10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from __________ to __________

QUEST PATENT RESEARCH CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	33-18099-NY	11-2873662
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

411 Theodore Fremd Ave., Suite 206S, Rye, NY	10580-1411
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 743-7577

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer (Do not check if smaller reporting company)	☐	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐    No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 313,038,334 shares of common stock are issued and outstanding as of August 12, 2016.

TABLE OF CONTENTS

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
	Unaudited Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	1
	Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015	2
	Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	3
	Notes to Unaudited Consolidated Financial Statements.	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	12
Item 4.	Controls and Procedures.	13
PART II – OTHER INFORMATION
Item 5.	Other Information	13
Item 6.	Exhibits.	13

FORWARD LOOKING STATEMENTS
 

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the year ended December 31, 2015, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC.  You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, “Quest”, “Company”, “we,” “us,” “our” and similar terms refer to Quest Patent Research Corporation, and its subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

	June 30, 2016			December 31, 2015
ASSETS
Current assets
Cash and cash equivalents	$	89,766		$	331,506
Accounts receivable		161,921			41,552
Other current assets		2,995			5,924
Total current assets		254,682			378,982
Patents, net of accumulated amortization of $179,978 and $57,500, respectively		2,196,253			2,318,731
Total assets	$	2,450,935		$	2,697,713
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current liabilities:
Accounts payable and accrued liabilities	$	470,422		$	69,884
Loans payable – third party		163,000			163,000
Purchase price of patents, current portion		1,000,000			1,000,000
Accrued interest - loans payable third party		240,763			232,614
Total current liabilities		1,874,185			1,465,498
Non-current liabilities
Loan payable – related party, net of unamortized discount and debt issuance costs of $655,082 and $687,754		681,735			586,562
Purchase price of patents, long term – net of unamortized discount of $121,712 and $173,769		878,288			826,231
Total liabilities		3,434,208			2,878,291
Stockholders’ deficit:
Preferred stock – par value $.00003 – authorized 10,000,000 Shares – no shares issued and outstanding
Common stock, par value $0.00003; authorized 1,250,000,000 shares and 1,250,000,000 at June 30, 2016 and December 31, 2015, respectively; shares issued and outstanding 313,038,334 and 313,038,334, at June 30, 2016 and December 31, 2015, respectively		9,391			9,391
Additional paid-in capital		14,232,882			14,232,882
Accumulated deficit		(15,228,338	)		(14,425,448	)
Total Quest Patent Research Corporation deficit		(986,065	)		(183,175	)
Non-controlling interest in subsidiary		2,792			2,597
Total stockholders’ deficit		(983,273	)		(180,578	)
Total liabilities and stockholders’ deficit	$	2,450,935		$	2,697,713

See accompanying notes to unaudited consolidated financial statements.

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QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

	FOR THE						FOR THE
	THREE MONTHS ENDED						SIX MONTHS ENDED
	JUNE 30,						JUNE 30,
	2016			2015			2016			2015
Revenues
Licensed Sales	$	9,975		$	8,379		$	19,857		$	19,111
Patent licensing fees		0			0			0			20,000
Management fees		315,124			46,762			464,403			131,701
		325,099			55,141			484,260			170,812
Operating expenses
Cost of revenue:
Cost of sales		10,048			4,024			13,313			7,055
Royalties		0			715			0			5,018
Management support services		446,376			12,524			696,700			30,345
Selling, general and administrative expenses		228,227			101,037			419,413			289,459
Total operating expenses		684,651			118,300			1,129,426			331,877
Loss from operations		(359,552	)		(63,159	)		(645,166	)		161,065	)
Other Income and (expenses)
Other income		0			0			0			32,182
Income tax		(9	)		0			(2,150	)		(3,176	)
Interest expense		(72,220	)		(4,075	)		(155,379	)		(8,150	)
Total Other Income and (expenses)		(72,229	)		(4,075	)		(157,529	)		20,856
Net loss		(431,781	)		(67,234	)		(802,695	)		(140,209	)
Net income (loss) attributable to non-controlling interest in subsidiaries		(130	)		(319	)		(195	)		(445	)
Net loss attributable to Quest Patent Research Corporation	$	(431,911	)	$	(67,553	)	$	(802,890	)	$	(140,654	)
Earnings (loss) per share basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted average shares outstanding – basic and diluted		313,038,334			263,038,334			313,038,334			260,538,334

See accompanying notes to unaudited consolidated financial statements.

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QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

	FOR THE
	SIX MONTHS ENDED
	JUNE 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(802,695	)	$	(140,209	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts		84,729			-
Share-based compensation		-			63,000
Gain on settlement of accounts payable		-			(32,182	)
Depreciation and amortization		122,478			-
Changes in operating assets and liabilities
Accrued interest expense		62,500			-
Accounts receivable		(120,369	)		(9,385	)
Other current assets		2,929			831
Accounts payable and accrued expenses		408,688			34,141
Net cash used in operating activities		(241,740	)		(83,804	)
Net increase (decrease) in cash and cash equivalents		(241,740	)		(83,804	)
Cash and cash equivalents at beginning of year		331,506			91,690
Cash and cash equivalents at end of year	$	89,766		$	7,886
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes		2,150			3,176
Interest		-

See accompanying notes to unaudited consolidated financial statements.

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QUEST PATENT RESEARCH CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company is a Delaware corporation, incorporated on July 17, 1987 and has been engaged in the intellectual property monetization business since 2008.

As used herein, the “Company” refers to Quest Patent Research Corporation and its wholly and majority-owned and controlled operating subsidiaries unless the context indicates otherwise. All intellectual property acquisition, development, licensing and enforcement activities are conducted by the Company’s wholly and majority-owned and controlled operating subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and notes required by GAAP for complete financial statements. All adjustments (consisting of normal recurring items) necessary to present fairly the Company’s consolidated financial position have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2015. Certain prior-period amounts have been reclassified to conform to the current-period presentation. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for any other interim period or for the entire year.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation and financial statement presentation

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of June 30, 2016. 

