be recognized as a reduction of license revenue over the five-year license term. Accordingly, we expect to recognize approximately $28.0 million of license revenue per quarter.

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Company counsel for the Micron litigation is entitled to receive up to 7.5% of amounts paid pursuant to the Micron License Agreement when such amounts are paid to the Company.

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Samsung Patent Cross License Agreement

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On August 4, 2026, we entered into a five-year term Patent Cross License Agreement (the "Samsung License Agreement") with Samsung Electronics Co., Ltd., a company existing under the laws of the Republic of Korea ("Samsung"), effective as of July 1, 2026 (the "Effective Date"). Pursuant to the Samsung License Agreement, each party grants the other party a worldwide, non-exclusive, non-transferable, non-sublicensable, royalty-bearing (in the case of Samsung as licensee) or royalty-free (in the case of us as licensee) licenses to certain patents. In consideration of the license under our patents, Samsung paid the Company an upfront license fee of $200 million and agreed to pay quarterly license fees of up to $27.5 million for each of the twenty calendar quarters from the Effective Date through the second calendar quarter of 2031, with the amount of each quarterly license fee payment to be calculated in accordance with a revenue-based formula set forth in the Samsung License Agreement. Under the Samsung License Agreement, Samsung is responsible for all Korean withholding taxes applicable to the license fee payments and is required to gross up such payments so that the Company receives the full stated amounts. As a result, Samsung's total payment obligation under the Samsung License Agreement, inclusive of estimated Korean withholding taxes payable to the Korean tax authorities, is up to approximately $898.2 million consisting of approximately $239 million in upfront fees and $32.9 million in fees per quarter. We received the upfront license fee in August 2026. We recognized $44.9 million of license fee revenue under the Samsung License Agreement during the third quarter of 2026, and, as of September 26, 2026, $227.5 million of the amounts received was recorded as deferred revenue, of which $47.9 million is expected to be recognized within the next 12 months and the remainder through July 2031. Quarterly license fees are calculated under a revenue-based formula and are subject to certain adjustments based on events that may occur later in the term of the contract; accordingly, the amount of future license fee revenue from Samsung may vary from quarter to quarter.

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Company counsel for the Samsung litigation is entitled to receive up to 7.5% of amounts paid pursuant to the Samsung License Agreement when such amounts are paid to the Company.

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Samsung Settlement Agreement

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On August 4, 2026, we entered into a Settlement and Release Agreement (the "Samsung Settlement Agreement") effective as of the Effective Date with Samsung. The Samsung Settlement Agreement was entered into in settlement of the pending legal proceedings between us and Samsung identified therein.

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Samsung Supply Agreement

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On August 4, 2026, we entered into a five-year Supply Agreement (the "SSI Supply Agreement") with Samsung Semiconductor, Inc. ("Samsung Semiconductor"), effective as of the Effective Date. Pursuant to the SSI Supply Agreement, the Company has the right to purchase from Samsung Semiconductor up to $300 million of DRAM and NAND products each year for an aggregate of up to $1.5 billion during the term of the SSI Supply Agreement on the pricing terms set forth therein.

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Samsung ITC Cooperation Agreement

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On August 4, 2026, in connection with the Samsung Settlement Agreement, we also entered into an ITC Cooperation Agreement with Samsung with a term of five years during which time Samsung agreed to produce or provide certain information, documents, or declarations to us to use in future International Trade Commission actions against third parties.

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Samsung Securities Purchase Agreement

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On August 4, 2026, in connection with and as a condition to the parties' entry into the SSI Supply Agreement and effective as of July 31, 2026, we entered into a Securities Purchase Agreement and a Lock-Up and Release Agreement with Samsung Semiconductor. Pursuant to the Securities Purchase Agreement, Samsung Semiconductor purchased 10 million shares (the "SSI Shares") of our common stock for an aggregate cash purchase price of $1 million. Pursuant to the Lock-Up and Release Agreement, twenty percent of the SSI Shares will be released from the disposition and transfer restrictions set forth therein on each of the first, second, third and fourth anniversaries of the issuance of the SSI Shares, with the remaining SSI Shares released on the fifth anniversary. The issuance of the SSI Shares to Samsung Semiconductor was not registered under the Securities Act of 1933, as amended (the "Securities Act"). The issuance of the SSI Shares was completed in reliance upon Section 4(a)(2) of the Securities Act. The closing of the transactions contemplated by the Securities Purchase Agreement occurred on August 6, 2026.

