Network-1 Technologies, Inc. (NYSE American: NTIP) today announced
financial results for the quarter ended September 30, 2018.
Network-1 had revenue of $1,798,000 for the
three months ended September 30, 2018 as compared to revenue of
$3,237,000 for the three months ended September 30, 2017. The
decline in revenue of $1,439,000 for the three months ended
September 30, 2018 was primarily due to several of Network-1’s
largest licensees ceasing to make royalty payments beginning in
late November 2017 and January 2018 as a result of the November
2017 jury verdict in Network-1’s trial with Hewlett-Packard, which
found certain claims of Network-1’s Remote Power Patent invalid and
not infringed by Hewlett-Packard (the “HP Jury Verdict”).
Excluding revenue from fully-paid licenses, revenue from
Network-1’s royalty bearing licenses decreased $466,000 from
$2,264,000 for the three months ended September 30, 2017 to
$1,798,000 for the three months ended September 30, 2018.
Network-1 had revenue of $21,732,000 for the
nine months ended September 30, 2018 as compared to revenue of
$14,320,000 for the nine months ended September 30, 2017. The
increase in revenue of $7,412,000 for the nine months ended
September 30, 2018 was primarily due to revenue from a fully-paid
license with Juniper Networks, Inc. of $12,700,000, a license
initiation installment payment of $1,000,000 from Polycom, Inc. in
accordance with a royalty bearing license and $6,320,000 of revenue
from sale of Network-1’s Avaya unsecured claim. Excluding revenue
from Network-1’s fully-paid license with Juniper Networks and sale
of its Avaya unsecured claim for the nine months ended September
30, 2018, revenue from Network-1’s royalty bearing licenses
decreased $8,335,000 from $11,047,000 for the nine months ended
September 30, 2017 to $2,712,000 for the nine months ended
September 30, 2018. The decrease was due primarily to several
of Network-1’s largest licensees ceasing to make royalty payments
as a result of the HP Jury Verdict.
Network-1 reported net income of $246,000
or $0.01 per share (basic and diluted) for the three months ended
September 30, 2018 compared with net income of $648,000 or $0.03
per share (basic) and $.02 per share (diluted) for the three months
ended September 30, 2017. The decrease in net income of
$402,000 for the three months ended September 30, 2018 was
primarily due to the loss of net income associated with several of
Network-1’s largest licensees ceasing to make royalty payments as a
result of the HP Jury Verdict.
Network-1 reported net income of $8,283,000 or
$0.35 per share (basic) and $0.33 per share (diluted) for the nine
months ended September 30, 2018 compared with net income of
$4,460,000 or $0.18 per share (basic) and $0.17 per share (diluted)
for the nine months ended September 30, 2017. The increase in
net income of $3,823,000 was primarily due to income associated
with increased revenue of $13,700,000 from Network-1’s fully-paid
license with Juniper, its royalty bearing license with Polycom, and
from the sale of its Avaya claim of $6,320,000, less related costs,
and a 14% reduction in Network-1’s federal corporate tax rate
related to the 2017 Tax Cuts and Job Act.
At September 30, 2018, Network-1 had cash and
cash equivalents and other investments of $56,805,000 and working
capital of $56,488,000. Network-1 believes based on its
current cash position that it will have sufficient cash to fund its
operations for the foreseeable future.
On November 13, 2017, a jury empaneled in the
United States District Court for the Eastern District of Texas,
Tyler Division, found that certain claims of Network-1’s Remote
Power Patent were invalid and not infringed by Hewlett-Packard (the
“HP Jury Verdict”). On August 29, 2018, the District Court (i)
granted Network-1’s motion for judgment as a matter of law that the
Network-1’s Remote Power Patent is valid, thereby overturning the
jury verdict of invalidity and (ii) denied Network-1’s motion for a
new trial on infringement. Network-1 has appealed the District
Court’s denial of its motion for a new trial on infringement to the
United States Court of Appeals for the Federal Circuit. The HP Jury
Verdict had a material adverse effect on Network-1’s results of
operations and cash-flow for the three and nine months ended
September 30, 2018 and may continue to do so in the future.