The consolidated financial statements include the accounts and operations of:

Quest Patent Research Corporation

Wynn Technologies, Inc.

Quest Licensing Corporation (NY)

Quest Licensing Corporation (DE) (wholly owned)

Quest Packaging Solutions Corporation (90% owned)

Quest Nettech Corporation (wholly owned)

Semcon IP, Inc. (wholly owned)

Mariner IC, Inc. (wholly owned)

IC Kinetics, Inc. (wholly owned)

The operations of Wynn Technologies Inc. are not included in the Company’s consolidated financial statements as there are significant contingencies related to its control of Wynn Technologies Inc. The sole asset of Wynn Technologies Inc. is US Patent No. RE38,137E. Wynn Technologies Inc. cannot transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,173E without the express written consent of Sol Li, owner of 35% of Wynn Technologies Inc., unless, as of the date of such transfer, assignment, sale, hypothecation or other encumbrance, Mr. Li has received a total of at least $250,000. 

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The Company accounts for its 65% interest in Wynn Technologies, Inc. under the equity method whereby the investment accounts are increased for contributions by the Company plus its 60% share of income pursuant to the contractual agreement which provide that Sol Li retains 40% of the income, and reduced for distributions and its 60% share of losses incurred, respectively, with the restriction whereby the account balances cannot go below zero.

Significant intercompany transaction and balances have been eliminated in consolidation. 

Inventor/Former Owner Royalties and Contingent Legal/Litigation Finance Expenses

In connection with the investment in certain patents and patent rights, certain of the Company’s operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

The Company’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded.

The Company’s operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for a legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities.

The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors.

Going Concern

As shown in the accompanying financial statements, the Company has an accumulated deficit of $15,228,338 and negative working capital of $1,619,503 as of June 30, 2016. Because of the Company’s continuing losses, the working capital deficiency, the uncertainty of future revenue, the Company’s low stock price and the absence of a trading market in its common stock, and the ability of the Company to raise funds in equity market or from lenders is severely impaired. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Although the Company may seek to raise funds and to obtain third party funding for litigation to enforce its intellectual property rights, the availability of such funds is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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NOTE 3 – SHORT-TERM AND LONG-TERM DEBT

The following table shows the Company’s short-term and long-term debt at June 30, 2016 and December 31, 2015.

	June 30,			December 31,
	2016			2015
Short term debt:
Loans payable – third party	$	163,000		$	163,000
Long term debt:
Loans payable – related party
Gross		1,250,000			1,250,000
Accrued Interest		86,817			24,316
Unamortized discount		(655,082	)		(687,754	)
Net loans payable – related party	$	681,735		$	586,562

Short term debt

The loan payable – third party is a demand loan made by former officers and directors, who are unrelated third parties at June 30, 2016, and December 31, 2015, in the amount of $163,000. The loans are payable on demand plus accrued interest at 10% per annum. These third parties are also shareholders, but their stockholdings are not significant.  See Note 6.

Long-term debt

The loan payable at June 30, 2016 represents the principal amount of the Company’s 10% note to United Wireless Holdings, Inc. (“United Wireless”) due September 30, 2020, in the amount of $1,250,000 pursuant to securities purchase agreement dated October 22, 2015 more fully described in our Annual Report on Form 10-K for the year ended December 31, 2015. Because of its stock ownership in the Company and its right to elect a director of the Company, United Wireless is treated as a related party. Prior to the consummation of the transactions described in this Note 3, the Company had no relationship with United Wireless.

NOTE 4 – STOCKHOLDERS’ EQUITY

Increase in Authorized Common Stock

On January 22, 2016, the Company amended and restated its certificate of incorporation to increase its authorized common stock from 390,000,000 shares to 1,250,000,000 shares. The Company’s financial statements at December 31, 2015 reflect this increase.

Issuance of Common Stock and Options

Pursuant to the restated employment agreement dated November 30, 2014, the Company issued to its chief executive officer a stock grant for 30,000,000 shares which vested on January 15, 2015. For the period ended June 30, 2015 the Company recognized compensation expense of $63,000, representing closing price of the common stock on the vesting date. There was no stock-based compensation expense for the six months ended June 30, 2016.

As of June 30, 2016, there was no unamortized option expense associated with compensatory options. 

A summary of the status of the Company's stock options and changes is set forth below:

	Number of Options (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)
Balance - December 31, 2015		50,000,000		0.03		4.75
Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-
Cancelled		-		-		-
Balance – June 30, 2016		50,000,000		0.03		4.25

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Warrants

A summary of the status of the Company's stock warrants and changes is set forth below: 

	Number of Warrants (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)
Balance - December 31, 2015		65,000,000		0.004		2.3
Granted		-		-		-
Cancelled		-		-		-
Expired		-		-		-
Exercised		-		-		-
Balance – June 30, 2016		65,000,000		0.004		1.8

NOTE 5 – NON-CONTROLLING INTEREST

The following table reconciles equity attributable to the non-controlling interest related to Quest Packaging Solutions Corporation.

Balance as of December 31, 2015	$	2,597
Net income attributable to non-controlling interest	$	195
Balance as of June 30, 2016	$	2,792

NOTE 6 – RELATED PARTY TRANSACTIONS

The Company has at various times entered into transactions with related parties, including officers, directors and major shareholders, wherein these parties have provided services, advanced or loaned money, or both, to the Company needed to support its daily operations. The Company discloses all related party transactions.

During 2003, the Company received loans from then officers and directors, now unrelated third parties, in the amount of $79,490. The loans are payable on demand plus accrued interest at 10% per annum. During 2014, all loan holders ceased to be related parties as a result of employee separation agreements and director resignations. As a result, in 2014, approximately $54,490 in principal on the loans was cancelled pursuant to a separation agreement and $25,000 in principal was reclassified as loans payable to third parties upon resignation of the loan holder from the board.