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Economic Conditions, Challenges and Risks

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Our performance improved since the second half of 2025, driven by increased demand for our memory products and disciplined commercial execution. In our view, accelerated AI adoption has tightened industry supply relative to demand, contributing to broad-based price increases. We currently expect these dynamics to continue until additional industry fabrication capacity becomes available, potentially beginning in 2028; however, the timing, scale and effectiveness of any additional capacity, and the level of end-market demand when such capacity becomes available, may differ materially from our expectations. Increased industry fabrication capacity could improve component availability, place downward pressure on pricing, and shift product mix, any of which may moderate or adversely affect our volumes, pricing, margins and results of operations. The semiconductor industry is cyclical and subject to rapid changes in supply and demand. Demand for our products is significantly influenced by data-center and AI infrastructure investment, and changes in the pace of that investment, including as a result of financing conditions or as a result of regulatory, permitting or energy-related constraints on data-center construction, could affect the timing and amount of our product sales. Future demand for our products is inherently unpredictable. Our current results of operations may not be indicative of our future results.

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In addition, the vast majority of our net product sales in recent periods have been generated from resales of products sourced from SK hynix pursuant to the Product Purchase and Supply Agreement with SK hynix, which was entered into on April 5, 2021 (the "SK hynix Supply Agreement"). The term of the supply provisions of this SK hynix Supply Agreement expired in April 2026. We continue to purchase products from SK hynix following expiration of the SK hynix Supply Agreement on a purchase order basis on similar terms to the prior SK hynix Supply Agreement, but SK hynix ultimately may not continue to supply us with products for resale on similar terms or at all. In such circumstances, our financial results, including our revenue, profits and margins in future periods may be adversely affected. In August 2026 and as noted above, we entered into the SSI Supply Agreement with Samsung Semiconductor providing us with the right to purchase up to $300 million of DRAM and NAND products per year for an aggregate of up to $1.5 billion over a five-year term. Should Samsung fail to comply with the terms of this agreement and the related arrangements, our financial results of operation would be adversely affected.

Our patent litigation with Samsung and Micron has been resolved pursuant to the Samsung Agreements and the Micron Agreements, and a significant portion of our near-term revenue and cash flow is now expected to be derived from license fees and net sales pursuant to these agreements. As a result, our results of operations and liquidity will depend on Samsung's and Micron's performance of their payment and supply obligations. Other proceedings, including our appeals to the CAFC, ex parte reexaminations at the USPTO, and our litigation with Google, remain pending, and we account for any potential recoveries from these matters as gain contingencies that are not recognized until realized. See "Legal Proceedings" in Part II, Item 1 of this report and See Note 6 to the condensed consolidated financial statements included in Part I, Item 1 of this report for more information.

We are also party to ongoing intellectual property litigation. While we have entered into the Samsung Settlement Agreement and Micron Settlement Agreement with Samsung and Micron, respectively, to resolve our pending patent litigations with Samsung and Micron, other matters remain subject to appeal and other proceedings, and any ultimate recovery from these matters may be less than any amounts awarded or may not be realized, including as a result of negotiated resolution, appeals, post-trial proceedings, patent office proceedings or other developments. We account for potential recoveries as gain contingencies and do not recognize them until realization is probable and reasonably estimable. The timing and amount of any recovery from these matters are inherently uncertain, prior settlements with Micron and Samsung may not be representative of any future litigation results, and any resolution of these ongoing matters could materially affect our results of operations or cash flows in the period in which it occurs. See "Legal Proceedings" in Part II, Item 1 of this report and See Note 6 to the condensed consolidated financial statements included in Part I, Item 1 of this report for more information.

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Results of Operations

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Net Sales and Gross Profit

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Net sales and gross profit for the three and nine months ended September 26, 2026 and September 27, 2025 were as follows (dollars in thousands):

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Net Sales

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Net sales include (i) resales of certain components, modules, and other products, including DIMMs and SSDs, and sales of our own products and (ii) license fee recognized for licensing of our patents pursuant to the Samsung License Agreement.