Network-1 has depended upon its Remote Power Patent for a
significant portion of its revenue. As a result of the HP Jury
Verdict several of Network-1’s largest licensees, including Cisco
Systems, Inc., its largest licensee, notified Network-1 in late
November 2017 and January 2018 that they will no longer make
ongoing royalty payments to Network-1 pursuant to their license
agreements. If Network-1 successfully overturns the HP Jury Verdict
of non-infringement in its appeal to the Federal Circuit, certain
licensees of the Remote Power Patent, including Cisco, will be
obligated to pay Network-1 ongoing royalties and all royalties that
accrued but were not paid following (and prior to) the HP Jury
Verdict in November 2017. If Network-1 is unable to reverse the HP
Jury Verdict of non-infringement on appeal, or there is an
arbitration ruling that certain of Network-1’s licensees, including
Cisco, are relieved of their obligations to pay royalties and the
District Court order of non-infringement is not subsequently
reversed on appeal, Network-1’s business, results of operations and
cash-flow will continue to be materially adversely effected.
Consistent with Network-1’s prior view, the
District Court decision overturning the HP Jury Verdict on
invalidity as referenced above confirmed the obligations of certain
licensees to pay Network-1 all prior unpaid royalties as well as
future royalties through the expiration of the Remote Power Patent
in March 2020.
On June 14, 2017, Network-1’s Board of Directors
authorized an extension and increase of its Share Repurchase
Program to repurchase up to $5,000,000 of shares of its common
stock over the subsequent 24 month period (for a total
authorization of approximately $17,000,000 since inception of the
program). Since inception of the Share Repurchase Program in
August 2011 through September 30, 2018, Network-1 has repurchased
an aggregate of 8,123,904 shares of its common stock at an
aggregate cost of $15,069,477 (exclusive of commissions) or an
average per share price of $1.86. During the three months ended
September 30, 2018, Network-1 repurchased 91,995 shares of its
common stock at an aggregate cost of $248,260 (exclusive of
commissions) or an average per share price of $2.70. During the
nine months ended September 30, 2018, Network-1 repurchased 548,351
shares of its common stock at an aggregate cost of $1,524,468
(exclusive of commissions) or an average per share price of
$2.78. At September 30, 2018, the remaining dollar value of
shares that may be repurchased under the Share Repurchase Program
was $1,394,532.
On December 7, 2016, Network-1’s Board of
Directors approved the initiation of a dividend policy providing
for the payment of a semi-annual cash dividend of $0.05 per common
share ($0.10 per common share annually) commencing in 2017.
Network-1 anticipates paying the semi-annual cash dividends in
March and September of each year. It is anticipated that the
semi-annual cash dividend will continue to be paid through March
2020 (the expiration of Network-1’s Remote Power Patent), provided
that Network-1 continues to receive royalties from licensees of its
Remote Power Patent. On July 26, 2018, the Board of Directors
declared a cash dividend of $.05 per common share with a payment
date of September 20, 2018 to all common stockholders as of
September 4, 2018. However, if Network-1 is unable to overturn the
jury verdict of non-infringement in its litigation with
Hewlett-Packard on appeal to the Federal Circuit, or there is not
an arbitration ruling that the HP Jury Verdict finding of
non‑infringement does not apply to certain licensees of the Remote
Power Patent including Cisco, the Board of Directors may decide to
modify or discontinue semi-annual cash dividends of $0.05 per
common share.
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 sixty-two
(62) 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 three patent portfolios (the Cox, Mirror Worlds and
M2M/IoT Patent Portfolios). 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
and Mirror Worlds Patent Portfolio. Network-1’s Remote Power Patent
has generated licensing revenue in excess of $143,000,000 from May
2007 through September 30, 2018. Network-1 has achieved licensing
and other revenue of $47,150,000 through September 30, 2018 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, 2017 filed with the Securities
and Exchange Commission, including, among others, the continued
material adverse effect on Network-1's business, results of
operation and cash-flow if the District Court order confirming the
HP jury verdict finding of non-infringement is not reversed by the
Federal Circuit Court of Appeals, the risk that Network-1 will not
continue to receive material royalty revenue from licensees of its
Remote Power Patent, the uncertainty of Network-1's revenue stream,
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, its M2M/IoT Patent Portfolio and
additional revenue and profit from its Mirror Worlds Patent
Portfolio as well as intellectual property it may acquire in the
future, the ability of Network-1 to enter into additional license
agreements, uncertainty as to whether cash dividends will continue
be paid, 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 risk in the future of Network-1 being classified as a
Personal Holding Company, 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 Horowitz, Chairman and
CEONetwork-1 Technologies,
Inc.(212) 829-577
The unaudited condensed consolidated statements
of income and comprehensive income and unaudited condensed
consolidated balance sheet are attached.
