Netlist: Deep Dive Into High-Risk High-Reward Litigation Play (OTCMKTS:NLST) (2024)

Investment Thesis

Netlist (OTCQB:NLST) is a litigation play, which by its nature implies high risk. I would not recommend this stock for any who cannot stomach profound volatility and ongoing dilution risk.

Legal proceedings with Micron (MU) and Samsung (OTCPK:SSNLF) are well underway, and I expect should conclude within the next two years if not sooner. Google (GOOG) could take much longer, perhaps in the region of four years. I expect the stock price to fluctuate a lot between now and then, hopefully in a general uptrend as successful litigation draws closer and seems more likely. That said, I note that Samsung and Micron could settle with Netlist at any point between now and then, which would likely both totally reverse Netlist’s profitability and shift the baseline for the stock much higher.

Introduction

Netlist specializes in design and manufacture of high-performance memory subsystems for the data centre, cloud computing, and storage markets. Its memory products are integrated into servers, storage systems, and other computing platforms to enhance their performance, reliability, and data protection capabilities.

Their current business economics aren’t sustainable. The majority of their revenues (generated as a reseller) are very low margins, and gross profits are far below their operating expenses. Their business is cyclical and lumpy, and Netlist has no clear edge as a reseller. While I expect their market to be heading into an upcycle due to the shift to AI, even with this shift, the business may not turn profitable, and is certainly overvalued.

The investment potential is derived from Netlist’s IP, specifically its patent portfolio. It is an innovative company, and its solution optimise performance and reliability. Several companies utilise Netlist’s technology but currently are not paying for that privilege.

Thus, Netlist are engaged in legal proceedings which, if successful, could generate huge value for the company. In 2021, Netlist settled one of these with SK Hynix. They also have varying combinations of cases against Micron, Google and Samsung ongoing. I have included a chart below which shows an overview of the legal proceedings. Don’t be intimidated at first glance. I’ll give overview and context for each of the cases, as well as estimate the value that could be generated from several of them (#3, #6, and #8 below). This is a longer piece than usual, so readers can skip to these three cases if they want to get to the valuation faster. Finally, I will give my fair value estimate for Netlist.

1) SK Hynix

Netlist opened legal proceedings against SK Hynix in 2016 for the infringement of patents related to their RDIMM and LRDIMM products. After several years of back and forth, Netlist received a favourable Claims Construction Order in March 2021, with the trial scheduled for December 2021.

By April 2021, Netlist and SK Hynix had settled their case, announcing a License agreement and a Supply agreement, both for the duration of 5 years. As part of the License agreement, Netlist received a lump sum of $40m, and in exchange, SK Hynix received a License to utilise Netlist’s patents. The Supply agreement entitled Netlist to purchase up to $600m worth of SK Hynix memory products at reasonable rates and to resell these. Additionally, the announcement included an agreement to “collaborate on certain technology development activities.”

It is worth noting the timing of the settlement. Claims Constructions Orders, which had been issued, are predictive of final verdicts. Additionally, Netlist would soon begin the discovery process, and SK Hynix would naturally be inclined not to have confidential documents disclosed that could discredit the company or further incriminate it.

Incidentally, it was at this point that the stock reached its 10-year peak, essentially quadrupling in a month. However, after a spike, it declined to pre-SK Hynix levels by the start of 2023.

I believe this to have been a huge win for Netlist. SK Hynix provided some much needed cash to enable Netlist to continue litigation against other infringers, reducing the need to dilute through capital raises. Also, SK Hynix is currently using a license for Netlist’s IP, and thus is more likely to continue to license the products moving forward. Assuming they do, Netlist would begin receiving ongoing royalties from Apr 2026 comparable, though a little smaller, than Samsung’s (see case #6).

As for the $600m worth of resale opportunity, this has helped the cash position somewhat but has not been as much a boon as some investors had hoped. Revenues did jump up, and currently account for around 75% of Netlist’s total. However, gross margins dropped sharply, SG&A increased and the company sometimes struggles turning inventory. As for the collaboration activities, to date these have yet to bear any fruit that I have observed.