During the three and six months ended June 30, 2016 and 2015, the Company contracted with an entity owned by the chief technology officer for the provision of information technology services to the Company. The cost of such services were approximately $600 and $1,200 for the three and six months ended June 30, 2015, respectively, and $600 and $1,200 for the three and six months ended June 30, 2016, respectively.

NOTE 7 – SUBSEQUENT EVENTS

On August 10, 2016, the Company’s board of directors approved annual bonus compensation to the Company’s chief executive officer equal to 30% of the amount by which the Company’s consolidated income before income taxes exceeds $500,000, but, if the Company is subject to the limitation on deductibility of executive compensation pursuant to Section 162(m) of the Internal Revenue Code, the bonus cannot exceed the amount which would be deductible pursuant to Section 162(m).

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our principal operations include the development, acquisition, licensing and enforcement of intellectual property rights that are either owned or controlled by us or one of our wholly owned subsidiaries. We currently own, control or manage eight intellectual property portfolios, which principally consist of patent rights. As part of our intellectual property asset management activities and in the ordinary course of our business, it has been necessary for either us or the intellectual property owner who we represent to initiate, and it is likely to continue to be necessary to initiate patent infringement lawsuits and engage in patent infringement litigation. To date, we have not generated any significant revenues from our intellectual property rights.

We seek to generate revenue from three sources:

● Patent licensing fees relating to our intellectual property portfolio, which includes fees from the licensing of our intellectual property, primarily from litigation relating to enforcement of our intellectual property rights.

● Management fees, which we receive for managing structured licensing programs, including litigation, related to our intellectual property rights.

● Licensed packaging sales, which relate to the sale of licensed products

Because of the nature of our business transactions to date, we recognize revenues from licensing upon execution of a license agreement following settlement of litigation and not over the life of the patent. Thus, we would recognize revenue when we receive the license fee or settlement payment. Although we intend to seek to develop portfolios of intellectual property rights that provide us for a continuing stream of revenue, to date we have not been successful in doing so, and we cannot give you any assurance that we will be able to generate any significant revenue from licenses that provide a continuing stream of revenue. Thus, to the extent that we continue to generate cash from single payment licenses, our revenue can, and is likely to, vary significantly from quarter to quarter and year to year. Our gross profit from license fees reflects any royalties which we pay in connection with our license.

Fees generated in connection with the management of litigation are paid to us by one of the third-party funding source in support of the litigation seeking to enforce our intellectual property rights. Our agreement with the funding source provides that the funding source pays the litigation costs and provides that this funding source receives a percentage of the recovery, thus reducing our recovery in connection with any settlement of the litigation. As a result, in connection with litigation funded by the third party, we would, if the litigation is successful, receive fees both for managing the litigation, if the agreement with the funding source provides for such payments, and from a license of the intellectual property, which will be net of that portion of the recovery payable to the funding source. To the extent that we have agreements with counsel and/or litigation funding sources pursuant to which payments made to them represent a portion of the gross recovery, and such payment is contingent upon a recovery, our revenue from litigation reflects the gross recovery from litigation as licensing fees, and payments to counsel and/or litigation funding sources are reflected as cost of revenue. Our gross profit from management fees reflects payments to third party support services providers which we pay in connection with management of the licensing program.

To a lesser extent, we generate revenue from sale of packaging materials based on our TurtlePak^TM technology. Our gross profit from sales reflects the cost of contract manufacturing and labor. We did not generate any revenue from the TurtlePak^TM Portfolio other than from the sale of products using our technology.

In March 2016, we entered into two funding agreements whereby a third party agreed to provide funds to us to enable us to implement a structured licensing program, including litigation if necessary, for the power management/bus control portfolio, which is owned by our subsidiary Semcon IP, Inc., and the anchor structure portfolio, which is owned by Mariner IC, Inc. These portfolios are two of the portfolios we acquired from Intellectual Ventures Assets 16 LLC (“Intellectual Ventures”) in October 2015. We engaged counsel on a partial contingency basis in connection with a proposed patent infringement action relating to these portfolios.

Following the execution of the funding agreements and the engagement of counsel, in April 2016, (i) Semcon brought patent infringement suits in the United States District Court for the Eastern District of Texas against Huawei Technologies, MediaTek Inc., STMicroelectronics Inc., Texas Instruments Incorporated and ZTE Corporation, and (ii) Mariner IC brought patent infringement suits in the United States District Court for the Eastern District of Texas against MediaTek Inc., Texas Instruments Incorporated, LG Electronics, Inc., Toshiba Corporation, and Panasonic Corporation.

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Pursuant to the terms of the funding agreements and the partial contingency agreements with counsel, we do not have any liability or obligations with respect to the costs associated with prosecuting the actions, and we do not receive any payments for any assistance which we may provide in connection with the litigation. Both the funding source and counsel will participate in any recovery in these lawsuits.

Results of Operations

Three and six months ended June 30, 2016 and 2015

Revenues for the three months ended June 30, 2016 were approximately $325,000, an increase of approximately $270,000, or 490%, from the comparable period of 2015, which were approximately $55,000. Revenues for the six months ended June 30, 2016 were approximately $484,000, an increase of approximately $313,000, or 184%, from the comparable period of 2015, which was approximately $171,000. The increase in revenue was primarily due to an increase in management fees of approximately $268,000 and approximately $332,000 for the three and six months ended June 30, 2016 respectively from the comparable periods of 2015, relating to our services in support of mobile data portfolio litigation which are paid by the firm that is providing the funding for the litigation. These management fees represent the only significant source of revenue in the three- and six-month periods ended June 30, 2016.

