NETWORK-1 TECHNOLOGIES INC
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
NTIP$1.600.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-08.
0001072613-24-000334
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0001072613-25-000187
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 42 previous paragraphs and 40 current paragraphs.
18 unchanged; 20 reworded; 2 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
Operating Expenses. Operating expenses for 2024 were $3,721,000 as compared to $4,836,000 for 2023. The decrease in operating expenses of $1,115,000 was primarily due to lower costs of revenue of $846,000, general and administrative of $275,000 and amortization of patents of $146,000. These reductions were offset somewhat due to higher professional fees of $152,000.
Current report
General and administrative expenses were $2,614,000 for 2024 as compared to $2,889,000 for 2023. The decrease in general and administrative expenses for 2024 was primarily due to lower payroll and related employer taxes of $159,000 and stock-based compensation of $109,000.
Removed paragraphs (4)
Previous report
General and administrative expenses were $2,889,000 for 2023 as compared to $2,778,000 for 2022. The increase in general and administrative expenses for 2023 was primarily due to an increase in state franchise taxes of $175,000 as well as increases in payroll taxes of $98,000 and NYSE American listing fees of $31,000. These increases were offset somewhat by reductions in office rent of $71,000 and employee benefits costs of $60,000.
Previous report
Interest and Dividend Income. Interest and dividend income for 2023 was $1,868,000 as compared to interest and dividend income of $1,020,000 for 2022. The increase in interest and dividend income of $848,000 for 2023 was primarily due to higher yielding fixed income investments due to generally higher interest rates during 2023.
Previous report
Gain on Equity Method Investment. For 2022, we recorded a gain on our equity method investment in ILiAD of $3,883,000, as compared to none for 2023, as a result of an observable price transaction relating to ILiAD’s private offering in August 2022( see Note H to our consolidated financial statements included herein).
Previous report
Gain on Conversion of Note. For 2022, we recorded a gain on conversion of our ILiAD convertible note of $271,000, as compared to none for 2023, as a result of an observable price transaction relating to ILiAD’s private offering in August 2022( see Note H to our consolidated financial statements included herein).
Reworded paragraphs (20)
Previous wording
Our principal business is the development, licensing and protection of our intellectual property assets. We presently own one hundred (100) U.S. patents and fifteen (15) foreign patents relating to: (i) our Cox Patent Portfolio relating to enabling technology for identifying media content on the Internet and taking further action to be performed after such identification; (ii) our M2M/IoT Patent Portfolio relating to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine and other mobile devices, including smartphones, tablets and computers, as well as automobiles; (iii) our HFT Patent Portfolio covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) our Mirror Worlds Patent Portfolio relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) our Remote Power Patent covering the delivery of power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras.
Current wording
Our principal business is the development, licensing and protection of our intellectual property assets. We presently own one hundred and six (106) U.S. patents and sixteen (16) foreign patents relating to: (i) our M2M/IoT Patent Portfolio relating to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine and other mobile devices, including smartphones, tablets and computers, as well as automobiles; (ii) our HFT Patent Portfolio covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iii) our Cox Patent Portfolio relating to enabling technology for identifying media content on the Internet and taking further action to be performed after such identification; (iv) our Remote Power Patent covering the delivery of power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras**;** and (v) our Mirror Worlds Patent Portfolio relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system.
Previous wording
With respect to our one hundred (100) U.S. patents, fifty-four (54) of such patents have expired. However, we can assert expired patents against third parties but only for past damages up to the patent expiration date. We currently have pending litigation involving expired patents including our Remote Power Patent and certain patents within our Cox and Mirror Worlds Patent Portfolios (see Note K to our consolidated financial statements included herein). Our revenue is dependent upon our ability to achieve successful litigation outcomes.
Current wording
With respect to our one hundred and six (106) U.S. patents, fifty-four (54) of such patents have expired. However, we can assert expired patents against third parties but only for past damages up to the patent expiration date. In 2024, our revenue was from our expired Remote Power Patent and we are currently appealing to the Federal Circuit a District Court dismissal of claims involving certain expired patents within our Cox Patent Portfolio (see Note K to our consolidated financial statements included herein). Our revenue is dependent upon our ability to achieve successful litigation outcomes.