2) Micron (West District - Texas)

• Filed: 04/2021
• Current Judge: TBD (former judge retired)
• Allegedly infringed patents: ‘833, ‘314, ‘035, ‘608
• Products in question: LRDIMM and NVDIMM modules

This case effectively was stayed in May 2022, pending IPR decisions for the four patents. The IPR request was outright denied for the ‘608 (i.e. it remains valid). The ‘035 was deemed partially valid. Regarding the ‘833, the few claims that Samsung challenged were invalidated, which is a shame for Netlist, but others weren’t challenged. I should note that these decisions can be appealed via a Rehearing Request or by escalating to the Federal Court. Even if the ‘833 is appealed as I expect, legal proceedings for the other 3 patents can proceed without the ‘833, since ‘833 was originally filed as a different case (and has since been merged). We’ll get decisions for the ‘314 by the start of November, after which, this case could be resumed. However, due to the uncertainty around timing and scope of this case, I will not factor it in the valuation.

3) Micron (East District - Texas)

• Filed: 06/2022
• Current Judge: Gilstrap / Mag. Payne
• Infringed patents: ‘060, ‘160, ‘506, ‘339, ‘918, ‘054
• Infringing products: DDR4 LRDIMMs, DDR5 DIMMs, HBMs, and PMIC

The Claim Construction took place before Honourable Magistrate Payne in July. We’re awaiting an Order for this, which is likely to come in the very near future. There is a pretrial conference scheduled for December 20^th and a jury trial scheduled for Jan 2024. Late August, Payne ordered Micron to produce the last 10 years of licensing deals, including the Rambus deal (a similar previous case from 2013), which will be very beneficial for Netlist to determine the scale of the infringement and have ammunition for any royalty discussions. Micron hasn’t produced these yet, and recent motions and replies cover whether Micron should be held in contempt of court. The recent volume of filings here imply interesting developments might soon follow.

I think there’s a lot of reason for optimism for Netlist to be successful in court or for a settlement beforehand. This case is regarding the same products and patents and is in front of the same Judge as the Samsung East District case (see #6). The only difference is that Samsung’s defence was mirkier, since at least they had a contract to begin with unlike Micron. Micron’s case is more straightforward. They have less to hide behind. Therefore, it follows that the chance of success for this case is high. In their recent earnings call, Netlist stated the following.

Prior to the trial itself, the claim construction is the most important predictor of outcome in a patent infringement litigation. On the day of the claim construction hearing, Magistrate Judge Roy Payne provided a tentative set of constructions. According to these tentative constructions received that morning, the court appears to have understood and adopted almost every Netlist construction, providing 16 out of the 17 terms at issue in Netlist's favor. We feel the hearing went very well and now look forward to the court's entry of a favorable claim construction order.

What kind of settlement could we expect from this case? The most important unknown at this point is the duration of infringement the court will consider. Micron has allegedly been infringing for years, and it is not unreasonable to think the duration of infringement could be in the region of 4-5 years. However, to be conservative, I will assume the minimum possible timeframe; that is, one year of shipments, the same as Samsung.

The below table shows my back of envelope calculation to determine Micron’s potential liability, which comes to $105m. To find this, I use the award amounts from the Samsung case (#6), and scale to match their respective market shares (for DRAM and HBM). Micron’s market share is much smaller, particularly for HBM products, so it comes out to be much lower than Samsung’s.

4) Micron & Samsung (East District - Texas)

• Filed: 08/2022
• Current Judge: Gilstrap
• Allegedly infringed patents: ‘912, ‘215, ‘417, ‘608
• Products in question: LRDIMMs and RDIMMs

In October 2022, two cases (Micron & Samsung) were consolidated, with Samsung considered the “Lead case”. Claim construction was expected on October 5^th, however, when a scheduling clash occurred, Gilstrap brought the case forward to September 26^th, which indicates increasing momentum. The trial is set to begin April 2024, and the parties will be tried separately. I have found fewer details on this case, and believe any valuation here to be challenging. I will not factor this case into my valuation and consider it only additional upside.

Incidentally, we are also awaiting FWDs on a few patents for this case. Of particular note is the ‘912 patent, which must be resolved before the Google case (#8) will continue. The FWD is expected in April 2024.