Operating expenses for the three and six months ended June 30, 2016 increased by approximately $566,000, or 479%, and by approximately $798,000, or 240%, respectively, compared to the three and six months ended June 30, 2015. Our principal operating expense for the three and six months ended June 30, 2016 and 2015 was management support services in support of mobile data portfolio litigation which are paid by the firm that is providing the funding for the litigation. Management support services, which was approximately $446,000 and $696,000 for the three and six months ended June 30, 2016, respectively, and approximately $12,000 and $30,000 for the three and six months ended June 30, 2015, respectively. Due to the timing of payables and receivables, management support services paid exceeded management fees during the three- and six-months ended June 30, 2016.

Other income (expense) included interest expense of $72,220 and $155,379 for the three and six months ended June 30, 2016, respectively, and $4,075 and $8,150 for the three and six months ended June 30, 2015, respectively. The increase in interest expense primarily reflect the accrued interest on our note to United Wireless. Other income (expense) for the six months ended June 30, 2015 included $32,182, reflecting the gain on the settlement of an account payable for less than the amount previously accrued.

As a result of the foregoing, we sustained a net loss of approximately $432,000, or $0.001 per share (basic and diluted), for the three months ended June 30, 2016 and a net loss of approximately $803,000, or $0.003 per share (basic and diluted), for the six months ended June 30, 2016, compared to net loss of approximately $68,000, or $0.000 per share (basic and diluted), for the three months ended June 30, 2015 and a net loss of approximately $141,000, or $0.001 per share (basic and diluted), for the six months ended June 30, 2015. 

Liquidity and Capital Resources

At June 30, 2016, we had current assets of approximately $254,682, and current liabilities of approximately $1,874,185. Our current liabilities include $1,000,000 payment due to Intellectual Ventures on account of the purchase price of the patent portfolios we purchased from Intellectual Ventures and loans payable of $163,000 and accrued interest of $240,763 due to former directors and minority stockholders. Our agreement with United Wireless requires United Wireless to lend us the funds to make the payments to Intellectual Ventures. As of June 30, 2016, we have an accumulated deficit of approximately $15,228,000 and a negative working capital of approximately $1,619,000. Other than salary to our chief executive officer, we do not contemplate any other material operating expense in the near future other than normal general and administrative expenses, including expenses relating to our status as a public company filing reports with the SEC. 

We cannot assure you that we will be successful in generating future revenues, in obtaining additional debt or equity financing or that such additional debt or equity financing will be available on terms acceptable to us, if at all, or that we will be able to obtain any third party funding in connection with any of our intellectual property portfolios. We have no credit facilities.

9

We have an agreement with a funding source which is providing litigation financing in connection with our pending litigation relating to our mobile data portfolio, and we have two agreements with a second funding source which is providing litigation financing in connection with our pending litigation relating to our power management/bus control and anchor structure portfolios. We cannot predict the success of any pending or future litigation. Our obligations to United Wireless are not contingent upon the success of any litigation. If we fail to generate a sufficient recovery in these actions (net of any portion of any recovery payable to the funding source or our legal counsel) in a timely manner to enable us to pay United Wireless on the present loans and the additional loans which United Wireless has agreed to make to us, we would be in default under our agreements with United Wireless which could result in United Wireless obtaining ownership of the three subsidiaries which own the patent rights we acquired from Intellectual Ventures. Our agreements with the funding sources provide that the funding sources will participate in any recovery which is generated. We believe that our financial condition, our history of losses and negative cash flow from operations, and our low stock price make it difficult for us to raise funds in the debt or equity markets.

As noted below, there is a substantial doubt about our ability to continue as a going concern. 

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial statements.

Principles of Consolidation

The condensed consolidated financial statements are prepared in accordance with US GAAP and present the financial statements of the Company and our wholly-owned subsidiary. In the preparation of our consolidated financial statements, intercompany transactions and balances are eliminated.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

We adopted Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

10

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

In addition, FASB ASC 825-10-25 “Fair Value Option” was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.

Stock-based Compensation

The Company accounts for share-based awards issued to employees in accordance with Accounting Standards Codification (ASC) 718, “Compensation-Stock Compensation.” Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period, which is normally the vesting period. Share-based compensation to directors is treated in the same manner as share-based compensation to employees, regardless of whether the directors are also employees. The Company accounts for share-based compensation to persons other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of share-based payments using the Black Scholes option-pricing model for common stock options and warrants and the closing price of the Company’s common stock for common share issuances.

Long-Lived Assets

We review for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets”. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

Revenue Recognition

We recognize revenue in accordance with ASC Topic 605, “Revenue Recognition”. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed, (iii) amounts are fixed or determinable and (iv) collectability of amounts is reasonably assured.

We consider our licensing and enforcement activities as one unit of accounting under ASC 605-25, “Multiple-Element Arrangements” as the delivered items do not have value to customers on a standalone basis, there are no undelivered elements and there is no general right of return relative to the license. Under ASC 605-25, the appropriate recognition of revenue is determined for the combined deliverables as a single unit of accounting and revenue is recognized upon delivery of the final elements, including the license for past and future use and the release. Also due to the fact that the settlement element and license element for past and future use are the major central business, we do not present these two elements as different revenue streams in its statement of operations. We do not expect to provide licenses that do not provide some form of settlement or release.

Cost of Revenue

Cost of revenues mainly includes expenses incurred in connection with our patent enforcement activities, such as legal fees, consulting costs, patent maintenance, royalty fees for acquired patents and other related expenses. Cost of revenue does not include expenses related to product development, patent amortization, integration or support, as these are included in general and administrative expenses.

11

Inventor/Former Owner Royalties and Contingent Legal/Litigation Finance Expenses

In connection with the investment in certain patents and patent rights, certain of our operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

Our operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded.

Our operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for a legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities.

