Seeking Alpha

JoeNatural's  Instablog

Send Message
In a world filled with so much deceptive behavior and fraud, I use my strength of basic common sense and DD skills to lead me down the path to profits.
  • WDDD - A Conversation With CEO Thomas Kidrin  22 comments
    Feb 19, 2013 10:44 AM | about stocks: WDDD, VRNG

    It was just a year ago when excitement started to really gain traction concerning the stocks of companies that were suing large mega corporations for patent infringement of their protected, respective technologies. After Vringo's (VRNG) recent victory over Google, investors began to search for the next possible multi-bagger and it appears the early birds are targeting Worlds Inc. and their lawsuit (explained here) against game giant Activision Blizzard. With the upcoming June 27th Markman hearing (aka patent claim construction hearing) rapidly approaching, I had a few questions for (OTCQB:WDDD)'s CEO that would ultimately sway my decision to be one of the early birds.

    Question: Obviously when approaching the very respected law firm of Susman Godfrey L.L.P. about taking your company's case against Activision Blizzard on a contingency, they would need some time to evaluate the case before giving you an answer. How long was it before they decided to take the case ?

    TK: Susman Godfrey spent nine months reviewing our case before they came back and said, "We'll take it." They had a team of experts extensively review our patents and prior art work and they also studied the court records of our case against NCSoft that was ultimately settled out of court for an undisclosed sum. We received three additional patents covering prior art and the assumptions of validity were greatly enhanced.

    Question: Of the seven patents that your company has been awarded, how many of them are you claiming were infringed upon by Activision Blizzard ?

    TK: Five

    Question: How many claims of infringement are you making against Activision Blizzard ?

    TK: There are 59 claims across five patents.

    Question: What is your company's monthly cash burn ?

    TK: About $20K to $25K per month and with last Thursday's filing whereby we raised $302K, we have enough cash for the next twelve months based upon the high end of our capex needs.

    Question: Can investors look forward to any future patents besides the seven you've been awarded ?

    TK: We believe so.

    Question: There was recent blog chatter that either management of Vringo or certain large investors in Vringo or both had engaged in conversation with your company about investing. Is this true ?

    TK: I can't comment about any such conversations.

    Question: Does your company foresee any such problems concerning "laches" and the ability to seek damages before the original filing of the suit against Activision Blizzard ? The same sort of roadblock that Vringo encountered, including "willful infringement" action ?

    TK: No, as we are the original founders of our technology unlike the technology that Vringo bought from Lycos and secondly, we've had past discussions with Activision Blizzard's CEO, Robert Kotick, concerning a possible JV with Worlds Inc, so he was aware of our patents many years ago, yet made the decision in our opinion to willfully infringe upon our patented technology.

    Question: In giving potential investors a chance to critique the current valuation versus the potential valuation based upon successful litigation, tell me about your current share structure.

    TK: After Thursday's filing, we have approximately 82 million fully diluted outstanding shares and the float is somewhere between 20 to 25 million.

    Question: Knowing that your company is seeking damages for many years prior to the filing of the lawsuit against Activision Blizzard and potentially many other MMOG gamers, what about the timeline of damages going forward ?

    TK: Damages being sought forward from today are in the range of six to seven years out and we cannot comment at this time about future potential defendants.

    Question: Susman Godfrey L.L.P. has been very successful in recent litigation against some of the world's largest corporations such as Comcast, Alcatel, Samsung, Oppenheimer, Xilink, Avnet, Microsoft, Alcoa, IBM, Oracle, SAP, Ariba and many others. Have they had any experience in dealing with Activision Blizzard ?

    TK: Yes, as they sued Activision Blizzard previously on behalf of Paltalk and an out of court settlement was reached on the eve of the trial for an undisclosed sum.

    Conclusion: Although nothing is ever 100% guaranteed, I absolutely love the set-up here heading into the Markman hearing. For anyone who has an ounce of speculative blood in their body, they MUST at least have some sort of stake in WDDD for what could be potentially huge upside gains, especially with a current fully diluted market cap of $21 million here at a PPS of .265 in comparison with Vringo's elevated market cap of over $250 million. The company has enough cash for the next year and with Susman Godfrey in Worlds' corner after having already beat Activision Blizzard once before, this factor alone does indeed provide a meaningful margin of safety. I also believe that Vringo management, large Vringo investors or both are in talks with Worlds Inc. and if confirmed, that's an additional huge boost, not only for the stock price, but awareness.

    Disclosure: I am long OTCQB:WDDD.