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Net product sales increased by approximately $18.0 million during the third quarter of 2026 compared to the same period of 2025, primarily as a result of a $21.2 million increase in sales of low-profile memory subsystem products, and a $1.2 million increase in sales of our flash and SSDs products, partially offset by a $4.5 million decrease in the sale of registered Dual Inline Memory Module ("RDIMM") and discrete memory component products.

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Net product sales increased by approximately $162.0 million during the first nine months of 2026 compared to the same period of 2025, primarily as a result of a $117.8 million increase in the sale of RDIMM and discrete memory component products, a $42.8 million increase in sales of low-profile memory subsystem products, and a $1.4 million increase in sales of our flash and SSDs products.

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These increases in net product sales are primarily due to strong customer demand in support of AI and data center applications.

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Gross license fee revenue of $44.9 million for each of the third quarter and first nine months of 2026 represents amounts recognized under the Samsung License Agreement, which became effective July 1, 2026, consisting of $12.0 million of the upfront license fee recognized over 20 quarters and the $32.9 million quarterly license fee recognized for the third quarter of 2026, each inclusive of foreign withholding taxes paid by Samsung on our behalf. We had no license fee revenue in the corresponding periods of 2025. Beginning in the fourth quarter of 2026, we also expect to recognize license fee revenue under the Micron License Agreement pursuant to its terms with the amount in excess of the grant-date fair value over the $1.0 million of cash received under the Micron Purchase Agreement. The excess of the fair value of the shares over the purchase price, totaling $39.2 million, was accounted for as consideration payable to a customer and will be recognized as a reduction of license revenue over the five-year license term. Accordingly, we expect to recognize approximately $28.0 million of license revenue per quarter.

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Gross Profit and Gross Margin

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Product gross profit and gross margin percentage increased significantly during the third quarter and first nine months of 2026 compared to the same periods of 2025, primarily as a result of higher sales prices due to the current supply-demand environment discussed above and product sales mix.

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Product gross profit increased by approximately $22.1 million during the third quarter of 2026 compared to the same period of 2025, primarily as a result of a $19.4 million increase in gross profit of RDIMM and discrete memory component products, and a $2.7 million increase in gross profit of low-profile memory subsystem products.

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Product gross profit increased by approximately $64.7 million during the first nine months of 2026 compared to the same period of 2025, primarily as a result of a $55.3 million increase in gross profit of RDIMM and discrete memory component products, and a $9.4 million increase in gross profit of low-profile memory subsystem products.

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Total gross margin percentage increased from 4% during the third quarter of 2025 to 66% in the same period of 2026, primarily due to license fee revenue under the Samsung License Agreement, which has no associated cost of sales, and higher product gross margin. Similarly, total gross margin percentage increased from 4% during the first nine months of 2025 to 36% in the same period of 2026 for these same reasons.

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Operating Expenses

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Operating expenses for the three and nine months ended September 26, 2026 and September 27, 2025, were as follows (dollars in thousands):

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Research and Development

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Research and development expenses increased during the three and nine months ended September 26, 2026 compared to the same periods of 2025, primarily due to higher employee headcount and the associated increase in overhead costs. We expect research and development expenses to increase in future periods as we invest to support growth in our products business.

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Intellectual Property Legal Fees

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Intellectual property legal fees consist of fees incurred for patent enforcement and licensing, appeals, patent drafting and prosecution, and opposition to third-party post-grant patent proceedings. These fees may not be linear but may occur in lump sums depending on jury trial management, due dates of various filings and their associated fees, and the arrangements we may make with our legal advisors in connection with enforcement proceedings, which often include fee arrangements or contingent fee arrangements in which we pay these legal advisors on a scaled percentage of any negotiated fees, settlements or judgments awarded to us based on if, how and when the fees, settlements or judgments are obtained. See Note 6 to the condensed consolidated financial statements included in Part I, Item 1 of this report for further discussion. In addition, in connection with the settlement of our patent litigations with Samsung (see "Management's Discussion and Analysis - Recent Developments" above) and Micron (see Note 10 to the condensed consolidated financial statements), we have incurred and expect to incur legal fees payable to outside counsel retained on a partial contingent fee basis, calculated as a percentage of amounts received under the Samsung Settlement Agreement, Samsung License Agreement, Micron Settlement Agreement, and Micron License Agreement. Such fees may be material to our results of operations and cash flows in the periods in which they become payable.

