Netlist Reports First Quarter Results

IRVINE, Calif., May 13 /PRNewswire-FirstCall/ -- Netlist, Inc. (Nasdaq: NLST) today reported financial results for the first quarter ended April 4, 2009. Revenues for the first quarter ended April 4, 2009, were $2.2 million compared to $13.1 million for the first quarter ended March 29, 2008. The decline in revenues was driven by a sharp reduction in demand from the Company's current customer base, ramp down of certain projects and the slower than expected growth in sales of the Company's flash products. The Company continues to transition to a new business strategy focused on the development of high-margin subsystems based on custom logic devices.

Negative gross profit for the first quarter ended April 4, 2009, was $537,000, or a negative gross margin of 25 percent, compared with a gross profit of $3.1 million, or a gross margin of 24 percent, in the year-earlier period.

Net loss for the first quarter ended April 4, 2009, was $3.8 million, or $0.19 loss per share, compared to a net loss in the prior year period of $584,000, or $0.03 loss per share. Fully diluted weighted-average shares outstanding for the first quarter ended April 4, 2009, were 19.9 million, compared to 19.8 million in the corresponding year-earlier period. These results include stock-based compensation expense in the first quarter ended April 4, 2009 of $307,000, compared with $244,000 in the prior year period.

During the first quarter, the Company remained focused on preserving cash. As of April 4, 2009, cash, cash equivalents, and investments in marketable securities were $20.6 million, total assets were $30.8 million, working capital was $19.4 million, total long-term debt was $48,000, and stockholders' equity was $26.7 million.

"We continue to make steady progress in the development of custom semiconductor logic devices, which will enable the next-generation of industry-leading high-density, high-speed, low-power memory subsystems," Chief Executive Officer Chun K. Hong said. "Current and potential OEM customers' reception to these new technologies has been encouraging, and we remain on track to roll these out late in the year. In the meantime, we have been successful in managing our cash so that we have ample resources to develop, market and manufacture these new products in high volume."

Conference Call Information

As previously announced, Netlist is conducting a conference call today to be broadcast live over the Internet at 4:00 p.m. Pacific Time/7:00 pm Eastern Time to discuss and review the financial results for the first quarter ended April 4, 2009. The dial-in number for the call is

1-877-941-2928. The live webcast and archived replay of the call can be accessed in the Investors section of Netlist's website at www.netlist.com.

About Netlist, Inc.

Netlist designs and manufactures high-performance chip-based and non-chip based memory subsystems for the server and high-performance computing and communications markets. The Company's memory subsystems are developed for applications in which high-speed, high-capacity memory, functionality, small form factor, and heat dissipation are key requirements. These applications include tower-servers, rack-mounted servers, blade servers, high-performance computing clusters, engineering workstations, and telecommunication equipment. Netlist maintains its headquarters in Irvine, California with manufacturing facilities in Suzhou, China.

Safe Harbor Statement

This news release contains forward-looking statements regarding future events and the future performance of Netlist, including future opportunities and growth for the company's business. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expected or projected. These risks and uncertainties include, but are not limited to, the rapidly-changing nature of technology; volatility in the pricing of DRAM ICs and NAND;changes in and uncertainty of customer demand, including delays in product qualifications; delays in our and our customers' product releases and development; introductions of new products by competitors; changes in end-user demand for technology solutions; the Company's ability to attract and retain skilled personnel; the Company's reliance on suppliers of critical components; fluctuations in the market price of evolving industry standards; and the political and regulatory environment in the People's Republic of China. Other risks and uncertainties are described in the Company's annual report on Form 10-K, dated March 30, 2009, and subsequent filings with the U.S. Securities and Exchange Commission made by the Company from time to time. Netlist undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                                 TABLES FOLLOW



                                 Netlist, Inc.
              Unaudited Condensed Consolidated Statements of Operations
                      (in thousands, except per share amounts)

                                                      Three Months Ended
                                                    April 4,      March 29,
                                                      2009          2008

    Net sales                                       $2,162       $13,104
    Cost of sales(1)                                 2,699         9,973
    Gross (loss) profit                               (537)        3,131
    Operating expenses:
      Research and development(1)                    1,614         1,576
      Selling, general and administrative(1)         1,935         3,468
        Total operating expenses                     3,549         5,044
    Operating loss                                  (4,086)       (1,913)
    Other income (expense):
      Interest income, net                              82           239
      Other income (expense), net                      175           (91)
        Total other income, net                        257           148
    Loss before provision (benefit) for
     income taxes                                   (3,829)       (1,765)
    Provision (benefit) for income taxes                18        (1,181)
    Net loss                                       $(3,847)        $(584)
    Net loss per common share:
      Basic                                         $(0.19)       $(0.03)
      Diluted                                       $(0.19)       $(0.03)
    Weighted-average common shares
     outstanding:
      Basic                                         19,855        19,820
      Diluted                                       19,855        19,820

    (1)  Amounts include stock-based compensation
          expense as follows:

      Cost of sales                                    $29           $14
      Research and development                          58            23
      Selling, general and administrative              220           207



                                  Netlist, Inc.
               Unaudited Condensed Consolidated Balance Sheets
                                 (in thousands)

                                                       April 4,     January 3,
                                                         2009          2009
    ASSETS
    Current assets:
      Cash and cash equivalents                         $8,563       $15,214
      Investments in marketable securities              11,077         5,199
      Accounts receivable, net                             895         1,917
      Inventories                                        1,322         1,829
      Income taxes receivable                              647         1,880
      Prepaid expenses and other current assets            786           761
        Total current assets                            23,290        26,800

      Property and equipment, net                        6,272         6,939
      Long-term investments in marketable
       securities                                          981           960
      Other assets                                         225           234
        Total assets                                   $30,768       $34,933

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                                  $1,320        $1,786
      Current portion of long-term debt                    433           474
      Current portion of deferred gain on sale and
       leaseback transaction                               118           118
      Accrued expenses and other current
       liabilities                                       2,045         2,083
        Total current liabilities                        3,916         4,461
    Long-term debt, net of current portion                  48           130
    Deferred gain on sale and leaseback
     transaction, net of current portion                    78           108
        Total liabilities                                4,042         4,699

    Commitments and contingencies

    Stockholders' equity:
      Common stock, $0.001 par value - 90,000
       shares authorized; 19,855                            20            20
      Additional paid-in capital                        69,690        69,383
      Accumulated deficit                              (42,960)      (39,113)
      Accumulated other comprehensive loss                 (24)          (56)
        Total stockholders' equity                      26,726        30,234
        Total liabilities and stockholders'
         equity                                        $30,768       $34,933

    Contact:  Allen & Caron Inc                 Gail Itow
              Jill Bertotti (investors)         Chief Financial Officer
              jill@allencaron.com               Netlist, Inc.
              Len Hall (media)                  (949) 435-0025
              len@allencaron.com
              (949) 474-4300

SOURCE Netlist, Inc.