The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by our operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors.  To the extent that we have agreements with counsel and/or litigation funding sources pursuant to which payments made to them represent a portion of the gross recovery, and such payment is contingent upon a recovery, our revenue from litigation reflects the gross recovery from litigation as licensing fees, and payments to counsel and/or litigation funding sources are reflected as cost of revenue.

Recent Accounting Pronouncements

Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition.

Going Concern

We have an accumulated deficit of $15,228,338 and negative working capital of $1,619,503 as of June 30, 2016. Because of our continuing losses, our working capital deficiency, the uncertainty of future revenue, our obligations to Intellectual Ventures and United Wireless, our low stock price and the absence of a trading market in our common stock, our ability to raise funds in equity market or from lenders is severely impaired, and we may not be able to continue as a going concern. Although we may seek to raise funds and to obtain third party funding for litigation to enforce our intellectual property rights, the availability of such funds in uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 

12

Item 4. Controls and Procedures.

Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2016, the end of the period covered by this Quarterly Report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, which positions are held by the same person. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to the inadequacy of our internal controls over financial reporting, our sole employee being our chief executive and financial officer and our limited internal audit function, our disclosure controls were not effective as of June 30, 2016, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the president and treasurer, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting.

As reported in our annual report on Form 10-K for the year ended December 31, 2015, management has determined that our internal audit our internal controls contains material weaknesses due to insufficient segregation of duties within accounting functions as well as lack of qualified accounting personnel and excessive reliance on third party consultants for accounting, financial reporting and related activities. These problems continue to affect us as we only have one full-time executive officer, who is our only full-time employee and who serves as chief executive officer and chief financial officer.

During the period ended June 30, 2016, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 5. Other Information.

On August 10, 2016, the Company’s board of directors approved bonus compensation to the Company’s chief executive officer pursuant to his existing employment agreement equal to 30% of the amount by which the Company’s consolidated income before income taxes exceeds $500,000, but, if the Company is subject to the limitation on deductibility of executive compensation pursuant to Section 162(m) of the Internal Revenue Code, the bonus cannot exceed the amount which would be deductible pursuant to Section 162(m). The board approval followed the report, dated August 9, 2016, of the Company’s two disinterested directors who made the determination of the bonus computation.

Item 6. Exhibits.

31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.ins	XBRL Instance Document
101.sch	XBRL Taxonomy Schema Document
101.cal	XBRL Taxonomy Calculation Document
101.def	XBRL Taxonomy Linkbase Document
101.lab	XBRL Taxonomy Label Linkbase Document
101.pre	XBRL Taxonomy Presentation Linkbase Document

13

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 12, 2016 

QUEST PATENT RESEARCH CORPORATION
By:	/s/ Jon C. Scahill
	Jon C. Scahill
	Chief executive officer and acting chief financial officer

14

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Jon C. Scahill, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Quest Patent Research Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated:  August 12, 2016	By:	/s/ Jon C. Scahill
		Chief Executive Officer and Acting Chief Financial Officer)
		(Principal Executive and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Quest Patent Research Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jon C. Scahill, chief executive officer and acting chief financial officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2016	By:	/s/ Jon C. Scahill
		Jon C. Scahill
		Chief Executive Officer and Acting Chief Financial Officer
		(Principal Executive and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 12, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	QUEST PATENT RESEARCH CORPORATION
Entity Central Index Key	0000824416
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		313,038,334

XML

Unaudited Consolidated Balance Sheets - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 89,766	$ 331,506
Accounts receivable	161,921	41,552
Other current assets	2,995	5,924
Total current assets	254,682	378,982
Patents, net of accumulated amortization of $179,978 and $57,500, respectively	2,196,253	2,318,731
Total assets	2,450,935	2,697,713
Current liabilities:
Accounts payable and accrued liabilities	470,422	69,884
Loans payable - third party	163,000	163,000
Purchase price of patents, current portion	1,000,000	1,000,000
Accrued interest - loans payable third party	240,763	232,614
Total current liabilities	1,874,185	1,465,498
Non-current liabilities
Loan payable - related party, net of unamortized discount and debt issuance costs of $655,082 and $687,754	681,735	586,562
Purchase price of patents, long term - net of unamortized discount of $121,712 and $173,769	878,288	826,231
Total liabilities	3,434,208	2,878,291
Stockholders' deficit:
Preferred stock - par value $.00003 - authorized 10,000,000 Shares - no shares issued and outstanding
Common stock, par value $0.00003; authorized 1,250,000,000 shares and 1,250,000,000 at June 30, 2016 and December 31, 2015, respectively; shares issued and outstanding 313,038,334 and 313,038,334, at June 30, 2016 and December 31, 2015, respectively	9,391	9,391
Additional paid-in capital	14,232,882	14,232,882
Accumulated deficit	(15,228,338)	(14,425,448)
Total Quest Patent Research Corporation deficit	(986,065)	(183,175)
Non-controlling interest in subsidiary	2,792	2,597
Total stockholders' deficit	(983,273)	(180,578)
Total liabilities and stockholders' deficit	$ 2,450,935	$ 2,697,713

XML

Unaudited Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
CONSOLIDATED BALANCE SHEETS
Patents, net of accumulated amortization	$ 179,978	$ 57,500
Loan payable - related party unamortized discount	655,082	687,754
Purchase price of patents unamortized discount	$ 121,712	$ 173,769
Preferred stock, par value	$ 0.00003	$ 0.00003
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.00003	$ 0.00003
Common stock, shares authorized	1,250,000,000	1,250,000,000
Common stock, shares issued	313,038,334	313,038,334
Common stock, shares outstanding	313,038,334	313,038,334