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Intellectual property legal fees increased during the third quarter and first nine months of 2026 compared to the same periods of 2025 due primarily to higher legal expenses incurred to protect and enforce our patent portfolio, and $1.8 million of contingent fee in connection with our Samsung settlement. Contingent fees in connection with settlement agreements are incremental costs of obtaining a contract to be capitalized and amortized over the license term.

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Selling, General and Administrative

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Selling, general and administrative expenses increased during the third quarter and first nine months of 2026 compared to the same periods of 2025 primarily due to a $6.1 million increase in stock-based compensation expense, primarily related to the Chief Executive Officer Performance Equity Award granted in July 2026, higher corporate legal expenses, and sales commissions associated with higher sales. We expect our selling, general and administrative expenses will increase in future periods as we invest to support growth in our products business, expand our customer base, and when, if and as we recognize additional compensation expenses related to the Award and the retention bonuses for our Chief Executive Officer and Chief Financial Officer approved in November 2026 and described in Note 10 to the condensed and consolidated financial statements.

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Other Income, Net

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Other income, net for the three and nine months ended September 26, 2026 and September 27, 2025 was as follows (dollars in thousands):

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Interest income, net increased during the third quarter and first nine months of 2026 compared to the same periods of 2025, primarily as a result of interest earned on higher cash balances. Other income, net included a deposit returned for our former manufacturing facility located in the People's Republic of China during the first nine months of 2025.

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Provision for Income Taxes

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We recorded an income tax benefit of $44.0 million for the third quarter and first nine months of 2026, compared to no provision for income taxes in the corresponding periods of 2025. The provision primarily relates to Korean withholding taxes on license fee payments under the Samsung License Agreement, which Samsung is required to gross up, and U.S. federal and state income taxes on taxable income from the license and settlement arrangements, after utilization of available net operating loss carryforwards. During the third quarter of 2026, we released $56.5 million of valuation allowance because we concluded it is more likely than not that the related deferred tax assets will be realized from projected taxable income, and we continue to maintain a $23.0 million valuation allowance against deferred tax assets we do not expect to realize. We will reassess our valuation allowance and estimated annual effective tax rate each quarter as projections change.

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Liquidity and Capital Resources

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Our primary sources of cash were historically proceeds from issuances of equity and receipts from net product sales. In addition, in August 2026 we received the upfront license fee under the Samsung License Agreement, and we may receive quarterly license fees pursuant to the terms of the Samsung License Agreement through the second calendar quarter of 2031 and under the Micron License Agreement from the fourth calendar quarter of 2026 through the third calendar quarter of 2031. These receipts will be partially offset by contingent fees payable to outside counsel as amounts are received and the potential effects of changes in variable consideration recognition. We previously received proceeds from the SK hynix Supply Agreement, which we used to support our operations. Historically, we have also funded our operations with our revolving line of credit under a bank credit facility with SVB and funds raised through the March 2025 Purchase Agreement, our October 2025 Offering, June 2025 Offering and warrant exercises.

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The following tables present selected financial information as of September 26, 2026 and December 27, 2025 and for the first nine months of 2026 and 2025 (in thousands):

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During the nine months ended September 26, 2026, net cash provided by operating activities was primarily a result of net income of $95.5 million, partially offset by non-cash adjustments to net income of ($79.9) million, primarily related to the deferred income tax benefit, and net cash inflows from changes in operating assets and liabilities of $229.4 million driven predominantly by an increase of deferred revenue related to unrecognized upfront license fee and advance payments from customers, an increase in accounts payable, and an increase in accrued payroll and related liabilities, partially offset by an increase in accounts receivable, an increase in inventories, and a decrease in other liabilities. Net cash provided by financing activities during the nine months ended September 26, 2026 primarily consisted of $42.0 million in net proceeds from exercise of stock options and warrants, and $1.0 million in net proceeds from the issuance of common stock under Samsung Securities Purchase Agreement (as defined below), partially offset by $1.8 million in net

repayments under the 2023 SVB Credit Agreement (as defined below), and $0.4 million in payments of notes payable to finance insurance policies.

