OTC:QPRC
QUEST PATENT RESEARCH CORP
A US-based patent research and IP analysis firm navigating high leverage but showing recent revenue volatility.
Key Metrics
Investment Thesis
Bull Case
Investors might consider QPRC if they believe the 2024 revenue drop was a cyclical anomaly given the strong $13.2M peak in 2023. The company holds substantial long-term assets and significant paid-in capital of $17.7M that could support a turnaround once market conditions improve. If the firm can stabilize its client base, the specialized nature of patent research offers defensive characteristics against general legal market downturns.
Bear Case
The bear case is driven by a dangerous balance sheet where current liabilities of $12M dwarf total assets of only $3.5M and shareholders equity is negative $8.7M. Consistent losses over the last two years indicate an inability to cover operating expenses without external financing, which may be restricted due to the high debt load. The massive working capital changes of -$4.4M suggest severe operational inefficiencies or aggressive billing practices that threaten long-term solvency.
About QUEST PATENT RESEARCH CORP
QPRC (QUEST PATENT RESEARCH CORP) is a specialized patent research entity operating primarily in the United States technology and legal sectors. The company generates revenue by providing intellectual property analysis, litigation support, and patent prosecution services to law firms and corporate clients. Despite recent fluctuations in profitability, the firm maintains a significant asset base focused on intangible operating assets.
Analysis
Management Discussion
Management has faced significant challenges with operating cash flow turning negative at $390K while reporting a net profit loss of $2.5M in 2024. The drastic revenue contraction from $13.2M in 2023 to $2.8M in 2024 suggests potential client concentration issues or market headwinds affecting the patent research sector. Despite non-cash adjustments adding $6.5M to reported earnings, the underlying cash position has weakened with a net change in cash of -$81K.
Industry Overview
The patent research and intellectual property services industry is highly competitive but specialized, dominated by large law firms and boutique research agencies. Demand fluctuates with litigation cycles and technology sector investment levels, making revenue forecasting difficult for smaller players. The market rewards firms with unique technical expertise in emerging fields like AI and biotechnology.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $451.2K | $13.2M | $2.8M |
| Cost of Revenue | $303.7K | $5.3M | $1.2M |
| Gross Profit | $147.5K | $7.6M | $950.9K |
| Operating Expenses | $2.0M | $2.7M | $2.8M |
| Operating Income | $-1.8M | $4.9M | $-1.8M |
| G&A | $2.0M | $2.7M | $2.8M |
| Stock-Based Comp | $117.4K | $48.7K | $5.8K |
| Amortization | $910.3K | $786.6K | $636.4K |
| Other OpEx | $0 | $0 | $0 |
| Non-Operating Income | $1.1M | $-1.2M | $-525.2K |
| Interest Expense | $82.7K | $222.9K | $118.9K |
| Pre-Tax Income | $-754.8K | $3.7M | $-2.4M |
| Income Tax | $-1.3K | $30.0K | $100.0K |
| Continuing Ops | $-753.5K | $3.6M | $-2.5M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $-753.5K | $3.6M | $-2.5M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $-753.5K | $3.6M | $-2.5M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Current Assets | $95.9K | $3.6M | $502.3K |
| Cash & Equivalents | $90.6K | $563.5K | $482.0K |
| Accounts Receivable | — | — | $8.3K |
| Other Current Assets | $5.3K | $3.0M | $12.0K |
| Long-Term Assets | $1.1M | $3.7M | $3.0M |
| Intangibles | $1.1M | $3.7M | $3.0M |
| Other LT Assets | $0 | $0 | $0 |
| Total Assets | $1.2M | $7.3M | $3.5M |
| Current Liabilities | $9.6M | $11.9M | $12.0M |
| Long-Term Liabilities | $203.7K | $203.7K | $203.7K |
| Total Liabilities | $9.8M | $12.1M | $12.2M |
| Shareholders' Equity | $-8.6M | $-4.9M | $-8.7M |
| Paid-In Capital | $17.6M | $17.7M | $17.7M |
| Retained Earnings | $-26.2M | $-22.5M | $-26.4M |
| Total L&E | $1.2M | $7.3M | $3.5M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net Income (CFO) | $-753.5K | $3.6M | $-2.5M |
| Non-Cash Adjustments | $-449.1K | $-5.1M | $6.5M |
| Working Capital Changes | $288.4K | $3.4M | $-4.4M |
| Cash from Operations | $-914.2K | $1.9M | $-390.3K |
| Cash from Investing | $-1.5M | $-3.3M | $0 |
| Cash from Financing | $2.2M | $1.9M | $308.9K |
| FX Effect | $0 | $0 | $0 |
| Net Change in Cash | $-174.2K | $472.9K | $-81.5K |
| Beginning Cash | $264.8K | $90.6K | $563.5K |
| Ending Cash | $90.6K | $563.5K | $482.0K |
Frequently Asked Questions
How does QUEST PATENT RESEARCH CORP make money?
Core revenue streams include litigation support services for intellectual property disputes, patent prosecution and filing fees from corporate clients, and specialized market research reports for technology sectors. The company also derives income from legal database subscriptions and data licensing agreements with external partners.
What are the main risks for QPRC?
The company faces severe liquidity risk with current liabilities exceeding total assets and a substantial accumulated retained earnings deficit. Revenue volatility is evident in the last three years, dropping sharply from 2023 highs to 2024 levels which impacts cash flow sustainability. High interest expenses of approximately $119K erode profitability, exacerbated by the negative net income trend.
What is QPRC's competitive advantage?
The firm possesses a niche expertise in complex IP litigation support that creates high switching costs for law firm clients. Its specialized workforce of patent attorneys and researchers offers deep technical domain knowledge that is difficult to replicate quickly. Strong relationships with key corporate R&D departments provide a stable pipeline for prosecution work.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.