XML

Unaudited Consolidated Statement of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues
Licensed Sales	$ 9,975	$ 8,379	$ 19,857	$ 19,111
Patent licensing fees	0	0	0	20,000
Management fees	315,124	46,762	464,403	131,701
Total revenue	325,099	55,141	484,260	170,812
Cost of revenue:
Cost of sales	10,048	4,024	13,313	7,055
Royalties	0	715	0	5,018
Management support services	446,376	12,524	696,700	30,345
Selling, general and administrative expenses	228,227	101,037	419,413	289,459
Total operating expenses	684,651	118,300	1,129,426	331,877
Loss from operations	(359,552)	(63,159)	(645,166)	(161,065)
Other Income and (expenses)
Other income	0	0	0	32,182
Income tax	(9)	0	(2,150)	(3,176)
Interest expense	(72,220)	(4,075)	(155,379)	(8,150)
Total Other Income and (expenses)	(72,229)	(4,075)	(157,529)	20,856
Net loss	(431,781)	(67,234)	(802,695)	(140,209)
Net income (loss) attributable to non-controlling interest in subsidiaries	(130)	(319)	(195)	(445)
Net loss attributable to Quest Patent Research Corporation	$ (431,911)	$ (67,553)	$ (802,890)	$ (140,654)
Earnings (loss) per share basic and diluted	$ 0	$ 0	$ 0	$ 0
Weighted average shares outstanding - basic and diluted	313,038,334	263,038,334	313,038,334	260,538,334

XML

Unaudited Consolidated Statement of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net loss	$ (802,695)	$ (140,209)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts	84,729
Share-based compensation		63,000
Gain on settlement of accounts payable		(32,182)
Depreciation and amortization	122,478
Changes in operating assets and liabilities
Accrued interest expense	62,500
Accounts receivable	(120,369)	(9,385)
Other current assets	2,929	831
Accounts payable and accrued expenses	408,688	34,141
Net cash used in operating activities	(241,740)	(83,804)
Net increase (decrease) in cash and cash equivalents	(241,740)	(83,804)
Cash and cash equivalents at beginning of year	331,506	91,690
Cash and cash equivalents at end of year	89,766	7,886
Cash paid during the year for:
Income taxes	2,150	3,176
Interest

XML

Description Of Business And Basis Of Presentation

6 Months Ended

Jun. 30, 2016

Description Of Business And Basis Of Presentation [Abstract]

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company is a Delaware corporation, incorporated on July 17, 1987 and has been engaged in the intellectual property monetization business since 2008.

As used herein, the “Company” refers to Quest Patent Research Corporation and its wholly and majority-owned and controlled operating subsidiaries unless the context indicates otherwise. All intellectual property acquisition, development, licensing and enforcement activities are conducted by the Company’s wholly and majority-owned and controlled operating subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and notes required by GAAP for complete financial statements. All adjustments (consisting of normal recurring items) necessary to present fairly the Company’s consolidated financial position have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2015. Certain prior-period amounts have been reclassified to conform to the current-period presentation. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for any other interim period or for the entire year.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation and financial statement presentation

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of June 30, 2016. 

The consolidated financial statements include the accounts and operations of:

Quest Patent Research Corporation

Wynn Technologies, Inc.

Quest Licensing Corporation (NY)

Quest Licensing Corporation (DE) (wholly owned)

Quest Packaging Solutions Corporation (90% owned)

Quest Nettech Corporation (wholly owned)

Semcon IP, Inc. (wholly owned)

Mariner IC, Inc. (wholly owned)

IC Kinetics, Inc. (wholly owned)

The operations of Wynn Technologies Inc. are not included in the Company’s consolidated financial statements as there are significant contingencies related to its control of Wynn Technologies Inc. The sole asset of Wynn Technologies Inc. is US Patent No. RE38,137E. Wynn Technologies Inc. cannot transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,173E without the express written consent of Sol Li, owner of 35% of Wynn Technologies Inc., unless, as of the date of such transfer, assignment, sale, hypothecation or other encumbrance, Mr. Li has received a total of at least $250,000. 

The Company accounts for its 65% interest in Wynn Technologies, Inc. under the equity method whereby the investment accounts are increased for contributions by the Company plus its 60% share of income pursuant to the contractual agreement which provide that Sol Li retains 40% of the income, and reduced for distributions and its 60% share of losses incurred, respectively, with the restriction whereby the account balances cannot go below zero.

Significant intercompany transaction and balances have been eliminated in consolidation. 

Inventor/Former Owner Royalties and Contingent Legal/Litigation Finance Expenses

In connection with the investment in certain patents and patent rights, certain of the Company’s operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

The Company’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded.

The Company’s operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for a legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities.

The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors.

Going Concern

As shown in the accompanying financial statements, the Company has an accumulated deficit of $15,228,338 and negative working capital of $1,619,503 as of June 30, 2016. Because of the Company’s continuing losses, the working capital deficiency, the uncertainty of future revenue, the Company’s low stock price and the absence of a trading market in its common stock, and the ability of the Company to raise funds in equity market or from lenders is severely impaired. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Although the Company may seek to raise funds and to obtain third party funding for litigation to enforce its intellectual property rights, the availability of such funds is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

XML

Short-Term and Long-Term Debt

6 Months Ended

Jun. 30, 2016

Short-Term and Long-Term Debt [Abstract]

SHORT-TERM AND LONG-TERM DEBT

NOTE 3 – SHORT-TERM AND LONG-TERM DEBT

The following table shows the Company’s short-term and long-term debt at June 30, 2016 and December 31, 2015.

	June 30,			December 31,
	2016			2015
Short term debt:
Loans payable – third party	$	163,000		$	163,000
Long term debt:
Loans payable – related party
Gross		1,250,000			1,250,000
Accrued Interest		86,817			24,316
Unamortized discount		(655,082	)		(687,754	)
Net loans payable – related party	$	681,735		$	586,562

Short term debt

The loan payable – third party is a demand loan made by former officers and directors, who are unrelated third parties at June 30, 2016, and December 31, 2015, in the amount of $163,000. The loans are payable on demand plus accrued interest at 10% per annum. These third parties are also shareholders, but their stockholdings are not significant.  See Note 6.