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During the nine months ended September 27, 2025, net cash used in operating activities was primarily a result of net loss of $22.6 million, non-cash adjustments to net loss of $2.7 million, and net cash outflows from changes in operating assets and liabilities of $8.2 million driven predominantly by a decrease in accounts payable, an increase in inventories due to orders not shipped in September 2025, an increase in prepaid expenses and other assets, partially offset by an increase in deferred revenue related to advance payments received on orders shipped in October 2025. Net cash provided by financing activities during the nine months ended September 27, 2025 primarily consisted of $1.1 million in net proceeds from the issuance of common stock under the March 2025 Purchase Agreement (as defined below) and $11.6 million in net proceeds from issuance of common stock under the June 2025 Purchase Agreement (as defined below), $2.2 million in net borrowings under the 2023 SVB Credit Agreement (as defined below), partially offset by $0.5 million in payments of notes payable to finance insurance policies.

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Capital Resources

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March 2025 Lincoln Park Purchase Agreement

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On March 13, 2025, we entered into a purchase agreement (the "March 2025 Purchase Agreement") with Lincoln Park Capital Fund, LLC ("Lincoln Park"), pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $75 million in shares of our common stock over the 36-month term of the March 2025 Purchase Agreement subject to the conditions and limitations set forth in the March 2025 Purchase Agreement. As of September 26, 2026, $73.7 million remains available under the March 2025 Purchase Agreement with Lincoln Park. Sales under the March 2025 Purchase Agreement are subject to daily volume-based limits and a contractual floor price, and our ability to access the remaining capacity at any point in time depends on prevailing market prices and trading volumes.

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October 2025 Offering

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On October 6, 2025, we entered into a Securities Purchase Agreement (the "October 2025 Purchase Agreement") with certain investors (collectively, the "October 2025 Purchasers"), pursuant to which we issued and sold to the October 2025 Purchasers in a registered offering (the "October 2025 Offering") an aggregate of (i) 14,285,716 shares of our common stock and (ii) Common Stock Purchase Warrants (the "October 2025 Warrants") to purchase up to an aggregate of 28,571,432 shares of our common stock (the "October 2025 Warrant Shares") at a combined purchase price of $0.70 per share and accompanying October 2025 Warrant. The October 2025 Offering closed on October 7, 2025. The net proceeds to us from the October 2025 Offering were approximately $9.3 million, after deducting placement agent fees and offering costs paid by us.

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The October 2025 Purchase Agreement also provided that we could not, subject to the exceptions described in the October 2025 Purchase Agreement (including an exception permitting us to utilize the March 2025 Purchase Agreement following the expiration of the 90-day period following the closing of the October 2025 Offering), effect or enter into any Variable Rate Transactions (as defined in the October 2025 Purchase Agreement) until the six-month anniversary of the closing date of the October 2025 Offering.

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June 2025 Offering

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On June 24, 2025, we entered into a Securities Purchase Agreement (the "June 2025 Purchase Agreement") with certain investors, including Chun K. Hong, Chairperson of our Board of Directors (the "Board" or "Board of Directors"), President and Chief Executive Officer (collectively, the "June 2025 Purchasers"), pursuant to which we issued and sold to the June 2025 Purchasers in a registered offering (the "June 2025 Offering") an aggregate of (i) 17,142,860 shares of our common stock and (ii) Common Stock Purchase Warrants (the "June 2025 Warrants") to purchase up to an aggregate of 34,285,720 shares of our common stock (the "June 2025 Warrant Shares") at a combined purchase price of $0.70 per share and accompanying June 2025 Warrant. Mr. Hong purchased $3.0 million of shares and accompanying June 2025 Warrants in the June 2025

Offering. The June 2025 Offering closed on June 25, 2025. The net proceeds to us from the June 2025 Offering were approximately $11.6 million, after deducting placement agent fees and offering costs paid by us.

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The June 2025 Purchase Agreement also provided that we could not, subject to the exceptions described in the June 2025 Purchase Agreement (including an exception permitting us to utilize the March 2025 Purchase Agreement following the expiration of the 90-day period following the closing of the June 2025 Offering), effect or enter into any Variable Rate Transactions (as defined in the June 2025 Purchase Agreement) until the six-month anniversary of the closing date of the June 2025 Offering.

