Walker Innovation Inc (WLKR:QBB)

Recent Share Price: $0.504

Avg. Cost per Share: $0.404

Accounting: U.S. GAAP

Fiscal Year: Dec. 31

Market Cap: $10.2 million

Fillings:

Walker Innovation seeks to develop Walker-Innovationand commercialize its portfolio of intellectual property assets through its licensing and enforcement operations.

In the 10-K, they stated that in response to the challenging developments in the patent licensing and enforcement environment, and their decision to cease operations of the Innovation Business, they now plan to acquire one or more operating business.  They also announced they retained an investment bank as an advisor.

On June 28, the board approved plans for liquidation and dissolution.

Walker Digital, LLC, a related party, is the owner of approximately 82% of the voting interest in the Company and owns approximately 48% of the economic interest in the Company. Jay Walker, (founder of Priceline.com), owns the majority of shares in Walker Digital, LLC. (Mr. Walker currently ranks as the world’s 13th most patented living individual, based on U.S. patent issuances according to Wikipedia.)

According to the most recent 10-Q, the company had 20,094,314  common shares outstanding.  In addition, the company issued 14,999,000 Series B Convertible Preferred stock, (convertible to common at 1:1), which is held by Walker Digital.  Stock options totaled 4,875,498.

Total dilution of shares is 39,968,812.

Workout

Current Assets: March 31, 2018
Cash and cash equivalents  $3,313
Short-term investment  $20,000
Prepaid expenses and other current assets  $92
Total current assets  $23,405
Total Liabilities  $200
Diluted Shares  39,969
NCAV per diluted share  $0.58
Entry price to NCAV 70%

Recent History

2017

Announced that it has raised an additional $16.8 million in funds from agreeing to the redemption of the remainder of its stake in The Upside Commerce Group LLC by Upside.

Prior to 2017, the company operated a second line of business that focused on helping companies innovate more effectively and efficiently.

The company reset option prices with an exercise price at or above $1.37 per share (representing an aggregate of 2,743,000 options, or 58% of the total outstanding) to $0.43 per share; equating to an aggregate option price of $0.405 per share.

2016

Announced that it has raised an additional $2.5 million from the sale of 1.25 million shares of Class A Common Stock in The Upside Commerce Group. The Company partially exercised its warrant to acquire the shares of Class A Common Stock at a price of $0.06 per share.

Announced that it raised $4.9 million from the sale of 2.5 million shares of Class A Common Stock in The Upside Commerce Group. The Company partially exercised its warrant to acquire the shares of Class A Common Stock at a price of $0.06 per share.

Prior to March 31, 2016, the Company had a custom innovation product for small and medium businesses called Haystack IQ™, which used proprietary Big Data software to connect the global stockpile of technology improvements and technical experts, represented by the U.S. patent database and other technical databases, with businesses that can put them into commercial uses that help them compete and grow. On March 31, 2016, the Company ceased operations of its Haystack IQ product and recorded a one-time non-recurring charge of approximately $575,000.

Terms of the Deal

From the proxy, the company expects to make an initial distribution as soon as reasonably practicable.

Excluding cash on the balance sheet, the company does not expect there will be much value realized in liquidation. In other words, the intellectual property and patents are worthless.

We have received a valuation analysis of one of the patent families in the Company’s portfolio which estimates the residual value of such patent as below the continued required maintenance fees, which taken together with the recent financial results of the Licensing and Enforcement business is indicative of the likelihood that any additional distributions to stockholders following the disposition of our remaining non-cash assets are highly unlikely and, if made, will be de minimis.

The patent portfolio consists of approximately 185 U.S. issued patents, as well as 8 pending patent applications and certain foreign counterpart patents and applications.  These enforcement and licensing efforts involving previously filed cases have resulted in $3.6 million in gross revenue from settlement and licensing income since January 2015.  There are currently no pending cases.

The company estimates between $0.53 and $0.50 per share will be distributed to shareholders.  Shares outstanding does not include the stock options, which will be paid out prior to distribution; but does include the convertible preferreds.

Estimated Liquidating Distributions to Stockholders
High Range of Net Low Range of Net
Proceeds for Proceeds for
Distribution Distribution
Cash and cash equivalents of July 15, 2018  $22,723,000  $22,723,000
Employee compensation  $886,000  $886,000
Professional fees (legal, tax, accounting, other)  $344,000  $444,000
Insurance  $345,000  $345,000
Other operating expenses  $370,000  $520,000
Total operating expenses  $(1,945,000)  $(2,195,000)
Total estimated liabilities and reserves  $(1,500,000)  $(2,500,000)
Settlement of in the money options outstanding  $(595,000)  $(462,000)
Estimated cash to distribute to stockholders  $18,683,000  $17,566,000
Shares outstanding 35,093,314 35,093,314
Estimated per share distribution  $0.53  $0.50

Disclosure: We own shares in Walker Innovation Inc (WLKR:QBB)

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