Long-term debt

The loan payable at June 30, 2016 represents the principal amount of the Company’s 10% note to United Wireless Holdings, Inc. (“United Wireless”) due September 30, 2020, in the amount of $1,250,000 pursuant to securities purchase agreement dated October 22, 2015 more fully described in our Annual Report on Form 10-K for the year ended December 31, 2015. Because of its stock ownership in the Company and its right to elect a director of the Company, United Wireless is treated as a related party. Prior to the consummation of the transactions described in this Note 3, the Company had no relationship with United Wireless.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 4 – STOCKHOLDERS’ EQUITY

Increase in Authorized Common Stock

On January 22, 2016, the Company amended and restated its certificate of incorporation to increase its authorized common stock from 390,000,000 shares to 1,250,000,000 shares. The Company’s financial statements at December 31, 2015 reflect this increase.

Issuance of Common Stock and Options

Pursuant to the restated employment agreement dated November 30, 2014, the Company issued to its chief executive officer a stock grant for 30,000,000 shares which vested on January 15, 2015. For the period ended June 30, 2015 the Company recognized compensation expense of $63,000, representing closing price of the common stock on the vesting date. There was no stock-based compensation expense for the six months ended June 30, 2016.

As of June 30, 2016, there was no unamortized option expense associated with compensatory options. 

A summary of the status of the Company's stock options and changes is set forth below:

	Number of Options (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)
Balance - December 31, 2015		50,000,000		0.03		4.75
Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-
Cancelled		-		-		-
Balance – June 30, 2016		50,000,000		0.03		4.25

Warrants

A summary of the status of the Company's stock warrants and changes is set forth below: 

	Number of Warrants (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)
Balance - December 31, 2015		65,000,000		0.004		2.3
Granted		-		-		-
Cancelled		-		-		-
Expired		-		-		-
Exercised		-		-		-
Balance – June 30, 2016		65,000,000		0.004		1.8

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Non-controlling Interest

6 Months Ended

Jun. 30, 2016

Non-controlling Interest [Abstract]

NON-CONTROLLING INTEREST

NOTE 5 – NON-CONTROLLING INTEREST

The following table reconciles equity attributable to the non-controlling interest related to Quest Packaging Solutions Corporation.

Balance as of December 31, 2015	$	2,597
Net income attributable to non-controlling interest	$	195
Balance as of June 30, 2016	$	2,792

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Related Party Transactions

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS

The Company has at various times entered into transactions with related parties, including officers, directors and major shareholders, wherein these parties have provided services, advanced or loaned money, or both, to the Company needed to support its daily operations. The Company discloses all related party transactions.

During 2003, the Company received loans from then officers and directors, now unrelated third parties, in the amount of $79,490. The loans are payable on demand plus accrued interest at 10% per annum. During 2014, all loan holders ceased to be related parties as a result of employee separation agreements and director resignations. As a result, in 2014, approximately $54,490 in principal on the loans was cancelled pursuant to a separation agreement and $25,000 in principal was reclassified as loans payable to third parties upon resignation of the loan holder from the board.

During the three and six months ended June 30, 2016 and 2015, the Company contracted with an entity owned by the chief technology officer for the provision of information technology services to the Company. The cost of such services were approximately $600 and $1,200 for the three and six months ended June 30, 2015, respectively, and $600 and $1,200 for the three and six months ended June 30, 2016, respectively.

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Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 7 – SUBSEQUENT EVENTS

On August 10, 2016, the Company’s board of directors approved annual bonus compensation to the Company’s chief executive officer equal to 30% of the amount by which the Company’s consolidated income before income taxes exceeds $500,000, but, if the Company is subject to the limitation on deductibility of executive compensation pursuant to Section 162(m) of the Internal Revenue Code, the bonus cannot exceed the amount which would be deductible pursuant to Section 162(m).

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Principles of consolidation and financial statement presentation

Principles of consolidation and financial statement presentation

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of June 30, 2016. 

The consolidated financial statements include the accounts and operations of:

Quest Patent Research Corporation

Wynn Technologies, Inc.

Quest Licensing Corporation (NY)

Quest Licensing Corporation (DE) (wholly owned)

Quest Packaging Solutions Corporation (90% owned)

Quest Nettech Corporation (wholly owned)

Semcon IP, Inc. (wholly owned)

Mariner IC, Inc. (wholly owned)

IC Kinetics, Inc. (wholly owned)

The operations of Wynn Technologies Inc. are not included in the Company’s consolidated financial statements as there are significant contingencies related to its control of Wynn Technologies Inc. The sole asset of Wynn Technologies Inc. is US Patent No. RE38,137E. Wynn Technologies Inc. cannot transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,173E without the express written consent of Sol Li, owner of 35% of Wynn Technologies Inc., unless, as of the date of such transfer, assignment, sale, hypothecation or other encumbrance, Mr. Li has received a total of at least $250,000. 

The Company accounts for its 65% interest in Wynn Technologies, Inc. under the equity method whereby the investment accounts are increased for contributions by the Company plus its 60% share of income pursuant to the contractual agreement which provide that Sol Li retains 40% of the income, and reduced for distributions and its 60% share of losses incurred, respectively, with the restriction whereby the account balances cannot go below zero.

Significant intercompany transaction and balances have been eliminated in consolidation.

Inventor/Former Owner Royalties and Contingent Legal/Litigation Finance Expenses

Inventor/Former Owner Royalties and Contingent Legal/Litigation Finance Expenses

In connection with the investment in certain patents and patent rights, certain of the Company’s operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

The Company’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded.

The Company’s operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for a legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities.

The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors.

