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Thursday, October 6, 2022

Netlist, Inc. (OTCMKTS: NLST) Major Reversal brewing (912) Seminal Patent (JDLA Update)

Netlist, Inc. (OTCMKTS: NLST) is among the most exciting stocks in small caps and speculators are looking for a major reversal off the low $4s here. The stock is a volume leader on the OTC and has a huge following of investors who are accumulating on this dip. NLST saw a specular rise during 2021 from pennies to highs of $10.20 per share in July and we reported on it all the way. The move up came after the U.S. Court of Appeals for the Federal Circuit affirmed the U.S. Patent Trial and Appeal Board’s decision upholding the validity of Netlist’s U.S. 7,619,912 (‘912) patent that applies to DDR server memory modules. The (‘912) patent is a seminal patent; an invention so impactful that it creates or shifts the technology space.  

While the case against GOOG continues to see delays, in December Netlist reported the Jury had declined to award them the $2.5 million in direct damages they were seeking in their federal case against Samsung. In October 2021 the Court issued summary judgment in favor of Netlist and against Samsung for material breach of various obligations under the Joint Development and License Agreement (JDLA), which the parties executed in November 2015. In the summary judgment Order, the Court also held that Netlist properly terminated the JDLA, a remedy which leaves Samsung without a license to Netlist’s patents. That ruling, however, limited the damages phase of the case to issues of direct damages. The case now moves to the post-trial phase over the next couple of months. 

Netlist, Inc. (OTCMKTS: NLST) operating out of Irvine, California, Netlist is a leading provider of high-performance modular memory subsystems to the world’s premier OEMs. Netlist specializes in hybrid memory – the merging of DRAM and NAND flash raw materials to create memory solutions. The Company’s patented memory technologies provide superior performance, and high density in a cost-efficient solution. From database to enterprise applications, Netlist serves diverse industries that require superior memory performance to empower critical business decisions in today’s data-driven environment. 

Netlist has a long history of being the first to market with disruptive new products such as the first load-reduced DIMM, HyperCloud®, based on Netlist’s distributed buffer architecture later adopted by the industry for DDR4 LRDIMM. Netlist was also the first to bring NAND flash to the memory channel with its NVvault® NVDIMM. These innovative products built on Netlist’s early pioneering work in areas such as embedding passives into printed circuit boards to free up board real estate, doubling densities via quad-rank double data rate (DDR) technology, and other off-chip technology advances that result in improved performance and lower costs compared to conventional memory. Netlist continues this tradition with the introduction of HybriDIMM, the industry’s first Storage Class Memory product built on commodity DRAM and flash. HybriDIMM is the first SCM product to operate in current Intel® x86 servers without BIOS and hardware changes, and the first unified DRAM-NAND solution that scales memory to terabyte storage capacities and accelerates storage to nanosecond memory speeds. 

Netlist holds a portfolio of patents, many seminal, in the areas of hybrid memory, storage class memory, rank multiplication and load reduction, among others. The strength of Netlist’s patent portfolio reflects its many years of research and development and track record of bringing disruptive new products to market. With state-of-the-art, wholly owned, ISO- and OSHAS-certified manufacturing and testing facilities in Suzhou, China, Netlist’s strategy is to marry its unique board-level intellectual property with a thorough understanding of semiconductor building blocks and system-level applications to deliver performance, cost, and time-to-market advantages to OEMs. 

Microcapdaily first reported on NLST on November 19, 2018 when the stock was about $0.30 stating at the time: “NLST is an exciting Company making big moves in recent times; the stock exploded to $1.10 in September after the Company announced a favorable claim construction order in ITC Investigation of SK hynix. Since a recent dip below $0.30 Netlist is rising fast.” 

The netlist story really took off in July when the US Court of Appeals for the Federal Circuit affirmed the U.S. Patent Trial and Appeal Board’s decision upholding the validity of Netlist’s U.S. 7,619,912 (‘912) patent that applies to DDR server memory modules. The decision is final and binding on future cases and represents a resounding win for Netlist. The (‘912) patent is a seminal patent; an invention so impactful that it creates or shifts the technology space.  

