NEW YORK, Nov. 11, 2016 /PRNewswire/ -- Network-1
Technologies, Inc. (NYSE: NTIP) today announced financial results
for the quarter ended September 30,
2016.
Network-1 had the largest quarterly revenues in its history with
revenue of $34,326,000 for the three
months ended September 30, 2016 as
compared with revenue of $3,008,000
for the three months ended September 30,
2015. The increase in revenue of $31,318,000 for the three months ended
September 30, 2016, was due primarily
to additional licensing revenue of $31,000,000 from settlement and licensing
agreements entered into with Apple Inc. and Dell, Inc. during the
quarter. Revenue from royalty bearing licenses for
patents decreased $232,000 or 14%
from $1,658,000 to $1,426,000 for the
three months ended September 30, 2016
compared to the three months ended September
30, 2015.
Network-1 had revenue of $59,963,000 for the nine months ended
September 30, 2016 as compared to
revenue of $10,382,000 for the nine
months ended September 30,
2015. The increase in revenue of $49,581,000 for the nine months ended
September 30, 2016, was due primarily
to additional licensing revenue of $31,000,000 from settlement and licensing
agreements with Apple Inc., and Dell, Inc. as well as a
$17,500,000 settlement of a
professional liability claim. Revenue from royalty
bearing licenses for patents increased $70,000 or 1% from
$8,593,000 to $8,663,000 for the
nine months ended September 30, 2016
compared to the nine months ended September
30, 2015.
Network-1 reported net income of $10,832,000 or $0.46 per share (basic) and $0.43 per share (diluted) for the three months
ended September 30, 2016 compared
with net income of $407,000 or
$0.02 per share (basic and diluted)
for the three months ended September
30, 2015.
Network-1 reported net income for the nine months ended
September 30, 2016 of $22,882,000 or $0.98 per share (basic) and $0.93 per share (diluted) as compared with net
income of $1,717,000 or $0.07 per share (basic and diluted) for the nine
months ended September 30,
2015.
At September 30, 2016, Network-1
had cash and cash equivalents of $57,759,000 and working capital of $50,179,000. Subsequent to the end of the
third quarter, Network-1 entered into settlement and license
agreements aggregating $5,000,000, a
portion of which will be recorded as revenue for the quarter ended
December 31, 2016.
Network-1 incurred current Federal, state and local income taxes
of $3,817,000 and $26,000 for the quarter ended September 30, 2016 and September 30, 2015, respectively. The
increase of $3,791,000 in such taxes
was related to Network-1's full utilization of NOLs during the
three months ended September 30, 2016
in connection with significant net income.
In September 2011, Network-1
initiated patent litigation against sixteen (16) data networking
equipment manufacturers in the United States District Court for the
Eastern District of Texas, Tyler
Division, for infringement of its Remote Power Patent. Network-1
has now reached settlement and license agreements with twelve (12)
of the original defendants. The remaining four defendants in
the lawsuit are Avaya Inc., AXIS Communications Inc.,
Hewlett-Packard Company, and Juniper Networks, Inc. Network-1 seeks
monetary damages based upon reasonable royalties. The
litigation is currently scheduled for trial in 2017.
The Remote Power Patent relates to, among other things,
delivering power over Ethernet cables to remotely power network
connected devices including, among others, wireless access points,
VoIP telephones and network cameras. In June 2003, the IEEE approved the 802.3af PoE
Standard, which led to the rapid adoption of PoE. The IEEE
also approved the 802.3at Power over Ethernet Plus (PoE Plus)
Standard, which increased the maximum power delivered to network
devices to 40-60 watts from the current 15 watts under the 802.3af
Standard.
Network-1 currently has twenty-five (25) license agreements with
respect to its Remote Power Patent, which include, among others,
license agreements with Cisco Systems, Inc., Extreme Networks,
Inc., Dell, Inc., Netgear Inc., Alcatel-Lucent USA, Sony Corporation, Shoretel Inc.,
Microsemi Corporation, Motorola Solutions, Inc., NEC Corporation,
Samsung Electronics Co., Ltd., and several other data networking
vendors.