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Securities Purchase Agreements

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On August 4, 2026, in connection with and as a condition to the parties' entry into the SSI Supply Agreement and effective as of July 31, 2026, we entered into a Securities Purchase Agreement and a Lock-Up and Release Agreement with Samsung Semiconductor. Pursuant to the Securities Purchase Agreement, Samsung Semiconductor purchased the SSI Shares for an aggregate cash purchase price of $1 million. Pursuant to the Lock-Up and Release Agreement, twenty percent of the SSI Shares will be released from the disposition and transfer restrictions set forth therein on each of the first, second, third and fourth anniversaries of the issuance of the SSI Shares, with the remaining SSI Shares released on the fifth anniversary. The issuance of the SSI Shares to Samsung Semiconductor was not registered under the Securities Act. The issuance of the SSI Shares was completed in reliance upon Section 4(a)(2) of the Securities Act. The closing of the transactions contemplated by the Securities Purchase Agreement occurred on August 6, 2026.

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On October 5, 2026, we entered into the Micron Purchase Agreement and the Micron Lock-Up and Release Agreement with Micron Technology, Inc. Pursuant to the Micron Purchase Agreement, Micron Technology purchased the Micron Shares for an aggregate cash purchase price of $1 million. Pursuant to the Micron Lock-Up and Release Agreement, twenty percent of the Micron Shares will be released from the disposition and transfer restrictions set forth therein on each of the first, second, third and fourth anniversaries of the issuance of the Micron Shares, with the remaining Micron Shares released on the fifth anniversary. The issuance of the Micron Shares to Micron Technology, Inc. was not registered under the Securities Act. The issuance of the Micron Shares was completed in reliance upon Section 4(a)(2) of the Securities Act. The closing of the transactions contemplated by the Micron Purchase Agreement occurred on October 7, 2026.

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2023 SVB Credit Agreement

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On November 7, 2023, we entered into a loan and security agreement (as amended to date, the "2023 SVB Credit Agreement") with 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 advances at a per annum rate equal to the greater of 8.50% and the Wall Street Journal prime rate. The maturity date was originally November 7, 2025. On November 7, 2025, we entered into a first amendment to the loan and security agreement (the "2023 SVB Credit Agreement Amendment") to, among other things, extend the maturity date from November 7, 2025 to November 7, 2027.

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As of September 26, 2026, the outstanding borrowings under the 2023 SVB Credit Agreement were $0 with $4.2 million available under the revolving line of credit. During the nine months ended September 26, 2026, we had net repayments of $1.8 million under the 2023 SVB Credit Agreement; because borrowing capacity is driven by eligible receivables and reserve adjustments, availability may fluctuate with collections and sales mix, and letters of credit issued under the facility and with other banks are secured by cash and reduce unrestricted liquidity.

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Warrant Exercises

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During the nine months ended September 26, 2026, we received $41.7 million in proceeds from the cash exercise of issued and outstanding warrants to purchase 59,096,756 shares of common stock. Future warrant

exercises will likely depend on market conditions, the strategies of the individual warrant holders, and are ultimately at the discretion of the individual warrant holders. As such, future warrant exercises (if any) may be unpredictable and may not be representative of recent exercise activity.

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Sufficiency of Cash Balances and Potential Sources of Additional Capital

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We believe our existing balance of cash and cash equivalents (including restricted cash balances), which totaled $327.7 million as of September 26, 2026, along with cash receipts from revenues, payments pursuant to the Samsung License Agreement (with the upfront payment received in August 2026) and the Micron License Agreement, potential borrowing availability, if any, under the 2023 SVB Credit Agreement, funds available through the March 2025 Purchase Agreement, proceeds received from potential warrant exercises, and other future debt and equity offerings and taking into account cash expected to be used in our operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. This belief reflects our current assessment of known trends and uncertainties that could affect near-term liquidity, including the timing of cash effects from customer advance payments, fluctuations in borrowing-base availability and letters-of-credit usage and market conditions that affect our ability to utilize the March 2025 Purchase Agreement. However, this estimate may ultimately be incorrect and we may use our cash resources faster than we expect as a result of many factors, including costs to defend our intellectual property portfolio, the results of ongoing litigation and legal proceedings, demand and acceptance of our products, whether our current customers continue purchasing our products, costs of developing and improving our products, our results of operations, including our level of net product sales that we receive which can vary based on a number of factors, including the amount and timing of vendor payments, the timing of customer orders, the effects of changes in international trade policy, non-recurring items and changing projected inventory needs and estimates. Beyond the next 12 months, we expect our principal sources of liquidity to include cash receipts from product sales and the quarterly license fees payable under the Samsung License Agreement and the Micron License Agreement through 2031. We expect our material cash requirements over the next 12 months and in the longer term to include cash retention bonus payments for our Chief Executive Officer and Chief Financial Officer, contingent fees payable to outside counsel in connection with payments received pursuant to our Samsung and Micron agreements, U.S. federal and state income taxes (to the extent not offset by available net operating loss carryforwards and foreign tax credits), purchases of DRAM and NAND products under the SSI Supply Agreement, which provides us the right, but not the obligation, to purchase up to $300 million of products per year, other purchases of inventory, lease obligations, strategic transactions, and the pursuit of such opportunities, and costs and expenses related to the continued enforcement and protection of our intellectual property portfolio.