NETWORK-1 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE
INCOMEUNAUDITED
|
Three Months EndedSeptember
30, |
|
Nine Months Ended September
30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
REVENUE |
$ |
1,798,000 |
|
|
$ |
3,237,000 |
|
|
$ |
21,732,000 |
|
|
$ |
14,320,000 |
|
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
|
Costs of
revenue Professional fees and related costs
General and administrative Amortization of
patents Stock-based compensation |
|
596,000 352,000 491,000
70,000 120,000 |
|
|
|
964,000 534,000 434,000 50,000 237,000 |
|
|
|
7,988,0001,456,0001,460,000209,000 571,000 |
|
|
|
4,339,0001,154,0001,358,000150,000 711,000 |
|
TOTAL OPERATING
EXPENSES |
|
1,629,000 |
|
|
|
2,219,000 |
|
|
|
11,684,000 |
|
|
|
7,712,000 |
|
|
|
|
|
|
OPERATING INCOME |
|
169,000 |
|
|
|
1,018,000 |
|
|
|
10,048,000 |
|
|
|
6,608,000 |
|
OTHER INCOME: |
|
|
|
|
Interest income,
net |
|
244,000 |
|
|
|
55,000 |
|
|
|
590,000 |
|
|
|
89,000 |
|
|
|
|
|
|
INCOME BEFORE INCOME
TAXES |
|
413,000 |
|
|
|
1,073,000 |
|
|
|
10,638,000 |
|
|
|
6,697,000 |
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES: |
|
|
|
|
Current |
|
167,000 |
|
|
|
425,000 |
|
|
|
2,355,000 |
|
|
|
2,198,000 |
|
Deferred taxes,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
39,000 |
|
Total income taxes |
|
167,000 |
|
|
|
425,000 |
|
|
|
2,355,000 |
|
|
|
2,237,000 |
|
|
|
|
|
|
NET INCOME |
$ |
246,000 |
|
|
$ |
648,000 |
|
|
$ |
8,283,000 |
|
|
$ |
4,460,000 |
|
|
|
|
|
|
Net Income Per
Share |
|
|
|
|
Basic |
$ |
0.01 |
|
|
$ |
0.03 |
|
|
$ |
0.35 |
|
|
$ |
0.18 |
|
Diluted |
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.33 |
|
|
$ |
0.17 |
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
Basic |
|
23,525,645 |
|
|
|
24,150,388 |
|
|
|
23,767,700 |
|
|
|
24,185,129 |
|
Diluted |
|
24,922,434 |
|
|
|
26,412,139 |
|
|
|
25,457,953 |
|
|
|
26,480,084 |
|
|
|
|
|
|
Cash dividends declared
per share |
$ |
0.05 |
|
|
$ |
0.05 |
|
|
$ |
0.10 |
|
|
$ |
0.10 |
|
|
|
|
|
|
NET INCOME |
$ |
246,000 |
|
|
$ |
648,000 |
|
|
$ |
8,283,000 |
|
|
$ |
4,460,000 |
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS) |
|
|
|
|
Unrealized holding loss on securities available-for-sale
arisingduring the period |
|
(5,000 |
) |
|
|
(2,000 |
) |
|
|
(39,000 |
) |
|
|
(1,000 |
) |
|
|
|
|
|
COMPREHENSIVE
INCOME |
$ |
241,000 |
|
|
$ |
646,000 |
|
|
$ |
8,244,000 |
|
|
$ |
4,459,000 |
|
|
|
|
|
|
Condensed Consolidated Balance Sheet as
of September 30, 2018 (Unaudited)
Cash and cash
equivalents |
$ |
27,193,000 |
|
|
|
Other Investments |
$ |
29,612,000 |
|
|
Total current
assets |
$ |
58,684,000 |
|
|
Total assets |
$ |
60,935,000 |
|
|
Total current
liabilities |
$ |
2,196,000 |
|
Total stockholders'
equity |
$ |
58,739,000 |
|
|
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