Lottery Ticket Confessions

It’s a new year and people from all walks of life will tell you confession is good for the soul, assuming you have a soul. Let’s start the new year off by owning up to those “lottery tickets” in our trading accounts. You know the ones. Those penny stocks you bought in a moment of weakness knowing the odds were completely against you, but, $100 got you a trunk full of shares and just over $1000 pushed your position to a million or more. Yes, you knew it was stupid when you did it, but, there was this long shot chance and if it ever did make it above a dime you could pay cash for your kid’s college tuition.

My guilty play here is QPRC. They used to be called Quest Products Corporation, but, changed their name to hide a more than decade long streak without a single quarterly profit. What drew me in at first were these user adjustable sunglasses for the ski market. After the company claimed to have placed an order for 1000 pair many years ago, they went silent about the item and no longer list it on their product Web site.

Make no mistake, at this point I believe the company is operated by felons (either previously convicted or simply not prosecuted yet) who do nothing but lie to anyone who will listen. I mean that official press release about $20 million in funding which never happened pretty much shredded any possibility of trust. … but … I’m still long. I know I will never see a dime, but, occasionally I will drop another $20-$40 on shares. Why? NTP. More specifically the Research in Motion (Nasdaq:RIMM) $612 million dollar settlement with NTP.

Why would this keep me going? Many years ago they signed a deal with Wynn Technologies and received a broad patent for multi-account cards and devices. The original concept was something we all call The Big Dud card. It was a credit card with a chip which looked a lot like Blue from American Express, but, this card had logic which would let you carry just one card but have all of your accounts (PIN accessible) on it. You could pick and choose what account to use at point of sale.

Let’s just say, this was an obvious “first round” attempt. It required new readers everywhere and there was no juggernaut behind it. The crater it left can be seen from other galaxies I’m told. The patents, many of the anyway, weren’t implementation specific, and, the company claimed to be associated with a big pile of patent attorneys.

Then we hear about Google Wallet. We hear about Visa and smart phones. And Card 2.0. As well as other multi-account solutions. All of these, in one way or another, seem to crisscross the multi-account patents. Google (Nasdaq:GOOG) has at least as much money as RIMM did. Dare we even ask just how much cash Visa (NYSE:V) has? They must be dwarfing both Google and RIMM.

So, does a nothing company like QPRC manage to lie in the tall grass and pull an NTP after one or more of these major players has gotten used to multi-account payment systems? Does one of these massive players simply offer shareholders $1/share and use the patents to sue the others for their money? Right now they all seem to be blindly moving forward despite all of the companies holding patents in this area. Even IBM and Microsoft got into the game at one point. Maybe RIMM will develop its own multi-account system and snatch up this company so it can pull an NTP on someone else?

I’ll never be that lucky, but, when it is $20 or $40 I neither need not care about, and the share price is sitting at the bottom, I pick up a little more. Hey, I don’t drink coffee so don’t criticize me over the top of that $8 Starbucks you are holding.

What’s your confession? Come on, own up to it.

=== Update 2016-08-23

I wrote this post back in June. Yes, you didn’t see it until New Years Day, but that is how scheduling works. Since that time the June 30 10-Q for QPRC finally hit the Edgar database. There were 2 interesting paragraphs.

In March 2016, we entered into two funding agreements whereby a third party agreed to provide funds to us to enable us to implement a structured licensing program, including litigation if necessary, for the power management/bus control portfolio, which is owned by our subsidiary Semcon IP, Inc., and the anchor structure portfolio, which is owned by Mariner IC, Inc. These portfolios are two of the portfolios we acquired from Intellectual Ventures Assets 16 LLC (“Intellectual Ventures”) in October 2015. We engaged counsel on a partial contingency basis in connection with a proposed patent infringement action relating to these portfolios.

Following the execution of the funding agreements and the engagement of counsel, in April 2016, (i) Semcon brought patent infringement suits in the United States District Court for the Eastern District of Texas against Huawei Technologies, MediaTek Inc., STMicroelectronics Inc., Texas Instruments Incorporated and ZTE Corporation, and (ii) Mariner IC brought patent infringement suits in the United States District Court for the Eastern District of Texas against MediaTek Inc., Texas Instruments Incorporated, LG Electronics, Inc., Toshiba Corporation, and Panasonic Corporation.

If you don’t know what Edgar is, it is the public filings database for the SEC. Every corporate document required to be filed with the SEC such as quarterly and annual financial reports eventually gets listed there. You can generally get free access to it through your on-line brokerage firm or through a variety of sites or you can just visit the SEC site.

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