Endeavor IP Inc (OTCBB:ENIP) Runs Out of Determination

Endeavor IP Inc (OTCBB:ENIP) is a patent troll which means that its business plan revolves around acquiring intellectual property, filing patent infringement lawsuits against big enterprises, and then generating revenues from either favorable rulings, licensing, or settlement agreements. ENIP isn’t the only patent troll in Pennyland.

Worlds Inc (OTCMKTS:WDDD), for example, fits pretty much the same description. It has been involved in a big lawsuit against Activision Blizzard, Inc. (NASDAQ:ATVI) for years now, but unfortunately, at least for the time being, it seems to be battling windmills. Revenues are still nowhere to be found and the whole financial statement is a mess.

In fact, most of the OTC companies with a similar business plan have failed to succeed, but it must be said that ENIP appears to be an exception to the rule. It managed to register nearly $470 thousand in revenues during the six months ended April 30 and a settlement and licensing agreement with Schneider Electric USA Inc from last week suggests that the future could be even brighter.

While ENIP‘s business operations are going surprisingly well, however, it’s stock performance isn’t exactly stellar. In fact, ENIP is a triple-zero OTC ticker. Thanks to last week’s settlement agreement, it did manage to briefly reach $0.001 for the first time in almost five months, but on Friday, it slipped and lost a fifth of its value which means that it’s about to start the new week with a price of just $0.0008 per share.

The stock is definitely struggling to stay afloat and once you do some due diligence, you’ll see that this is not really that much of a surprise. Filing a lawsuit against big companies like Schneider Electric is not exactly cheap. ENIP needed money in order to carry out their business plan and certain financing providers were only too happy to loan them cash in exchange for convertible notes.

Unfortunately, while the press releases would have you believe otherwise, ENIP haven’t really been able to monetize on their precious intellectual property. The settlement and licensing agreements are indeed bringing some revenues, but a positive bottom line is still a distant dream (the net loss for the last reported quarter, for example, is around $555 thousand).

And this means that ENIP‘s creditors have been converting the debt into stock at some pretty hefty discounts. More specifically, between October 31, 2014 and April 30, 2015, ENIP issued a grand total of 239,580,134 shares of common stock at prices ranging from $0.0007 to $0.002 per share. There was still plenty of convertible debt outstanding at the end of April and the authorized cap was recently raised to 3 billion which means that we won’t be too surprised if we see some more dilution in the next report.

Dilution is the absolute killer of penny stocks and OTC investors who tend to get a bit carried away, but some of you will probably reckon that sooner or later, the toxic debt will be dealt with and that the ticker will be allowed to run.

Of course, this might just happen and if it does, the people who are jumping in right now could be able to make some cash. Don’t forget, however, that in March, alongside the increase in the number of authorized shares, the majority shareholders also approved a reverse split, the ratio of which should be decided upon in due time.

Reverse splits could sometimes cause just as much damage to investors as the dreaded dilution which means that thinking through all the risks is absolutely essential.