    Themes: Short, Medium, Long Term Stocks: WDDD, VRNG
Back To JoeNatural's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (23)
Track new comments
  • I've reached the same conclusions here. The Patents and Child Patents indeed are strong, coupled with the PE history status and defendants prior knowledge making a very convincing argument to any mock jury. The prior art will be key here. I devoted about a week to researching it (my time limit for this kind of investment) and undoubtedly reached the same conclusion as Susman. This has merit.
    19 Feb 2013, 11:14 AM Reply Like
  • In response to many questions that have hit my email concerning this Company- I am investing here totally off the Patents & Child Patents existing Prior Art and the 59 claims across 5 patents the Plaintiff is claiming infringement on. How the company maintains its operations I leave to those that have more expertise.
    27 Feb 2013, 10:55 AM Reply Like
  • Aside from trying to read the tea leaves of his "I can't comment about any such conversations" response (which is a boiler plate response, BTW, that is used as often when there are bona fide discussions going on behind the scenes as well as when there really are no discussions going on whatsoever), what exactly are the circumstantial pieces of the puzzle that you have come across that make you believe that "Vringo management, large Vringo investors or both are in talks with Worlds Inc."? TIA...
    19 Feb 2013, 01:46 PM Reply Like
  • Author’s reply » No one knows for sure about related parties associated with Vringo making contact with WDDD, but I think there's plenty of substance behind the chatter. Wouldn't surprise me at all to see Vringo make an offer to WDDD after the Markman hearing ... or even before. It's right in their wheelhouse. There's a recent short-seller in WDDD IMO that may be biting off more than he can chew, thus I suspect a bear raid is in the cards at some point and that will be a great sign the stock is going much higher.
    19 Feb 2013, 02:19 PM Reply Like
  • Yes, I have heard this rumor many times, always from someone who is citing some other anonymous source who reported "chatter".


    Are you personally aware of what this "chatter" is or at least the source of this "chatter" (with "chatter" clearly not being the conversations themselves that people are alleging may have occurred between the two companies, but being the epicenter of the rumor)? And why do you believe that there is "plenty of substance" behind it? Is it simply because VRNG is trying to become a patent aggregator?


    I'm not trying to attack you or trap you with anything here. I am long VRNG and WDDD as I have disclosed in other comments to other articles, but am simply trying to vet the veracity of your statements so that I and other readers can know for sure whether there are actual legitimate sources that you can personally vouch for behind your claims -- or whether you are simply relying on 3rd and 4th hand rumors that are getting passed around but don't really know where they came from or even whether the rumor may have gotten distorted by the time it got around to you, in which case your claims are really simply your opinions -- which is fine as well.


    Thanks again.
    19 Feb 2013, 11:54 PM Reply Like
  • I agree with one of your responses. The Nokia Patent purchase has established them as a full fledged "Patent Aggregator". That would put companies like Worlds, Inc. on their radar. However they are not the only player in this field, and as I have commented before Worlds does not need Vringo to be successful.
    20 Feb 2013, 10:07 AM Reply Like
  • @princetonattyy44,


    Yes, I concur that WDDD absolutely does not NEED VRNG. And considering that VRNG is but one of many patent aggregation companies out there, and WDDD is but one of many companies who own patents which could be a fit with any one of these patent aggregation companies -- I have still yet to hear anything other than rumors which are simply re-hashes of other rumors to lend any credence to the likelihood of VRNG specifically acquiring WDDD.


    As a shareholder of both, this clearly is of great interest to me. But what I have seen over and over again is simply that a rumor starts somewhere and by the time it gets passed around, it begins to take on a life of its own and now, suddenly, the fact that this rumor is popping up everywhere, people begin thinking that there must be multiple rumors starting from multiple sources -- so therefore there must be some substance and merit to this rumor! When in reality, it is the same single rumor that was never substantiated in any way.
    20 Feb 2013, 12:40 PM Reply Like
  • I bought 4,000 shares in August @ .12 I would love for it to go up $1-2 at leas . adding more on the next big dip (if there is one)
    19 Feb 2013, 04:55 PM Reply Like
  • Great info again. Thanks
    21 Feb 2013, 11:54 AM Reply Like
  • Author’s reply » Here's an update ......


    In my interview of the CEO last weekend for my SA blog ....



    I realized I left out a couple of questions that are very significant and something that I haven't even seen discussed yet. Just an oversight, but nonetheless very meaningful.


    Question: What will your company do with the cash proceeds from any settlement or jury verdict from the Activision Blizzard case ?


    TK: There's nothing set in stone just yet, but as with all successful companies, returning cash to shareholders is why people invest in stocks in the first place, thus we hope to have a one-time special dividend and the percentage will depend on the amount of cash received. Obviously the larger amount we receive, the greater the cash dividend would be.


    Question: So for example you're saying something like a 15% dividend for $100 million, 25% for $150 million, 35% for $200 million and 50% for $500 million, etc. etc. ?


    TK: Yes, an increasing special dividend for larger cash amounts, but also dependent on discussions and guidance from large shareholders, bankers, etc. Obviously large shareholders are going to want as much money returned as possible.


    Question: How much are you suing Activision Blizzard for ?


    TK: Susman Godfrey hasn't yet completed the damage report as part of the current litigation. Obviously we believe that MMOG gamers would have never made the enormous profits they did and continue to make without implementing methods and techniques covered by our patented technology.


    Question: So if I were to say $2 billion, would that be in the ballpark ?