On April 4, 2014 and December 3,
2014, Network-1 initiated litigation against Google Inc. and
YouTube, LLC in the United States District Court for the Southern
District of New York for
infringement of several of its patents which relate to the
identification of media content on the Internet. The lawsuits
allege that Google and YouTube have infringed and continue to
infringe certain of the Company's patents by making, using, selling
and offering to sell unlicensed systems and related products and
services, which include YouTube's Content ID system. In
December 2014, Google Inc. filed four
petitions to institute Inter Partes Review (the "IPRs") at
the United States Patent and Trademark Office ("USPTO") pertaining
to patents asserted in the litigation. In each of the four IPRs
Google sought to invalidate certain claims of the patents at issue
within the Cox Patent Portfolio. On June 21,
2016, the PTAB issued its Final Written Decision in the four
pending IPRs finding eighty-six (86) claims "not unpatentable"
(valid) and, in total, one hundred and nineteen (119) out of one
hundred and twenty-nine (129) or 92% of the challenged claims of
the patents have survived Google's challenges in the IPRs.
None of the claims of the patents being asserted in the pending
litigations against Google and YouTube were found invalid. On
August 18, 2016, Google filed Notices
of Appeal to appeal the Final Written Decisions on the IPRs to
the United States Court of Appeals
for the Federal Circuit.
On April 13, 2015, Google filed a
Petition for Covered Business Method Review (CBM) at the
PTAB seeking to invalidate claims pertaining to Network-1's U.S.
Patent No. 8,904,464, the patent asserted in the Company's
litigation against Google and YouTube filed on December 3, 2014 as referenced above. On
October 19, 2015, the PTAB issued an
order instituting the Covered Business Method Review on
certain grounds. The oral hearing took place on May 11, 2016. On October 18, 2016, the PTAB issued its Final
Written Decision in favor of Network-1 with respect to the CBM and
ruled that Google had failed to show that any of the thirty-four
(34) claims of the Company's patent at issue were unpatentable.
ABOUT NETWORK-1 TECHNOLOGIES, INC.
Network-1 Technologies, Inc. is engaged in the development,
licensing and protection of its intellectual property and
proprietary technologies. Network-1 works with inventors and
patent owners to assist in the development and monetization of
their patented technologies. Network-1 currently owns twenty-eight
(28) patents covering various telecommunications and data
networking technologies as well as technologies relating to
document stream operating systems and the identification of media
content. Network-1's current strategy includes continuing to
pursue licensing opportunities for its Remote Power Patent and its
efforts to monetize two patent portfolios (the Cox and Mirror
Worlds patent portfolios) acquired by Network-1 in 2013.
Network-1's acquisition strategy is to focus on acquiring high
quality patents which management believes have the potential to
generate significant licensing opportunities as Network-1 has
achieved with respect to its Remote Power Patent. Network-1's
Remote Power Patent has generated licensing revenue in excess of
$100,000,000 from May 2007 through September
30, 2016. As a result of the acquisition of its Mirror
Worlds Patent Portfolio in May 2013,
Network-1 achieved licensing and other revenue of $47,150,000 through September 30, 2016 with respect to its Mirror
Worlds Patent Portfolio.
This release contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. These statements address future
events and conditions concerning Network-1's business plans. Such
statements are subject to a number of risk factors and
uncertainties as disclosed in the Network-1's Annual Report on Form
10-K for the year ended December 31,
2015 filed with the Securities and Exchange Commission,
including, among others, the continued validity of Network-1's
Remote Power Patent, the ability of Network-1 to successfully
execute its strategy to acquire high quality patents with
significant licensing opportunities, Network-1's ability to achieve
revenue and profits from its Cox Patent Portfolio as well as
intellectual property it may acquire in the future, the ability of
Network-1 to enter into additional license agreements, the ability
of Network-1 to continue to receive material royalties from its
existing license agreements for its Remote Power Patent, the
uncertainty of patent litigation and proceedings at the United
States Patent and Trademark Office, the difficulty in Network-1
verifying royalty amounts owed to it by its licensees, Network-1's
ability to enter into strategic relationships with third parties to
license or otherwise monetize their intellectual property, the
continued viability of the PoE market, future economic conditions
and technology changes and legislative, regulatory and competitive
developments. Except as otherwise required to be disclosed in
periodic reports, Network-1 expressly disclaims any future
obligation or undertaking to update or revise any forward-looking
statement contained herein.
