Spherix Inc (NASDAQ:SPEX) Files Yet Another Patent Infringement Lawsuit
Spherix Inc (NASDAQ:SPEX)’s performance isn’t very typical for a NASDAQ stock. On May 27, for example, the ticker jumped up and almost doubled its value. Just two days later, it crashed and burned through 40% of its market cap.
In fact, in many ways, the chart on the right is pretty similar to the ones drawn by some of the more volatile OTC tickers.
Unfortunately, this can also be said about the revenues section of SPEX‘s latest 10-Q. Here’s what the company recorded at the end of the first quarter of 2014:
- cash: $4.5 million
- current assets: $4.6 million
- current liabilities: $1.1 million
- quarterly revenues: $4 thousand
- quarterly net loss: $7.9 million
It’s pretty clear that SPEX haven’t yet succeeded in getting their patent monetization business off the ground. We should note, however, that they’re trying hard.
They have filed patent infringement complaints against companies such as AT&T Inc. (NYSE:T), CISCO Systems, T-Mobile, etc. Yesterday, they announced a lawsuit against Verizon Communications Inc. (NYSE:VZ) which, Anthony Hayes (SPEX‘s CEO) said, could result in an entirely new line of potential licensing revenues.
Mr. Hayes’ words certainly sounded exciting enough, but apparently, the stock wasn’t ready to make a double-digit jump – something it was more than willing to do at the end of May. Still, SPEX gained 3.2% and finished the day with a price of $1.93 per share.
There’s little doubt in anyone’s mind that SPEX‘s future is dependent on the outcome of the lawsuits. Unfortunately, it could take a while until the legal proceedings come to a conclusion and in the meantime, the stock is taking a beating.
If you have a look through the one-year chart, you’ll see that back in August 2013, SPEX reached its 52-week high of $27.86 per share. Ten months later, it’s hovering around 93% below these levels. On May 29, a law firm called Glancy Binkow & Goldberg LLP initiated an investigation against SPEX‘s Board of Directors to see if there aren’t any actions that could have contributed to the massive drop.
Glancy Binkow & Goldberg’s announcement resulted in a 40% crash and if the outcome of the investigation is unfavorable, SPEX might take another dive.
There’s another problem. Because of the lack of a steady stream of revenues, SPEX are forced to raise money through the sale of equity. Recently, they completed a $20 million private placement as a part of which some investors received a total of 10 million preferred shares. The preferred shares can be turned into common ones at a rate of one-for-one which could cause some severe dilution.
Between March and May, the O/S count grew by around 4.4 million and in April, SPEX increased the number of authorized shares which could suggest that the stock issuance is not over yet. Bearing this in mind is, we reckon, absolutely crucial.
