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Patriot Scientific (PTSC) continues to ink licenses, but will it return to profitability?
Topics: UncategorizedPatriot Scientific (PTSC.OB) traders have had a wild ride for the past two years. Since January 1996, the stock shot up from 8 cents to over $2. Now, as the weekly chart below shows, the stock is trying to bottom around $.40.
Whether the bottom holds will likely be dependent on the company’s return to profitability. For a few quarters, Patriot Scientific announced not only substantial profits, but numerous dividends, as its licensing joint venture secured key deals with PC, semiconductor and electronic manufacturers to license the Moore Patent Portfolio, of which the company is part-owner. As the pace and (by most estimates) size of the licensing deals began to subside, operating metrics also deteriorated. Last quarter, Patriot Scientific lost $1.96 million on licensing proceeds to the joint venture of $1.5 million.
Today, the company announced that it had reached a deal with Philips Electronics. “We welcome the expansion of our program with Philips, a proven worldwide leader in medical equipment and consumer electronics. This agreement further validates the strength and broad scope of the MMP Portfolio,” said Andre-Pascal Chauvin, vice president of licensing for Alliacense, Patriot Scientific’s licensing partner. More importantly, the company suggested that further deals could be in the pipeline: “It’s pretty common to see the pace of deals pick up as a trial approaches,” said Mike Davis, senior vice president, licensing. “A number of major businesses that have been following the case closely needed a little time to evaluate the recent Markman ruling, and are now moving to capture licenses at current prices and avoid significantly higher royalty rates following trial.”
Bottom line: This is certainly good news for Patriot, but the size of the Philips deal has not been disclosed and I for one will remain skeptical until I see the company transform its dealflow into a significant, lasting revenue stream. With a market cap. of $164.33M (per Yahoo!), lofty expectations are still baked into the share price. Unless PTSC starts delivering profits soon, shareholders are likely to see more disappointment.
DISCLOSURE: No position.
I think this reviewer is right–PTSC is speculative.
However, he fails to note so many things that anyone unfamilair with this stock would simply yawn and continue to the next article.
He ignores what many people have skipped past recently: a very successful Claims Construction Hearing (Markman) that firms up terms under which the trial would be conducted. He also fails to mention that the January trial will be in East Texas (generally regarded as a Plaintiff-friendly venue for patent enforcement), and that despite a trial date rapidly approaching, companies continue to ink deals when they could easily delay doing so. Why? Because legal teams know what a Markman represents, and that a trial under those strict constraints bodes extremely well for PTSC. A verdict for PTSC or favorable settlement before trial will shoot the price of a license skyward. The infringing companies have balanced this risk and are still signing deals or in heavy negotiation.
Personally, having studied this company for more than seven years from every angle, I believe PTSC faced its heaviest risk one – three years ago. The obstacles have been steadily cleared since that time, including but not limited to: internal patent holder issues and conflicts, poison pill financing, the ending of warrants, stock buyback, no debt, a new CEO well known to the tech world. Add to that $24 million in the bank–and growing–and it is clear the foundation for a boom is approaching. Everything rests on the results in Texas, and uncertainty generates a flucuating stock price.
I can’t find another penny stock with this potential. Bets are placed, and the cards are about to be flipped over. Whether you are in or out of this stock now, I think when news of a settlement
or verdict is revealed, getting out fast enough, or getting in fast enough, will be difficult.
You failed to note that PTSC has an 18 million investment, 20 million in the bank and no debt. I’m a very happy shareholder.
PTSC is a scam pure an simple. PTSC s patents are currently being reviewed for “obviousness” by the US Patent Office in an OFFICIAL INVESTIGATION. ONE OF PATRIOTS PATENTS HAS ALREADY BEEN RULED UNENFORCEABLE FROM THEIR MMP PORTFOLIO BY THE US PATENT OFFICE. Recent court precedents will allow multiple instances or “prior art” to be combined in whatever way possible to make the result prove Patriots Moore Microprocessor Portfolio was a known idea before Patriot applied for their ’336′ 148 patents. Also, a patent can be ruled unenforcible if there was some shennanigans and deceit involved in their application at the USPTO. The companies fighting patriot have evidence of this AND WILL GET IT SUBMITTED IN COURT. Patriot has always been a loser BB company that bilks fools to pay death spiral financiers. Currently there is a shareholder who financed Patriot that got shares for a few tenths of a cent and is selling with both hands on every PR. Think about it! 2 years of seemingly good PRs with a continuously declining price. Basically, imo, Schwartz (the financier), knows the MMC patents are going to be ruled unenforcible and he is selling.
One line of 129 odd lines is in question so Patriot virtually swept the Markman. 23 companies have signed, and you don’t think there lawyers extensively review the validity of these patients? The only people who bash this stock are the ones who didn’t buy enough when it was DIRT cheap or are trying to get the price down.
Pubat is not even an issue–tell it to the 23 companies that have already signed.
Boo hoo to all those that didn’t take advantage!!
@ Militarybrooks: Agree the Markman is impt., which is why I included the quote. The pro-plaintiff reputation of E.D.Tx. I thought stemmed from mass torts not patent litigation, but at any rate the decision will be subject to appeal to the federal circuit. That said, the proceedings to date look good for PTSC and I agree that a win would help its bargaining position. The million-dollar question is: by how much?
Finally re: cash in bank, it is worth noting that last Q the co. said it had $20.3M in cash and liquid investments. Back out $7.7M in income taxes payable and you get under $13M. Coupled with a clean balance sheet, this gives the co. a good deal of financial latitude. But net of taxes its still less than 4 cents/share.
@ Marilyn: see above
@ John: thanks for your comment, but I have yet to see any strong evidence supporting the claim you make (technically called a fraud on the PTO defense). If you have anything you think I should look at, email it to me.
@ Colorist: I have not read the Markman ruling in detail but by all accounts PTSC came out ahead. Here is a good description of the importance of a Markman ruling.