5) Samsung – Breach of Contract (Central District – California / 9^th circuit court of appeals)

Netlist entered into Joint Development & Licensing Agreement (JDLA) with Samsung in 2015. Before long, Samsung decided to exit their licensing agreement, but continued to use Netlist’s IP. Due to this breach of contract, Netlist terminated their contract with Samsung, but Samsung continued using Netlist’s IP, stating that Netlist unlawfully terminated the contract. Netlist first filed a legal complaint about the initial breach with the courts in May 2020, and later requested an Order stating it had lawfully terminated the contract. It received the Order in February 2022, stating that:

1. Samsung breached its supply obligations to Netlist;
2. Samsung breached its payment obligations to Netlist; and
3. Netlist properly terminated the JDLA such that Samsung's licenses and rights under the JDLA have ceased.

Shortly thereafter, Samsung appealed the Order, and Netlist then cross-appealed to receive associated professional fees with interest. Oral arguments were heard in June, which session can be viewed here if interested. We are awaiting a decision for these appeals, which could be received anytime, but by June 2024 at the latest.

If Samsung’s appeal is upheld, this would lead to another jury trial. This would significantly delay the cases against Samsung, and if the appeal is eventually won, would entirely undermine the Samsung cases. The downside here would be large for Netlist, undermining their recent wins. However, I believe the chance of a successful appeal is remote. It seems fairly evident that Samsung broke the contract, and which is why the Judgement was granted to Netlist in the first place. In the oral arguments, Netlist seemed to have the upper hand, presenting several supporting precedents (unlike Samsung). If the appeal is not upheld, Netlist’s recent win becomes more secure. The potential of professional fees could be a nice bonus too.

6) Samsung – Patent Infringement (East District – Texas)

• Reference: 2:22-cv-00293
• Filed: 12/2021
• Current Judge: Gilstrap

• Allegedly infringed patents: ‘060, ‘160, ‘506, ‘339, ‘918, ‘054

• Products in question: DDR4 LRDIMMs, DDR5 DIMMs and HBM components
• Duration in question: one year of supply

This infringement relates to the breach of contract discussed in #5. Despite the contract being lawfully terminated by Court Order, Samsung continues to infringe Netlist’s IP.

The Jury Trial concluded in April 2022. Of note, during the case, Samsung employees stated that there is no suitable alternative to Netlist’s IP on the market. Samsung (and we can assume other companies by extension) have no way to produce the products they do without infringing or licensing Netlist’s products.

Shortly thereafter the company announced that it had won $303m in damages covering infringement through March 2023. The jury’s unanimous verdict was

that all five Netlist patents had been infringed by Samsung, that none of Netlist's five patents were invalid, that Samsung wilfully infringed those patents, and that money damages were owed to Netlist for the infringement of all five patents.

The final summary judgement was released on the 14^th of August confirming this (document here), as well as awarding pre/post-trial interest as well as all legal costs, excluding attorney fees.

In addition to the damages, if the infringers are deemed wilful (amongst a few other conditions), treble damages could have been awarded. Judge Gilstrap is generally known to award an 20-30% extra damages in similar cases. Since Samsung’s wilfulness had already been established at trial, many did hope these additional damages would be awarded. It came as a surprise then when Netlist’s CEO stated that

in advance of the Final Judgment Netlist chose not to seek any enhancement as to past damages. Netlist is confident that the Court's ruling in this case will remain intact through any post-judgment motions and appeal.

Netlist effectively chose not to pursue additional damages, perhaps in favour of an outcome that is harder to appeal. This seems sensible to me, as I believe this choice increases the chance of arriving at the licensing deal which is certainly the priority.

I should note that Samsung has filed various IPR requests to PTAB to invalidate each of the patents in question, some of which are awaiting a decision. Oral arguments for two of these (‘054 & ‘918) were held on September 11^th. However, please note that IPR’s are superseded by the courts, and that Judge Gilstrap in East Texas has made it clear that he has no intention to wait for IPR decisions prior to his own decision. Therefore, these IPR decisions will have limited consequence.

So what happens next? Samsung seem intent to drag proceeding on as far as possible, as evidenced by their recent motion indicating their intent to file for a retrial. Once Samsung do file an appeal (within the next 60 days or so), the appeal will be considered as to whether it has merit. If it is found to have merit, the appeal will be fully considered and legal action will continue for around another 12 months. There is a chance that the appeal will be thrown out on first inspection, which would mean things wrap up after a couple of months. I note that once they finally do appeal, the likelihood of a successful appeal is remote. Around 90% of appeals made against Judge Gilstrap’s cases are unsuccessful. In the Q2 conference call, Netlist stated that it was

confident in the strength of the verdict and the careful trial procedures the court used in this case.

