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Saturday, September 24, 2022

Netlist, Inc. (OTCMKTS: NLST) Bull Runner as Company Wins Big Victory in U.S. District Court for the District of Northern California Over (‘912) Seminal Patent

Netlist, Inc. (OTCMKTS: NLST) is rocketing up the charts on a massive surge of volume after the Company’s motion for summary judgement was granted by Judge Seeborg meaning Netlist Inc. can now pursue allegations that Google Inc. memory servers infringe its patented memory module technology. Microcapdaily has been covering NLST since it was below $0.25 and the boards were filled with long suffering longs but that has all changed and many believed it would not. Everything changed in July of last year when 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.  NLST soared on May 5 after the Judge Richard Seeborg granted Netlist’s motion for summary judgement. This means that Netlist Inc. can pursue allegations that Google Inc. memory servers infringe its patented memory module technology. As soon as NLST took off in summer 2020 many suggested it would drop down below a quarter again but it never did and just kept on going. Microcapdaily suggested in July that there were way too many good things happening here for Netlist not to keep rising and that is exactly what has happened. Watch the l2, there are plenty of buyers and not a lot of sellers.  

https://www.youtube.com/watch?v=4B0FyyEgflU

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 was 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. This ruling has much larger implications than just GOOG which will more than likely set the tone for other settlements long overdue here. This represents a much-needed win for Netlist after the company was awarded zero dollars in damages in a breach of contract dispute with Samsung back in December. Netlist had soared 20% on Oct. 25 after the Irvine, Calif.-based memory and storage technology company won a victory in a breach of contract case involving Samsung. NLST has a long history of explosive moves skyrocketing from under $0.25 to highs of $10.20 per share last year and has a significant gap to fill from current levels. 

Netlist, Inc. (OTCMKTS: NLST) provides high-performance solid-state drives and modular memory solutions to enterprise customers in diverse industries. The Company’s NVMe™ SSDs in various capacities and form factors and the line of custom and specialty memory products bring industry-leading performance to server and storage appliance customers and cloud service providers. Netlist licenses its portfolio of intellectual property including patents, in server memory, hybrid memory and storage class memory, to companies that implement Netlist’s technology. 

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. The Company has over 130 issued and pending U.S. and foreign patents. Netlist has been monetizing its intellectual property through a combination of product sales and licensing, royalty and other revenue-producing arrangements. 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.  

The Company is led by founder and CEO Chun K. Hong. Prior to Netlist, Mr. Hong was president and chief operating officer of Infinilink Corp., a communications software company based in Irvine, CA. Prior to that, he was executive vice president of Viking Components, Inc., a memory manufacturing company based in RSM, CA. Mr. Hong has assembled an impressive management team including Gail Sasaki, the Company’s VP and CFO who joined netlist in 2006 and helped take the Company public. Prior to Netlist, Ms. Sasaki served as Senior VP of Finance and Treasurer at eMotion, Inc., previously a subsidiary of Eastman Kodak. The Companys Chief Licensing Officer is Marc Frechette who has more than eighteen years of licensing and patent prosecution experience and most recently served as Senior Vice President and Senior Counsel at WiLAN, where he managed their U.S.-based licensing business unit. Other executives in Netlist are Paik Ki Hong, Todd Levy, Scott Milton, Tinh Ngo, and Jerry Alston.  

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Microcapdaily has been reporting on Netlist since November 9, 2018 and was here too last summer when the stock was under $0.25. On July 18, 2020 we stated on Netlist: “The stock is quickly emerging as the darling of small caps, attracting legions of shareholders ever since 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 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. This ruling has much larger implications than just GOOG which will more than likely set the tone for other settlements long overdue here.  

NLST CEO C.K. Hong who fired his BOD giving him full control of the Company and the ability to make big decisions quickly stated at the time of the U.S. Court of Appeals decision: “For ten years Netlist has steadfastly opposed Google’s misguided campaign to invalidate the ‘912 patent,” said Netlist’s CEO, C.K. Hong. “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.”  

Earlier this month Netlist reported financial results for the first quarter ended April 2, 2022. Revenue more than tripled to $50.2 million compared to $14.9 million for last year’s quarter Gross profit dollars more than doubled to $3.4 million compared to $1.5 million for last year’s quarter. Net sales for the first quarter ended April 2, 2022 were $50.2 million, compared to net sales of $14.9 million for the first quarter ended April 3, 2021 and $36.3 million in the prior quarter. Gross profit for the first quarter ended April 2, 2022 was $3.4 million, compared to a gross profit of $1.5 million for the first quarter ended April 3, 2021 and $2.0 million for the prior quarter. 

Net loss for the first quarter ended April 2, 2022 was ($5.9) million, or ($0.03) per share, compared to a net loss in the prior year period of ($4.0) million, or a loss per share of ($0.02). These results include stock-based compensation expense of $0.7 million and $0.3 million for the quarters ended April 2, 2022 and April 3, 2021, respectively. As of April 2, 2022, cash, cash equivalents and restricted cash was $58.3 million, total assets were $88.5 million, working capital was $48.7 million, total debt was $5.1 million, and stockholders’ equity was $50.2 million. 

Netlist CEO, C.K. Hong stated: “Netlist delivered revenue and gross profit growth on both a year over year and consecutive quarter basis. During the quarter, we also made targeted investments in sales, marketing and research and development. As we execute on our product and licensing strategies, we remain well positioned to capitalize on the growth opportunities in front of us.” 

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Currently trading at a $950 million market valuation NLST has 232 million shares outstanding Netlist has a strong balance sheet with $58.3 million in the treasury, total assets of $88.5 million and just $5.1 million in total liabilities. The Company just reported record revenues that more than tripled to $50.2 million for the first quarter ended April 2, 2022, compared to the same period last year. In a much-needed win, NLST is now rocketing northbound after the Company reported that the Judge Richard Seeborg granted Netlist’s motion for summary judgement. This means that Netlist Inc. can pursue allegations that Google Inc. memory servers infringe its patented memory module technology. 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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