OCI International Holdings Ltd. (DGTLF)

[ecig observer]

Settlement implications related to Dragonite business model.

The fact that Dragonite is willing to discuss settlement with BLEC and NJOY signals the best and most effective path to monetizing its technology and its growing IP portfolio. BLEC and NJOY are serious players and, clearly, take the patent infringement claims seriously. BLEC and NJOY are serious players because the US distribution and retail supply chain see them as credible and reliable. The same cannot be said for 99% of US-based importers and distributors of e-cigs.

Unfortunately, Dragonite’s Ruyan subsidiary has a very spotty record in the US- due entirely to their inability to manufacture with any consistency when it comes to quality or quantity. The various Dragonite recaps have made some of us hopeful that Ruyan’s manufacturing and distribution issues would be addressed. To date, that has not been the case, as Dragonite always seems to get distracted with dubious investment activity whenever they have cash on their balance sheet.

Many of us would love to see the current court activities come down to a race between BLEC and NJOY as to who gets to stay in business without threat of lengthy, costly legal battles. One or the other accomplishes this through negotiation or settlement with Dragonite.

But, one also has to be concerned about the constant regulatory buzz that the US FDA seems intent on fermenting. Both BLEC and NJOY have the experience and expertise to manage US regulatory issues. After all, NJOY beat the FDA in court, something that many large US pharma companies have never done!

BEST CASE- long term licensing/partnership with one of the large US importers/distributors and a growing, sustainable source of revenue.

ALTERNATIVE- Dragonite gets out of the e-cig business through a strategic divestment of Ruyan and its IP through a sale or spin-off involving one of the large US importers/distributors.

REALITY- Dragonite will not be a major player in the e-cig business on its own. They do not have the resources, the expertise or the desire, irrespective of what they are saying in their filings.