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Off-Balance Sheet Arrangements

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We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or capital resources that is material to investors.

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Recent Accounting Pronouncements

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In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which updates expense disclosure requirements on an annual and interim basis. This ASU is effective for the annual periods beginning after December 15, 2026, and the interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU.

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In May 2025, the Financial Accounting Standards Board issued ASU 2025-04, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer, which clarifies accounting for shares, warrants, and other share-based awards an entity grants to its customers. This ASU is effective for the annual periods beginning

after December 15, 2026, including interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU.

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Critical Accounting Policies and Use of Estimates

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The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net sales and expenses during the reporting period. By their nature, these estimates and assumptions are subject to an inherent degree of uncertainty. We base our estimates and assumptions on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. We review our estimates and assumptions on an ongoing basis. Actual results may differ from our estimates, which may result in material adverse effects on our consolidated operating results and financial position.

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Our critical accounting policies and estimates are discussed in Note 1 to the condensed consolidated financial statements in this report and in the notes to consolidated financial statements in Part II, Item 8 of our Annual Report and in the MD&A in our Annual Report. Other than the addition of revenue recognition for patent license arrangements, including the identification of performance obligations, the timing of their satisfaction and estimates of variable consideration, including the constraint on variable consideration, and the grant-date fair value of common stock issued to a supplier, including the discount for lack of marketability for post-vesting transfer restrictions and accounting for income taxes as each described below, there have been no significant changes to our critical accounting policies since our Annual Report.

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Revenue Recognition

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Intellectual Property License and Royalty Revenue

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During the third quarter of 2026, we entered into a five-year patent license agreement under which we granted Samsung Electronics a license to our patent portfolio. Under the Samsung License Agreement, we may receive total license fees of up to $750.0 million, consisting of a $200.0 million upfront license fee and quarterly license fees of up to $27.5 million per quarter for 20 quarters, subject to variable consideration described below. Including foreign withholding taxes paid by Samsung on our behalf, the total potential consideration is up to approximately $898.2 million. During the third quarter of 2026, we received $227.5 million ($272.5 million inclusive of foreign withholding taxes paid by Samsung on our behalf), consisting of the upfront license fee and the first quarterly license fee. License fee revenue is recognized inclusive of foreign withholding taxes paid by Samsung on our behalf, as described below.

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Our intellectual property license and royalty revenue is comprised of licenses which provide Samsung the right to access our portfolio of patents, including patents added to the portfolio during the license term, in exchange for license fees and sales-based royalties. License fee revenue is recognized on a straight-line basis over the license term. Royalty revenue is recognized in the fiscal quarter to which the royalty relates. License fees and royalties are recognized gross of foreign withholding taxes paid by Samsung on our behalf, which are recorded as an income tax asset until utilized.

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Performance Obligations

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Our intellectual property license and royalty revenue includes a single performance obligation to provide Samsung with the right to access our patent portfolio, including patents added to the portfolio during the license term, which is satisfied over time. We use a time-elapsed measure of progress because the licensing rights are made available to the customer evenly throughout the license term.

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Royalties are variable consideration based on Samsung's reported revenue and are recognized in accordance with the sales-based royalty guidance under ASC Topic 606, Revenue from Contracts with Customers, in the calendar quarter to which the royalty relates. We have elected the optional exemption not to include sales-based royalties in the remaining performance obligation disclosed under Contract Assets and Liabilities below; these royalties will be determined quarterly over the remaining license term through July 2031. The remaining performance obligation also excludes variable consideration that is constrained, as described under Variable Consideration below.

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Variable Consideration

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Our licensing agreement includes variable consideration that is contingent upon events occurring in the later periods of the contract. We include variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the related matters are resolved. We reassess the estimate of variable consideration at each reporting date. Changes to our estimate of variable consideration are accounted for as changes in the transaction price. Based on our current estimates, no variable consideration was excluded from the transaction price.