Previous wording
At December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000**.**Based on our cash position, we review opportunities to acquire additional intellectual property as well as evaluate other strategic opportunities.
Current wording
At December 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $40,600,000 and working capital of $40,066,000**.**Based on our cash position, we review opportunities to acquire additional intellectual property as well as evaluate other strategic opportunities.
Previous wording
To date we have invested $7,000,000 in ILiAD, a clinical stage biotechnology company with an exclusive license to seventy(70) patents (see Note H to our consolidated financial statements included herein). Our investment continues to involve significant risk and the outcome is uncertain.
Current wording
To date we have invested $7,000,000 in ILiAD, a clinical stage biotechnology company with an exclusive license to seventy-four (74) patents (see Note H to our consolidated financial statements included herein). Our investment continues to involve significant risk and the outcome is uncertain.
Previous wording
We have been dependent upon our Remote Power Patent for a significant portion of our revenue. Our Remote Power Patent has generated revenue in excess of $188,000,000 from May 2007 through December 31, 2023. We no longer receive licensing revenue for our Remote Power Patent for any period subsequent to March 7, 2020 (the expiration date of the patent). During the fourth quarter of 2022, we commenced nine separate litigations against ten defendants involving our Remote Power Patent for patent infringement for the period prior to March 7, 2020. During 2023, we entered into settlement agreements with eight of the defendants with respect to the aforementioned litigation resulting in aggregate settlement payments made to us of $2,601,000 and a future conditional payment of $150,000 (see Note K to our consolidated financial statements included herein). All of our revenue for 2023 was from these settlements involving our Remote Power Patent. If we are unable to successfully monetize our other patent portfolios or achieve a successful outcome of our investment in ILiAD, our business, financial condition and results of operations will be negatively impacted.
Current wording
We have been dependent upon our Remote Power Patent for a significant portion of our revenue. Our Remote Power Patent has generated revenue in excess of $188,000,000 from May 2007 through December 31, 2024. We no longer receive licensing revenue for our Remote Power Patent for any period subsequent to March 7, 2020 (the expiration date of the patent). During the fourth quarter of 2022, we commenced nine separate litigations against ten defendants involving our Remote Power Patent for patent infringement for the period prior to March 7, 2020. During 2024, we entered into a settlement agreement with one defendant for which we received $100,000. Such settlement payment constituted all of our revenue for 2024. During 2023, we entered into settlement agreements with eight of the defendants with respect to the aforementioned litigation resulting in aggregate settlement payments made to us of $2,601,000 and a future conditional payment of $150,000 (see Note K to our consolidated financial statements included herein). All of our revenue for 2023 was from these settlements involving our Remote Power Patent. If we are unable to successfully monetize our other patent portfolios or achieve a successful outcome of our investment in ILiAD, our business, financial condition and results of operations will be negatively impacted.
Previous wording
In addition, we have pending litigation involving certain patents within our Cox Patent Portfolio and have appealed the judgment of the District Court dismissing our litigation against Meta (Facebook) on the grounds of non-infringement involving certain patents within our Mirror Worlds Portfolio. We may not achieve successful outcomes of such litigation, the appeal, or future litigation involving our patent assets.
Current wording
In addition, we have pending litigation involving certain patents within our HFT Patent Portfolio and have appealed the judgment of the District Court dismissing our litigation against Google and YouTube on the grounds of non-infringement involving certain patents within our Cox Patent Portfolio. In addition, we intend to monetize our M2M/IoT Patent Portfolio. We may not achieve successful outcomes of such litigation, the appeal, or future litigation involving our patent assets.
Previous wording
Revenue. We had revenue of $2,601,000 for the year ended December 31, 2023 (“2023”) as compared to no revenue for the year ended December 31, 2022 (“2022”). Our revenue for 2023 was from litigation settlements involving our Remote Power Patent (see Note K[4] to our consolidated financial statements included herein).
Current wording
Revenue. We had revenue of $100,000 for the year ended December 31, 2024 (“2024”) as compared to revenue of $2,601,000 for the year ended December 31, 2023 (“2023”). All of our revenue for 2024 and 2023 was from litigation settlements involving our Remote Power Patent (see Note K[4] to our consolidated financial statements included herein).