Corey M. Horowitz,
Chairman and CEO
|
Network-1
Technologies, Inc.
|
(212)
829-5770
|
The unaudited condensed consolidated statements of operations
and comprehensive income and unaudited condensed consolidated
balance sheet are attached.
NETWORK-1
TECHNOLOGIES, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
UNAUDITED
|
|
|
|
Three Months
Ended
September
30
,
|
Nine Months
Ended
September
30 ,
|
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
REVENUE
|
$
34,326,000
|
$
3,008,000
|
$
59,963,000
|
$
10,382,000
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Costs of revenue
|
16,943,000
|
927,000
|
24,183,000
|
3,094,000
|
Professional fees and
related costs
|
633,000
|
475,000
|
1,458,000
|
1,248,000
|
General and
administrative
|
428,000
|
440,000
|
1,256,000
|
1,891,000
|
Amortization of
patents
|
49,000
|
413,000
|
760,000
|
1,239,000
|
Stock-based
compensation
|
189,000
|
69,000
|
233,000
|
243,000
|
Contingent patent
cost
|
—
|
—
|
500,000
|
—
|
TOTAL OPERATING
EXPENSES
|
18,242,000
|
2,324,000
|
28,390,000
|
7,715,000
|
|
|
|
|
|
OPERATING
INCOME
|
16,084,000
|
684,000
|
31,573,000
|
2,667,000
|
OTHER
INCOME:
|
|
|
|
|
Interest income, net
|
24,000
|
11,000
|
50,000
|
44,000
|
|
|
|
|
|
INCOME BEFORE INCOME
TAXES
|
16,108,000
|
695,000
|
31,623,000
|
2,711,000
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES:
|
|
|
|
|
Current
|
3,817,000
|
26,000
|
4,198,000
|
66,000
|
Deferred taxes, net
|
1,459,000
|
262,000
|
4,543,000
|
928,000
|
Total income taxes
|
5,276,000
|
288,000
|
8,741,000
|
994,000
|
|
|
|
|
|
NET
INCOME
|
$10,832,000
|
$
407,000
|
$22,882,000
|
$
1,717,000
|
|
|
|
|
|
Net Income Per
Share
|
|
|
|
|
Basic
|
$
0.46
|
$
0.02
|
$
0.98
|
$
0.07
|
Diluted
|
$
0.43
|
$
0.02
|
$
0.93
|
$
0.07
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
23,320,514
|
23,273,946
|
23,291,408
|
23,597,143
|
Diluted
|
25,198,142
|
24,654,699
|
24,700,784
|
24,590,487
|
|
|
|
|
|
NET INCOME
|
$10,832,000
|
$ 407,000
|
$22,882,000
|
$
1,717,000
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME:
|
|
|
|
|
Unrealized holding gain
(loss) on securities available-for-sale
arising during the period
|
(4,000)
|
12,000
|
39,000
|
—
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
$
10,828,000
|
$
419,000
|
$
22,921,000
|
$
1,717,000
|
Condensed
Consolidated Balance Sheet as of September 30, 2016
(Unaudited)
|
Cash and cash
equivalents
|
$
57,759,000
|
|
|
Total
current assets
|
$
60,293,000
|
|
|
Total
assets
|
$
61,973,000
|
|
|
Total
current liabilities
|
$ 10,
114,000
|
Total stockholders' equity
|
$
51,859,000
|
|
|
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visit:http://www.prnewswire.com/news-releases/network-1-reports-record-breaking-third-quarter-2016-results-300361304.html
SOURCE Network-1 Technologies, Inc.