NLST CEO C.K. Hong stated: “For ten years Netlist has steadfastly opposed Google’s misguided campaign to invalidate the ‘912 patent. We are very pleased that in the end the appellate court made it clear that the claims of this seminal patent are indeed valid and in so doing, further vindicate our decade-long defense of the company’s strategic intellectual property. We will now move to lift the stay in the patent infringement lawsuit against Google in the U.S. District Court for the Northern District of CA., in order to recover current and past damages related to the ‘912 patent.” 

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Netlist has seen rapid growth; revenue for the third quarter ended October 2, 2021 was $26.7 million which was up 162% year over year. Net loss for the third quarter ended October 2, 2021 was ($10.7) million, or loss per share of ($0.05), compared to a net loss in the prior year’s period of ($2.1) million, or a loss per share of ($0.01).  

As of October 2, 2021, cash, cash equivalents and restricted cash was $73.2 million, total assets were $98.9 million, working capital was $47.2 million, total debt and accrued interest, net of debt discount, was $21.2 million, and stockholders’ equity was $47.9 million. 

Netlist CEO C.K. Hong stated: “Third quarter revenue more than doubled compared to the prior year period, while investments in sales, research and development, and legal activities tempered bottom line results. The recent summary judgement in the case against Samsung was a major victory for Netlist. We look forward to the hearing on November 10th in the case against Google which will address the question of intervening rights.”  

In December the Company reported the Jury had declined to award them the $2.5 million in direct damages they were seeking in their federal case against Samsung. In October 2021 the Court issued summary judgment in favor of Netlist and against Samsung for material breach of various obligations under the Joint Development and License Agreement (JDLA), which the parties executed in November 2015. In the summary judgment Order, the Court also held that Netlist properly terminated the JDLA, a remedy which leaves Samsung without a license to Netlist’s patents. That ruling, however, limited the damages phase of the case to issues of direct damages. The case now moves to the post-trial phase over the next couple of months. 

Tobin Hobbs, Patent Counsel for Netlist stated: “While we are disappointed with the jury’s decision on this narrow issue. We’re very pleased with the overall outcome of the case as it confirmed that Samsung no longer has a valid license to Netlist patents and therefore requires a licensing agreement.” 

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NLST is among the most exciting stocks in small caps and speculators are looking for a major reversal off the low $4s here. The stock is a volume leader on the OTC and has a huge following of investors who are accumulating on this dip. NLST saw a specular rise during 2021 from pennies to highs of $10.20 per share in July and we reported on it all the way. The move up came after the U.S. Court of Appeals for the Federal Circuit affirmed the U.S. Patent Trial and Appeal Board’s decision upholding the validity of Netlist’s U.S. 7,619,912 (‘912) patent that applies to DDR server memory modules. The (‘912) patent is a seminal patent; an invention so impactful that it creates or shifts the technology space. While the case against Google continues to see delays, in December Netlist reported the Jury had declined to award them the $2.5 million in direct damages they were seeking in their federal case against Samsung. In October 2021 the Court issued summary judgment in favor of Netlist and against Samsung for material breach of various obligations under the Joint Development and License Agreement (JDLA), which the parties executed in November 2015. In the summary judgment Order, the Court also held that Netlist properly terminated the JDLA, a remedy which leaves Samsung without a license to Netlist’s patents. That ruling, however, limited the damages phase of the case to issues of direct damages. The case now moves to the post-trial phase over the next couple of months. We will be updating on Netlist when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with Netlist.

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Disclosure: we hold no position in NLST either long or short and we have not been compensated for this article.

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4 COMMENTS

  1. Comment to the author. Please change Netflix to Netlist in paragraph 9 and paragraph 11 of your article. Kudos for a great article.

  2. Great summary on this exciting stock. The short-term outlook is incredible, but the long-term growth potential is even more appealing to me. I’ve been in this stock for about 7 months and expect to hold most of it it for decades.

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