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Contract Assets and Liabilities

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We continually evaluate whether the revenue generating activities and advanced payment arrangements with customers result in the recognition of contract assets or liabilities. Generally, we do not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed. Contract liabilities (deferred revenues) are comprised of payments received from our customers in advance of transferring products to customers and upfront license fees received in advance of satisfying our license performance obligation over the license term.

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As of September 26, 2026 and December 27, 2025, deferred revenue was $258.0 million and $30.6 million, respectively. Deferred revenue at September 26, 2026 included $227.5 million related to the unrecognized upfront license fee, of which $47.9 million is expected to be recognized within the next 12 months and the remainder through July 2031. The remaining $30.5 million related to advance payments received during the third quarter of 2026 on product orders shipped subsequent to the end of the quarter. Deferred revenue at December 27, 2025 was related to advance payments received during the quarter on product orders shipped subsequent to the end of the quarter.

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During the three and nine months ended September 26, 2026, we recognized $3.0 million and $30.6 million, respectively, of revenue included in deferred revenue at the beginning of each period, all related to product orders.

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We capitalize incremental costs of obtaining contracts with customers when such costs are expected to be recovered. These costs include contingent legal fees that would not have been incurred if the related contracts had not been obtained. Legal fees and other costs that do not qualify for capitalization are expensed as incurred.

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Capitalized contract acquisition costs are amortized on a systematic basis consistent with the transfer of the goods or services to which the costs relate and are evaluated for impairment in accordance with ASC 340-40.

In connection with our license agreement with Samsung, we capitalized contingent legal fees that represent incremental costs of obtaining the agreement and are expected to be recovered through the consideration received under the agreement. These costs are being amortized on a straight-line basis over the 20-quarter license term, consistent with the recognition of the related license revenue.

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As of September 26, 2026, capitalized contract acquisition costs totaled approximately $32.9 million, consisting of $7.2 million classified as current assets and $25.6 million classified as noncurrent assets in the accompanying condensed consolidated balance sheets. Amortization expense related to these costs was approximately $1.8 million for the three and nine months ended September 26, 2026.

Prepaid Vendor Nonrefundable Deposit

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Equity instruments issued to suppliers for goods or services are accounted for under ASC 718, Compensation-Stock Compensation. When the supplier is also a customer or customer affiliate, we apply the consideration payable to a customer guidance in ASC 606. The grant-date fair value of common stock subject to post-vesting transfer restrictions reflects a discount for lack of marketability.

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Advance payments for contractual rights to access supplier products are recorded as prepaid vendor nonrefundable deposit assets and recognized in cost of sales on a straight-line basis over the contract term. Amounts expected to be recognized within 12 months are classified as prepaid expenses and other current assets, with the remainder classified as other assets. Recoverability is assessed at each reporting date, and any unamortized balance is recognized in cost of sales upon early termination of the supply arrangement.

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Income Taxes

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We recorded income tax benefit of $44.0 million and $44.0 million for the three and nine months ended September 26, 2026, respectively. We recorded no income tax provision for the three and nine months ended September 27, 2025.

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Our effective tax rate was (85.4)% and (85.4)% for the three and nine months ended September 26, 2026, respectively, and 0% for the three and nine months ended September 27, 2025. The effective tax rate for the 2026 periods differs from the U.S. statutory rate of 21% primarily due to the discrete benefit from the release of valuation allowance described below.

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During the third quarter of 2026, we released $56.5 million of its valuation allowance on federal and state deferred tax assets. Of this amount, $48.6 million was recognized as a discrete benefit resulting from a change in judgment about the realizability of beginning-of-year deferred tax assets. The remaining $7.9 million is reflected in the estimated annual effective tax rate. Management based this conclusion on all available positive and negative evidence, including cumulative income in recent years and projected future taxable income, and concluded it is more likely than not that these deferred tax assets will be realized.

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As of September 26, 2026, we maintained a valuation allowance of $23.0 million, primarily against federal net operating loss carryforwards expected to be utilized against projected 2026 taxable income and foreign tax credits that are not expected to be utilized due to limitation. The remainder relates to certain state and China deferred tax assets. We will continue to evaluate the realizability of its deferred tax assets in future periods.

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