Significantly, Netlist has recently filed a motion for Samsung to pay an ongoing royalty. The Motion is sealed, so we don’t have details, but it opens the possibility that Samsung will be forced to pay an ongoing royalty far before the appeal resolves. If enforced, this would of course be hugely bullish. However, even if it isn’t, I’m happy to be patient. Not only does Samsung continue to accrue additional liabilities as they continue to use Netlist’s IP without a license, but they’re also racking up interest on payments. If interest rates stay where they are, that’s around 5% interest p.a.

It's also worth taking a moment to consider the growth trajectory of these products. In their Q2 conference call, Netlist stated that these

products that are at the infancy of their ramp meaning DDR4 and HBM products. We're kind of in the first half of the first inning. Those products will ramp rapidly over the next few years. So, whatever the volumes were that led to the $303 million in judgment those volumes will probably increase four, five, six times annually over the next few years.

These projections align with other sources. 2024 expected to see a 105% increase according to Trendforce. If one wanted to be extra conservative, the CAGR from 2023 to 2032 expected to be 31.7% according to Market research future.

Bear in mind the $303m was awarded based on around one years’ worth of shipments. Assuming no growth, that’s around $25m per month. Below, I build a liabilities model that factors in interest and the ongoing accruing liabilities. I use 5% p.a. interest and 31.7% CAGR to shipment liabilities, applied monthly. This CAGR is highly conservative, as many sources do expect sales to double next year. From the below chart, you can see that Samsung already increased their liability to around $470m. If they appeal and do not pay until Sep 2024, the sum comes close to $1bn.

7) Samsung & Google (District of Delaware)

• Filed: 10/2021
• Current Judge: Andrews / Mag. Hall

• Allegedly infringed patents: ‘523, ‘595, ‘218

This case relates to Google’s use of products which they acquired from Samsung, thus both could be deemed to have infringed the patents.

In October 2021, Samsung requested an Order declaring it did not infringe on a number of Netlist’s patents. In August 2022, these requests were dismissed or denied. In September 2022, Netlist amended a counterclaim to include Google in the action, which Google filed a motion against. Oral arguments were heard in May for which we are awaiting an Order. In the meantime, the Claim Construction hearing is scheduled for October 20^th, with the Jury Trial scheduled for Feb 2025.

I know less about this case for now and given the long horizon until the trial, I will not factor it into the valuation.

8) Google (Northern District - California)

• Filed: 12/2009
• Current Judge: Seeborg / Mag. Spero

• Allegedly infringed patents: ‘912
• Products in question: LRDIMMs and RDIMMs

Essentially, Netlist met with Google to sell them their IP. Google saw the IP, declined Netlist’s services, and then went ahead using the IP inside their servers. It has been implied that Netlist’s code is inside all of Google’s servers, which as you can imagine, is a lot of infringement.

In December 2009, Netlist first filed a patent infringement lawsuit against Google, seeking damages and an injunction. During discovery, imitations of Netlist’s software were found on Google’s servers. Google then began an extremely long and drawn out process of attempting to challenge the ‘912 patent through every possible avenue, including at a federal level. I note that the patent has proven extremely robust, and is still unamended. Failing these avenues, Google successfully delayed the case further when a judge entered an Order to stay the case pending resolution of Claim 16 – which will be decided on through the Samsung & Micron case in East Texas (#4) in April next year. Assuming Claim 16 stands, the Google case will resume. Google seems to be exhausting most, if not all, its delaying tactics.

Below, I estimate the potential size of this liability, with all my assumptions bullet pointed below. However, I should note that there is a high level of uncertainty given the limited data available. I have attempted to be conservative throughout.

• • To estimate the number of servers, I use a few historic estimates as data points, namely from 2006, 2009, and 2016. I extrapolate the growth rates in between as shown in the table below.