Previous wording
Operating Expenses. Operating expenses for 2023 were $4,836,000 as compared to $3,903,000 for 2022. The increase in operating expenses of $933,000 was primarily due to increases in costs of revenue of $874,000 related to contingent legal fees and incentive bonus compensation in connection with the litigation settlements and increases in general and administrative expenses of $111,000, offset somewhat by a reduction in amortization of patents of $50,000. We had costs of revenue of $874,000 and $-0- for 2023 and 2022, respectively. Included in the costs of revenue for 2023 were contingent legal fees of $744,000 and incentive bonus compensation of $130,000 payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note J[1] to our consolidated financial statements included herein).
Current wording
We had costs of revenue of $28,000 and $874,000 for 2024 and 2023, respectively. Included in the costs of revenue for 2024 were contingent legal fees of $23,000 and incentive bonus compensation of $5,000 payable to our Chairman and Chief Executive Officer. Included in the costs of revenue for 2023 were contingent legal fees of $744,000 and incentive bonus compensation of $130,000 payable to our Chairman and Chief Executive Officer pursuant to his employment Agreement (see Note J [1] to our consolidated financial statement included herein).
Previous wording
*Operating Loss.*We had an operating loss of $2,235,000 for 2023 compared with an operating loss of $3,903,000 for 2022. The operating loss decrease of $1,668,000 was due to revenue of $2,601,000 from litigation settlements offset by increased operating expenses of $933,000.
Current wording
Operating Loss.We had an operating loss of $3,621,000 for 2024 compared with an operating loss of $2,235,000 for 2023. The operating loss increase of $1,386,000 was primarily due to lower revenue from patent litigation settlements in 2024 of $2,501,000 as compared to 2023.**
Previous wording
Realized and Unrealized Loss on Marketable Securities. For 2023, we recorded realized and unrealized gains on marketable securities of $525,000 as compared to realized and unrealized losses on marketable securities of $1,351,000 in 2022, primarily due to the more favorable interest rate environment for fixed income securities in 2023 as compared to 2022.
Current wording
Realized and Unrealized Loss on Marketable Securities. For 2024, we recorded realized and unrealized gains on marketable securities of $177,000 as compared to realized and unrealized gains on marketable securities of $525,000 in 2023, primarily due to the timing of maturities on marketable securities and the declines in yields on our fixed income holdings.
Previous wording
Income Taxes. For 2023, we had a current tax expense for federal, state and local income taxes of $11,000 and a deferred tax benefit of $399,000**.**For 2022, we had no current income tax for federal, state and local income taxes and a deferred tax expense of $607,000. The net decrease in income tax expenses of $995,000 was primarily due to gains on our equity method investment and conversion of our ILiAD note in 2022 compared to no such transactions in 2023.
Current wording
Income Taxes. For 2024, we had no current tax expense for federal, state and local income taxes and a deferred tax benefit of $425,000**.**For 2023, we had a current income tax for federal, state and local income taxes of $11,000 and a deferred tax benefit of $399,000.
Previous wording
Share of Net Losses of Equity Method Investee. We recognized $2,003,000 of net losses during 2023 related to our equity share of ILiAD net losses, as compared to recognized net losses of $1,639,000 for 2022 (see Note H to our consolidated financial statements included herein). The increase in our equity share of the ILiAD net losses of $364,000 for 2023 includes an additional loss of $42,000 recorded on a one quarter lag basis as a result of audited financial information for 2022 received in 2023 from ILiAD (see Note B[2] to our consolidated financial statements included herein).
Current wording
Share of Net Losses of Equity Method Investee. We recognized $1,912,000 of net losses during 2024 related to our equity share of ILiAD net losses, as compared to recognized net losses of $2,003,000 for 2023 (see Note H to our consolidated financial statements included herein). We anticipate continuing to record our share of net losses from ILiAD.
