Shares of WordLogic Corp. (WLGC), the predictive texting technology licensing company run by self-described venture capitalist and CEO Frank Evanshen, jumped 25% on Tuesday, May 12 as investors bet the company was about to embark on a new direction that could make it a takeover target.
To be sure, the 25% increase was only 2 cents as WordLogic shares closed at 10 cents on Tuesday giving the penny stock company a market value of just $10.9 million.
The jump in the stock was justified by “numbers that are truly scary in a good way,” Evanshen said in a phone interview, referring to a licensing agreement reached with undisclosed private backers who are setting up an operating company assisted by Nirvana Canada, a software development and marketing firm founded by former Microsoft program manager Sandeep Mittal.
WordLogic’s products include the IKnowU and REACH patented technologies, which try to predict texting word choices and automatically connect the user to commercial websites, respectively. They’re used on Android-type phones.
“We’ve turned the keyboard into a search engine,” Evanshen, 66, said. “It reads the ecosystem of the phone. It’s browserless and supersedes Google. You don’t have to go to search engines anymore.”
All of which sounds great until you realize that WordLogic has cash and equivalents of just $76,351 and posted a net loss of $2.95 million or 3 cents a share in 2014, compared with a loss of $4.77 million or 6 cents a share, a year ago.
Moreover, the Vancouver-based company is the product of a reverse merger and trades over-the-counter. Even Evanshen admits WordLogic would probably be out of business if it wasn’t for a $5 million licensing agreement from RPX Corp. (RPXC) in 2012.
All those issues have made it difficult for WordLogic to succeed as a going concern despite what he says is $40 million spent on its technologies and patents. Of that $40 million, Evanshen says $6 million came from him and his family. He has a 20% stake in WordLogic.
“RPX made hundreds of millions of dollars from that deal,” Evanshen asserted. “They wouldn’t verify that but it’s something we heard from someone who used to work there.” He said WordLogic’s licenses enabled RPX to bring in many new subscribers to its services.
Of course, RPX’s retained earnings since inception including from its recent purchase of the Rockstar patents amount to $200 million from $1.8 billion spent on acquiring patents. That’s a margin of roughly 11%, which would suggest RPX earned closer to $556,000 from the WordLogic patent.
Officials from San Francisco-based RPX declined to comment.
Shares of WordLogic gained another 10%, or 1 cent, to 11 cents on Wednesday before giving back a penny in midday trading today. They’ve traded between 2 cents and 18 cents over the past year.
The impact of the new licensing agreement seems dubious because Evanshen and WordLogic have given no details on their partner and few details on the terms.
WordLogic said the terms of agreement called for a one-time $250,000 cash payment where all revenue will be split 40% to WordLogic and 60% to the venture fund after commissions.
“If they are able to tie up one major app it could mean $1 per month per user for WordLogic,” he said. “You’re talking a lot of money.”
WordLogic has produced few tangible results from previous announcements including an agreement for exclusive rights to monetize specific patented intellectual property in General Electric Co.’s portfolio.
“GE approached us,” Evanshen said. “They said: ‘GE has some patents in your space and we see you’re the market leader.’”
Evanshen said GE told him it would like to do a joint venture whereby WordLogic could potentially help monetize GE’s patents.
WordLogic is dealing with the healthcare division of GE on the agreement and has worked with Raymond Millien, the senior IP counsel for GE’s healthcare division.
The agreement has yielded no results for WordLogic because GE is in the process of reorganizing and spinning off its financial services business.
Evanshen said General Electric approached WordLogic because of its leadership in predictive technologies and foundational patent portfolio.
GE’s Millien couldn’t be reached for comment.
In August 2014, WordLogic said it agreed to sell the non-exclusive rights to its legal enterprise solutions for North America to several Virginia-based shareholders.
The agreement called for a one-time payment of $1 million, plus a 10% royalty on all sales and a 15% annual software maintenance fee on all sales.
To date, the shareholders have paid WordLogic only $50,000.
WordLogic also is involved in patent infringement litigation against a British company called SwiftKey, which Evanshen says copied its predictive keyboard technology and is now on the verge of a $2 billion IPO.
“We create the technology and we’re worth $10 million and they copy it and are worth $2 billion? That’s ridiculous.”
Evanshen declined to comment on the status of the case, saying it was “very delicate. I have to refrain from commenting. Something very important is happening. I’m not at liberty to say.”
WordLogic was originally incorporated in Nevada as TheAmericanWest.com Inc. in March 1999. The company’s primary business was the development and commercialization of data entry software for handheld computing devices.
In March 2003, AmericanWest reverse merged with WordLogic Corp., a private British Columbia-based corporation and adopted its name and ticker symbol.
Evanshen has been accused of abusing his power as CEO by a former officer and director named Paul Silverstein, who served briefly as CEO and COO before being suspended and resigning.
Silverstein had threatened to bring a whistle blower claim against the company after he uncovered evidence that Evanshen was abusing his corporate credit card.
Evanshen said Silverstein didn’t understand the context of the credit card spending, which was used to compensate his brother for bringing the RPX licensing deal to the company instead of paying him a finder's fee.
In December 2013, WordLogic agreed to issue stock and warrants to Silverstein as part of a settlement of a lawsuit filed in U.S. District Court in the Southern District of New York. WordLogic recorded a loss of $773,644 on the stock and warrants.
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