• Post 2016, most estimates for hyperscale data centre server growth are between 20% and 26% (source one, two and three). In my calculations, I assume 20%.
• Until 2020, Google replaced its servers every three years, but this has since been slowing. I assume a third of servers are replaced each year until 2020, after which that fraction decreases.
• I calculate an annual server purchase count by summing the new and replacement servers. I count only from 2009 when the case was first filed. There is a chance this timeframe could be reduced through the proceedings, but I show the full period for context. I do not use the lump sum as part of my valuation, so it doesn’t really matter which date infringement begins to that extent.
• We know that in 2009, servers typically had 8 DIMMs. Many modern servers now use 32 or even 64. I will use 8 throughout.
• The Samsung East Texas case (#6) gives us a royalty rate of $16 for DDR4/5. We don’t know the cost of the DDR3’s type. I will conservatively assume $10 for the DDR3 which were the more common between 2009 and 2014.

Thus, we can see Google have accrued a liability of around $2.6 billion by 2023. Incidentally, if 3% interest is added to the cumulative liability annually, this rises to $3.1bn. We can also observe that if Netlist were to receive a royalty from Google, it would have been in the region of $380m annually based on 2023, but this is growing quickly. I also expect the growth rates to be faster than I modelled due to AI-driven demand.

If the liabilities seem high, bear in mind the infringement period is around 15x longer than the Samsung case. Also, $380m annually is just 0.1% of Google’s $300bn revenue, or 0.5% of their $71bn profit. They have over $100bn cash on hand.

9) European cases

Netlist filed for patent infringement in Europe against each of the three of the offending parties, with injunctions requested against Samsung and Micron.

Oral Arguments against Samsung were held on September 5^th with Google and Micron on November 9^th and April 2024 respectively. The Samsung case’s final hearing will be in November. I have few details on these cases, and so will not estimate any associated value. That said, the timeline for resolution of these cases is more concise, and the cases could provide significant upside if successful.

Legal team

Jason Sheasby of Irell & Manella is managing Netlist’s legal proceedings in the US. This is a big deal. While not cheap, Sheasby is regarded as one of the best patent litigators there is. He has won a variety of cases, awards, records and so forth. His profile, linked above, is well worth a read. I should also note that since he took the lead in July 2021, Netlist has been winning the smaller battles and making notable progress towards the bigger victory.

In Europe, Netlist are represented by Wildanger, “an esteemed IP boutique with an excellent reputation for patent litigation.” It regarded as a top firm in Germany with the relevant specialities.

In general, I think Netlist is working with a highly qualified team who have the experience of winning cases such as these. Netlist’s future is in very good hands from a legal perspective.

Legal fees and cash flow

Let’s consider how cash flow could change over the next year.

First, revenue. I believe the revenue to step up over the next year. A lot of Netlist’s customers had excess inventory the past couple of quarters. Netlist also stands to benefit from the AI push. In the latest conference call, the CEO stated that:

The second quarter 2023 product revenue increased modestly from the first quarter of the year. Results continue to reflect the continuing downturn in the memory market due to oversupply of components and lower demand. On the other hand, OEMs and hyperscalers are working through their inventories and recent industry forecasts have become more optimistic. We believe the market has bottomed and anticipate sequential quarterly improvements in the company's top line over the second half of the year….

So we believe that we've got a very strong position in AI servers in all three fronts: IP coverage on HBM MRDIMM and then both IP and a physical product for CXL.

Hence, analyst estimates put Q3 at $16m (a 33% increase sequentially), and for 2024 at $90m (a 91% increase YoY). However, I should note that 2024’s revenue of $22.5m a quarter, with a recent gross profit margin of 6%, is only $1.35m in gross profit, very far below their legal expense of $10m (H1 average) and ongoing expense (R&D & SGA) of around $5.5m (H1 average). Legal expenses tend to fluctuate and make a far larger difference to ongoing cash flow. Given the number of ongoing legal cases, I do not expect this expense to reduce much. If I increase this to around $12m per quarter on average to be conservative, we get a total operating expense of $17.5m. Subtracting $1.5m gross profit, we can assume an operating loss of around $16m a quarter moving forward.

As of Q2, Netlist was sitting on $31m cash last quarter, and received around $30m from a recent direct offering. If Netlist continues burning through cash at $16m per quarter, they would run out of cash in around 4 quarters. They also have a further $38m accessible through the Lincoln Park purchase agreement which I expect them to continue to dip into over the coming quarters to maintain their cash level.

In conclusion, I think it is fair to expect ongoing dilution of shareholders to continue. To maintain cash levels, at a market cap of $564m, Netlist needs to dilute around 3% a quarter to offset a $16m loss. This is undoubtably substantial, and risks being higher if the share price declines for any reason.