    TK: Based upon the MMOG market size of well over $12 billion, that would not be a disproportionate assumption. Keep in mind that we also have $40 million in NOL's to carry forward.


    Brief Conclusion:


    People need to realize (for example) that if $250 million was returned to shareholders on an award or settlement of $500 million (50%), that's $3.00 a share alone as a special dividend. Any such award is up in the air, but I think you get the picture going forward. Anyone seriously dumb enough to short the stock down here apparently has no problem getting run over by a train. I'm not even sure why there's so much hoopla about a .35 stock price, as current valuation (as of today) belongs no lower than $1.00 IMO and with a favorable Markman ruling, I would expect a much much greater valuation. Susman Godfrey didn't spend 9 months of DD executed by their team of experts before they took the case just for the fun of it. They feel like there's big money to be paid out here and in future cases against MMOG players. Also, anyone look at PRKR and where their stock is now after last Thursday's favorable Markman ruling ? Their market cap is $316 million versus WDDD's current $28 million here at .35 (11 times larger) and both have the exact same number of outstanding shares, 82 million. WDDD has all the money they need in their pocket now to operate for no less than the next 12 months and there will be no need to worry about stock being sold by the company.
    25 Feb 2013, 01:51 PM Reply Like
  • @Joe and @EDVA,


    Appreciate the updates and analyses that both of you have been providing and continue to provide to us longs. Would either of you by any chance know the following based on your research and/or conversations w/TK:


    Whether WDDD is claiming infringement for the full 6 years permitted under the USC?


    What the annual revenues have been for the WOW and COD franchises? I know that for this past Xmas season, COD was reported to have generated $1B in revenues in just its first 15 days!


    What the contingency fee rate is for Susman Godfrey? I thought I read somewhere a while back that it may be 50%. Is this correct? Or is it not that high?


    26 Feb 2013, 10:54 AM Reply Like
  • Great update Joe. I agree it is severely undervalued here but as the company gains visibility (as it is now) the value will become more apparent.
    25 Feb 2013, 02:04 PM Reply Like
  • The first question I would ask is how are they going to finance the trial. Who pays all the expenses? That $100k cash will burn in no time when the trial starts.
    25 Feb 2013, 02:07 PM Reply Like
  • Same question here.
    25 Feb 2013, 11:28 PM Reply Like
  • It's in the first paragraph: They took the case on a contingency basis which tells you how strong they thought it was


    Question: Obviously when approaching the very respected law firm of Susman Godfrey L.L.P. about taking your company's case against Activision Blizzard on a contingency, they would need some time to evaluate the case before giving you an answer. How long was it before they decided to take the case ?


    TK: Susman Godfrey spent nine months reviewing our case before they came back and said, "We'll take it." They had a team of experts extensively review our patents and prior art work and they also studied the court records of our case against NCSoft that was ultimately settled out of court for an undisclosed sum. We received three additional patents covering prior art and the assumptions of validity were greatly enhanced.
    25 Feb 2013, 11:37 PM Reply Like
  • I see. Very interesting. Thanks!
    26 Feb 2013, 12:15 AM Reply Like
  • Then my second question will be what the terms and conditions are. If someone else is financing your case, they will work for themselves.
    26 Feb 2013, 02:46 AM Reply Like
  • What do you mean "they will work for themselves?" They are lawyers working on a contingency basis which is common practice. They have a fiduciary duty to their client, same as if they were being paid by the hour. Keep in mind that the reward for Susman Godfrey is that if they win they will be paid somewhere in the neighborhood of 40% of any award so the benefit to them is that they have the potential to be paid far more than a simple hourly rate. But since they only eat what they kill SG must, as many posters have said, believe strongly in their potential to win against Activision.
    26 Feb 2013, 09:10 AM Reply Like
  • Yo EDVA...there you go again, making sensible reasoned comments based upon actual knowledge of the methods, responsibilities and practices of the components of the legal system in the US!
    26 Feb 2013, 09:20 AM Reply Like
  • EDVA,


    I am trying to understand. Public companies have responsibility to their shareholder too. The administrations tend to fill up their pockets before shareholders. Whether it is a law firm or a farm firm doesnt change the fact. Of course they are bound by the agreement (and that I would like to know more about it) but there is always a gray area. If they receive 20% of settlement or 50% of an after-trial award they may push for a trial. It may make sense for the shareholders too if Activision offer low yet it will take a lot longer.


    Now Activision has patents about the same technology too. What if they sue Worlds Inc. Is Susman going to take it over?
    26 Feb 2013, 10:35 AM Reply Like
  • I have added to my MIMV position since it went below .30 sitting with a .31 average at the moment adding more if it drops below .26
    27 Feb 2013, 02:10 PM Reply Like
  • The CEO's statements about Vringo not being the original creators of the intellectual property is a little incorrect considering the fact that Andrew Lang works for Vringo as their CTO and he created the intellectual property
    17 Oct 2013, 10:37 PM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.