Going Concern

Going Concern

As shown in the accompanying financial statements, the Company has an accumulated deficit of $15,228,338 and negative working capital of $1,619,503 as of June 30, 2016. Because of the Company’s continuing losses, the working capital deficiency, the uncertainty of future revenue, the Company’s low stock price and the absence of a trading market in its common stock, and the ability of the Company to raise funds in equity market or from lenders is severely impaired. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Although the Company may seek to raise funds and to obtain third party funding for litigation to enforce its intellectual property rights, the availability of such funds is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Short-Term and Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2016

Short-Term and Long-Term Debt [Abstract]

Schedule of short-term and long-term debt

	June 30,			December 31,
	2016			2015
Short term debt:
Loans payable – third party	$	163,000		$	163,000
Long term debt:
Loans payable – related party
Gross		1,250,000			1,250,000
Accrued Interest		86,817			24,316
Unamortized discount		(655,082	)		(687,754	)
Net loans payable – related party	$	681,735		$	586,562

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2016

Stock Options [Member]

Schedule of outstanding stock warrants and options

	Number of Options (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)
Balance - December 31, 2015		50,000,000		0.03		4.75
Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-
Cancelled		-		-		-
Balance – June 30, 2016		50,000,000		0.03		4.25

Warrants [Member]

Schedule of outstanding stock warrants and options

	Number of Warrants (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)
Balance - December 31, 2015		65,000,000		0.004		2.3
Granted		-		-		-
Cancelled		-		-		-
Expired		-		-		-
Exercised		-		-		-
Balance – June 30, 2016		65,000,000		0.004		1.8

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Non-controlling Interest (Tables)

6 Months Ended

Jun. 30, 2016

Non-controlling Interest [Abstract]

Schedule of equity attributable to the non-controlling interest

Balance as of December 31, 2015	$	2,597
Net income attributable to non-controlling interest	$	195
Balance as of June 30, 2016	$	2,792

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Summary of Significant Accounting Policies (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Summary of Significant Accounting Policies (Textual)
Accumulated deficit	$ (15,228,338)	$ (14,425,448)
Working capital deficiency	1,619,503
Mr. Li received total cash	$ 250,000
Quest Packaging Solutions Corporation [Member]
Summary of Significant Accounting Policies (Textual)
Ownership percentage	90.00%
Wynn Technologies [Member]
Summary of Significant Accounting Policies (Textual)
Ownership percentage	65.00%
Contribution percentage	60.00%
Distribution percentage	60.00%
Ownership description	Wynn Technologies Inc. cannot transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,173E without the express written consent of Sol Li, owner of 35% of Wynn Technologies Inc.,
Percentage of income retained	40.00%

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Short-Term and Long-Term Debt (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Short term debt:
Loans payable - third party	$ 163,000	$ 163,000
Loans payable - related party
Gross	1,250,000	1,250,000
Accrued Interest	86,817	24,316
Unamortized discount	(655,082)	(687,754)
Net loans payable - related party	$ 681,735	$ 586,562

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Short-Term And Long-Term Debt (Details Textual) - USD ($)	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Short-Term and Long-Term Debt (Textual)
Loan payable - third party	$ 163,000	$ 163,000
Percentage of accrued interest on loans payable	10.00%	10.00%
Securities Purchase Agreement [Member]
Short-Term and Long-Term Debt (Textual)
Percentage of accrued interest on loans payable	10.00%
Principal amount	$ 1,250,000
Due date	Sep. 30, 2020

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Stockholders' Equity (Details ) - Stock Options [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares shares
Number of Options/Warrants (#)
Beginning Balance | shares	50,000,000
Granted | shares
Exercised | shares
Expired | shares
Cancelled | shares
Ending Balance | shares	50,000,000
Weighted Average Exercise Price ($)
Beginning Balance | $ / shares	$ 0.03
Granted | $ / shares
Exercised | $ / shares
Expired | $ / shares
Cancelled | $ / shares
Ending Balance | $ / shares	$ 0.03
Weighted Average Remaining Contractual Life (Years)
Beginning Balance	4 years 9 months
Ending Balance	4 years 3 months

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Stockholders' Equity (Details 1) - Warrants [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares shares
Number of Options/Warrants (#)
Beginning Balance | shares	65,000,000
Granted | shares
Cancelled | shares
Expired | shares
Exercised | shares
Ending Balance | shares	65,000,000
Weighted Average Exercise Price ($)
Beginning Balance | $ / shares	$ 0.004
Granted | $ / shares
Cancelled | $ / shares
Expired | $ / shares
Exercised | $ / shares
Ending Balance | $ / shares	$ 0.004
Weighted Average Remaining Contractual Life (Years)
Beginning Balance	2 years 3 months 18 days
Ending Balance	1 year 9 months 18 days

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Stockholders' Equity (Details Textual) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2016	Jan. 22, 2016	Dec. 31, 2015	Nov. 30, 2014
Stockholders Equity (Textual)
Common stock, shares authorized		1,250,000,000		1,250,000,000
Common stock authorized ptior to amendment			390,000,000
Stock grant to officer					30,000,000
Compensation expense	$ 63,000

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Non-controlling Interest (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Equity attributable to noncontrolling interest [Abstract]
Balance as of December 31, 2015			$ 2,597
Net income (loss) attributable to non-controlling interest	$ 130	$ 319	195	$ 445
Balance as of June 30, 2016	$ 2,792		$ 2,792

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Related Party Transactions (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2014	Dec. 31, 2003	Dec. 31, 2015
Related Party Transactions (Textual)
Percentage of accrued interest on loans payable	10.00%		10.00%				10.00%
Principal on loans cancelled					$ 54,490
Cost of information technology services	$ 600	$ 600	$ 1,200	$ 1,200
Reclassification of loans payable					$ 25,000
Officers and Directors [Member]
Related Party Transactions (Textual)
Proceeds from related party loans						$ 79,490
Percentage of accrued interest on loans payable						10.00%

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Subsequent Events (Details)	Aug. 10, 2016 USD ($)
Subsequent Event [Member]
Subsequent Events (Textual)
Income before income taxes	$ 500,000