NETWORK-1 TECHNOLOGIES INC

Previous wording

Our revenue is dependent upon our litigation outcomes. We currently have pending litigation involving our Cox Patent Portfolio and Mirror Worlds Patent Portfolio as well as our Remote Power Patent (see “Legal Proceedings” at pages 19 - 21 hereof). Patent litigation is inherently risky and uncertain and we cannot assure you that any of our current or future litigation will result in a favorable outcome for us. Accordingly, our revenue is uncertain.

Current wording

Our revenue is dependent upon our litigation outcomes. We currently have pending patent infringement litigations involving our HFT Patent Portfolio and a pending appeal of dismissal of litigation involving our Cox Patent Portfolio (see “Legal Proceedings” at page 20 hereof). Patent litigation is inherently risky and uncertain and we cannot assure you that any of our current or future litigation will result in a favorable outcome for us. Accordingly, our revenue is uncertain.

Previous wording

We believe our patents are valid, enforceable and valuable. Despite this belief, third parties typically defend assertion of our patents by asserting defenses, among others, of non-infringement and invalidity. In addition, in the future certain of our patents may be subject to USPTO post-grantinter partes review proceedings (IPRs) which could result in all or a part of our patents being invalidated or the claims being limited. Unfavorable outcomes in our litigation or IPRs may reduce our ability to enforce our patents or have other adverse consequences. If we are unable to protect our patents or otherwise realize value for them, our business would be negatively impacted.

Current wording

We believe our patents are valid, enforceable and valuable. Despite this belief, third parties typically defend assertion of our patents by asserting defenses, among others, of non-infringement and invalidity. In addition, in the future certain of our patents may be subject to USPTO post-grantinter partes review proceedings (IPRs) which could result in all or a part of our patents being invalidated or the claims being limited. Unfavorable outcomes in our litigation or IPRs may reduce our ability to enforce our patents or have other adverse consequences. If we are unable to protect our patents or otherwise realize value for them, our business, financial condition and operating results would be negatively impacted.

Previous wording

To date we have invested $7,000,000 in ILiAD, a privately held clinical stage biotechnology company, with focus on validating its proprietary intranasal vaccine (BPZE1) for the prevention of pertussis (whopping cough). Notwithstanding the aforementioned, ILiAD still faces material risks going forward. Accordingly, our investment in ILiAD remains subject to substantial risks.

Current wording

We have invested $7,000,000 in ILiAD, a privately held clinical stage biotechnology company, with focus on validating its proprietary intranasal vaccine (BPZE1) for the prevention of pertussis (whopping cough). Notwithstanding the aforementioned, ILiAD still faces material risks going forward. Accordingly, our investment in ILiAD remains subject to substantial risks.

Previous wording

We have been dependent upon our Remote Power Patent for a significant portion of our revenue and we may not be able to generate future revenue from our other patents.

Current wording

We have been dependent upon our Remote Power Patent for a significant portion of our revenue in the past and we may not be able to generate future revenue from our other patents.

Previous wording

Our Remote Power Patent has generated revenue for us in excess of $188,000,000 from May 2007 through December 31, 2023. Revenue from our Remote Power Patent constituted 100% of our revenue ($2,601,000) for 2023. We had no revenue in 2022 and revenue from our Remote Power Patent constituted 100% of our revenue for 2021 ($36,029,000), 2020 ($4,403,000) and 2019 ($3,037,000). As a result of the expiration of our Remote Power Patent on March 7, 2020, we no longer receive revenue from such patent for any period subsequent to the expiration date. Our failure to successfully monetize our other patents would have a negative impact on our business, financial condition and operating results.

Current wording

Our Remote Power Patent has generated revenue for us in excess of $188,000,000 from May 2007 through December 31, 2024. Revenue from our Remote Power Patent constituted 100% of our revenue for 2024 ($100,000) and 2023 ($2,601,000). We had no revenue in 2022 and revenue from our Remote Power Patent constituted 100% of our revenue for 2021 ($36,029,000), 2020 ($4,403,000) and 2019 ($3,037,000). As a result of the expiration of our Remote Power Patent on March 7, 2020, we no longer receive revenue from such patent for any period subsequent to the expiration date. Our failure to successfully monetize our other patents, including our HFT Patent Portfolio and M2M/IoT Patent Portfolio, would have a negative impact on our business, financial condition and operating results.

Previous wording

Based upon the success we achieved from licensing our Remote Power Patent (twenty-eight (28) license agreements and in excess of $188,000,000 of revenue through December 31, 2023), the revenue we generated from our Mirror Worlds Patent Portfolio ($47,150,000) and establishing a patent portfolio currently consisting of one hundred (100) U.S. patents and fifteen (15) foreign patents as well as our cash position, we believe we have the expertise and sufficient capital to compete in the patent monetization market and to enter strategic relationships with third parties to develop, commercialize, license or otherwise monetize their patents. Our strategy is to focus on acquiring high quality patent assets which management believes have the potential for significant licensing opportunities. However, we may not be able to acquire such additional high quality patents or, if acquired, we may not achieve material revenue or profit from such patents. Acquisitions of patent assets are competitive, time consuming, complex and costly to consummate. High quality patents with significant licensing opportunities are difficult to find and are often very competitive to acquire. In addition, such acquisitions present material risks. Even if we acquire such additional patent assets, we may not be able to achieve significant licensing revenue or even generate sufficient revenue related to such patent assets to offset the acquisition costs and the legal fees and expenses which may be incurred to enforce, license or otherwise monetize such patents. In addition, we may not be able to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property and, even if we consummate such strategic relationships, we may not achieve material revenue or profit from such relationships.