Previous wording
Net Loss. As a result of the foregoing, we realized a net loss of $1,457,000 or $0.06 per share basic and diluted for 2023 compared with a net loss of $2,326,000 or $0.10 per share basic and diluted for 2022. Our net loss for 2023 decreased by $869,000 compared to 2022 primarily due to increases in revenue of $2,601,000, interest and dividend income of $848,000, and realized and unrealized gains on investments of $1,876,000, as compared to gains in 2022 of $3,727,000 on our equity investment in ILiAD and $271,000 on conversion of our ILiAD note. These increases in 2023 of revenue and income items were offset by an increase in operating expenses of $933,000 and a reduction of income taxes of $995,000**.**
Current wording
Net Loss. As a result of the foregoing, we realized a net loss of $3,034,000 or $0.13 per share basic and diluted for 2024 compared with a net loss of $1,457,000 or $0.06 per share basic and diluted for 2023. Our net loss for 2024 increased by $1,577,000 as compared to 2023 primarily due to lower revenue from patent litigation settlements in 2024 of $2,501,000.
Previous wording
We have financed our operations primarily from revenue from licensing our patents. At December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000**.**Based on our current cash position, we believe that we will have sufficient cash to fund our operations for the next twelve months and the foreseeable future. Our patent infringement litigation or realization of our investment in ILiAD may result in a material increase in our liquidity and capital resources.
Current wording
We have financed our operations primarily from revenue from licensing our patents. At December 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $40,600,000 and working capital of $40,066,000**.**Based on our current cash position, we believe that we will have sufficient cash to fund our operations for the next twelve months and the foreseeable future. Our patent infringement litigation or realization of our investment in ILiAD may result in a material increase in our liquidity and capital resources.
Previous wording
Working capital decreased by $2,509,000 at December 31,2023 to $44,850,000** **as compared to working capital of $47,359,000 at December 31, 2022. The decrease in working capital in 2023 was primarily due to our operating loss of $2,235,000, cash dividends payments of $2,371,000 and share repurchases of $966,000. These uses ofworking capital were offset somewhat by interest and dividend income of $1,868,000 and realized and unrealized gains on investment of $525,000.
Current wording
Working capital decreased by $4,784,000 at December 31,2024 to $40,600,000 as compared to working capital of $44,850,000 at December 31, 2023. The decrease in working capital in 2024 was primarily due to our operating loss of $3,621,000, cash dividends payments of $2,366,000 and share repurchases of $1,295,000, offset by interest and dividend income of $1,897,000.
Previous wording
Net cash provided by (used in) operating activities for 2023 increased by $5,767,000 from $(5,436,000) for 2022 to $331,000 for 2023, primarily as a result of lower income taxes paid in 2023 of $2,722,000 and increased interest and dividend income of $1,868,000. Also, non-cash gains on equity method investment of $3,883,000 and on conversion of the ILiAD note of $271,000 represented uses of cash in 2022 compared to no such transactions in 2023.
Current wording
Net cash used in operating activities for 2024 increased by $1,407,000 from $1,076,000 used in operating activities for 2024 compared to $331,000 provided by operating activities for 2023, primarily because of the increase in our net loss of $1,577,000.
Previous wording
Net cash provided by (used in) investing activities during 2023 increased by $28,808,000 to $6,537,000 as compared to $(22,271,000) for 2022, primarily as a result of a significant shift to investments in marketable securities in 2022 from investments in securities previously classified as cash and cash equivalents.
Current wording
Net cash used in investing activities during 2024 decreased by $5,488,000 as a result of our holdings of marketable securities declining by $1,049,000 in 2024 as compared to $6,537,000 in 2023.
Previous wording
Net cash used in financing activities for 2023 and 2022 was $3,420,000 and $3,342,000, respectively. The increase of $78,000 primarily resulted from an increase in repurchases of treasury shares of $432,000 in 2023, offset by a reduction in the value of shares delivered to fund withholding taxes of $272,000.
Current wording
Net cash used in financing activities for 2024 and 2023 was $3,724,000 and $3,420,000, respectively. The increase of $304,000 primarily resulted from higher repurchases of common shares of $329,000.
Previous wording
We maintain our cash equivalents and marketable securities in money market funds, government securities, certificates of deposit and short-term fixed income securities. Accordingly, we do not believe that our investments have significant exposure to interest rate risk.
Current wording
We maintain our cash equivalents and marketable securities in money market funds, government securities, certificates of deposit, corporate bonds and short-term fixed income securities. Accordingly, we do not believe that our investments have significant exposure to interest rate risk.
Previous wording
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
Current wording
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenue and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.