Management

I should note that the current trend of the company’s management and compensation structure is not desirable. In 2018, the company delisted from the NASDAQ. In 2020, Netlist had removed its board of directors, leaving Hong, CEO, as sole director. This removed an important layer of accountability and governance. Board of directors are theoretically there to protect shareholders.

I suppose it is not surprising then to see compensation for management to have substantially increased since then (see chart below). Given the negative cash flow of the company, I personally find it unethical to be continually increasing one’s compensation package to such a high degree. Nonetheless, the company has increased Hong's pay package, while diluting shareholders and this gives me pause. Thus, I'm quite sceptical of management and would not consider this a long-term hold after legal cases conclude.

Insiders have been selling, though still own 1-2% of the company. This doesn’t inspire confidence. That said, there are always many reasons management can sell.

I also note that based on a quick glance at Glassdoor, the employees do not have a favourable view of the company environment or the senior management. One recent review stated “Atrocious Senior management. Worst possible.” This is another red flag for me, and makes me wary of the company’s long term prospects.

Valuation

Due to the nature and volume of the legal proceedings, there is a huge amount of complexity and uncertainty. A discounted cash flow analysis would be redundant given high levels of uncertainty as to when cash comes in. Instead, to value the company, I will consider the company as if it were earning royalties from the most immediate, important and knowable cases, and then I will reduce these royalties according to perceived risk and delay. I will ignore the value of Netlist’s balance sheet and any large lump sum payments they are to receive.

Simply put, I will base the entire valuation on the core business and the predicted royalty rates from some of the main cases. I discount these royalties three times, including by:

1. My estimate of the likelihood of winning the case in court or settling at similar rates.
2. My estimated cost of delayed royalties. I discount the future royalties by 10% for each year I think it reasonably could take to close licensing deals (conservatively – I assume no settlements).
3. My estimated risk that the settlement could be smaller than my estimate.

Below I briefly discuss the probabilities of success:

• I will assume the core business is running at a loss of $64m annually (see above).
• A win over Samsung (#6 above) has a high probability since they already have the Order, and any appeal is unlikely to succeed. However, I expect Samsung to drag their feet as far as possible.
• The case over Micron (see #3 above) seems likely to succeed, given they are being tried on a similar basis to Samsung.
• The case over Google (see #8) has the highest degree of uncertainty hence the conservative likelihood. However, I am encouraged by the resilience of the ‘912 patent in question.

After applying all these discounts, we get a conservative estimate of how much royalties should Netlist be paid, adjusted for risk. If $201m were to drop to the bottom line, and assuming a P/E of 20, we would get a market cap of around $4bn. I will assume they will need to dilute around 25% before receiving the royalties, so will increase the share count to 300 million. This would give a share price of around $13. That’s almost a 6 bagger. This is a risk adjusted estimate, and could obviously be far higher or lower depending on the success of the various cases.

If Netlist actually won these cases, so removing the various discounts, we’d get a market cap closer to $14.5bn. This also ignores the other legal cases ongoing (e.g. cases #2; #4; #7; #9), which could also add substantial value. This value also ignores the likely tremendous growth facing the industry. Royalties in 2024 could well look substantially higher if the growth is as large as some expect. Therefore I deem my estimate of the upside to be conservative. Though I find it unlikely, if Netlist were to lose all the various near-term cases, I would assume a loss of most of the invested capital, hence I associate a high level of risk.

Of course, all this assumes Netlist is awarded ongoing royalty payments. This certainly appears to be their objective, recently confirmed by filing for such royalties in the Samsung case (#6).

Summary

This is a relatively high risk investment. Litigation is inherently risky. The cases are complicated and intertwined. There are many things we don’t know about the cases, as we are only privy to so much of the information. I also feel somewhat uncomfortable about the management of the company, especially around the governance of the company and the direction of the compensation amount. I also acknowledge my own tendency to root for the underdog, and will need to focus to remain unbiased in my ongoing assessment of the proceedings.

That said, the reward is obvious. Even adjusted conservatively for risk, I believe the company is substantially undervalued. If even some of the legal cases resolve in Netlist’s favour, and I generally like Netlist’s chances here, this could feasibly be more than a 6 bagger in the next couple of years. I own a speculative position and rate the company a buy.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Samuel McColgan