Current wording

Based upon the success we achieved from licensing our Remote Power Patent (twenty-eight (28) license agreements and in excess of $188,000,000 of revenue through December 31, 2024), the revenue we generated from our Mirror Worlds Patent Portfolio ($47,150,000), establishing a patent portfolio currently consisting of one hundred and six (106) U.S. patents and sixteen (16) foreign patents, and our cash position, we believe we have the expertise and sufficient capital to compete in the patent monetization market and to enter strategic relationships with third parties to develop, commercialize, license or otherwise monetize their patents. Our strategy is to focus on acquiring high quality patent assets which management believes have the potential for significant licensing opportunities. However, we may not be able to acquire such additional high quality patents or, if acquired, we may not achieve material revenue or profit from such patents. Acquisitions of patent assets are competitive, time consuming, complex and costly to consummate. High quality patents with significant licensing opportunities are difficult to find and are often very competitive to acquire. In addition, such acquisitions present material risks. Even if we acquire such additional patent assets, we may not be able to achieve significant licensing revenue or even generate sufficient revenue related to such patent assets to offset the acquisition costs and the legal fees and expenses which may be incurred to enforce, license or otherwise monetize such patents. In addition, we may not be able to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property and, even if we consummate such strategic relationships, we may not achieve material revenue or profit from such relationships.

Previous wording

Our quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period to period. In 2023, we had revenue of $2,601,000 and incurred a net loss of $1,457,000. In 2022, we had no revenue and incurred a net loss of $2,326,000. We had revenue of $36,029,000 and net income of $14,281,000 for 2021, as compared to revenue of $4,403,000 and a net loss of $1,709,000 for 2020. Accordingly, our revenue, net income and results of operations may widely fluctuate as a result of a variety of factors that are outside our control including the timing and our ability to achieve successful outcomes from current and future patent litigation, our ability and timing in consummating future license agreements for our intellectual property assets, the timing and extent of payments received by us from licensees, whether we will achieve a successful outcome of our investment in ILiAD, and the timing and our ability to achieve revenue from future strategic relationships.

Current wording

Our quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period to period. Our revenue, net income and results of operations may widely fluctuate, including years where we may have no revenue, as a result of a variety of factors that are outside our control, including the timing and our ability to achieve successful outcomes from current and future patent litigation, our ability and timing in consummating future license agreements for our intellectual property assets, the timing and extent of payments received by us from licensees, whether we will achieve a successful outcome of our investment in ILiAD, and the timing and our ability to achieve revenue from future strategic relationships.

Previous wording

Legislation, regulations, court rulings and actions by the USPTO have materially increased the risk and cost of enforcing patents. U.S. patent laws were amended by the Leahy-Smith America Invents Act, referred to as the America Invents Act, which became effective on March 16, 2013. The America Invents Act included a number of significant changes to U.S. patent law. In general, it addressed issues surrounding the enforceability of patents and the increase in patent litigation by, among other things, established new procedures for patent litigation and new administrative post-grant review procedures to challenge the patentability of issued patents outside of litigation, includingInter PartesReview (IPR) proceedings, which provide third parties a timely, cost effective alternative to district court litigation to challenge the validity of an issued patent. In addition, the America Invents Act changed the way that parties may be joined in patent infringement actions, and increased the likelihood that such actions will need to be brought against individual parties allegedly infringing by their respective individual actions or activities. The America Invents Act and its implementation also increased the uncertainties and costs surrounding the enforcement of patent rights, which have made it more difficult to successfully prosecute our patents.

Current wording

Legislation, regulations, court rulings and actions by the USPTO have materially increased the risk and cost of enforcing patents. U.S. patent laws were amended by the Leahy-Smith America Invents Act, referred to as the America Invents Act, which became effective on March 16, 2013. The America Invents Act included a number of significant changes to U.S. patent law. In general, it addressed issues surrounding the enforceability of patents and the increase in patent litigation by, among other things, establishing new procedures for patent litigation and new administrative post-grant review procedures to challenge the patentability of issued patents outside of litigation, includingInter PartesReview (IPR) proceedings, which provide third parties a timely, cost effective alternative to district court litigation to challenge the validity of an issued patent. In addition, the America Invents Act changed the way that parties may be joined in patent infringement actions, and increased the likelihood that such actions will need to be brought against individual parties allegedly infringing by their respective individual actions or activities. The America Invents Act and its implementation also increased the uncertainties and costs surrounding the enforcement of patent rights, which have made it more difficult to successfully prosecute our patents.

Previous wording

The increasing development of artificial intelligence could materially impact our business.

Current wording

The increasing development of artificial intelligence could impact our business.

Previous wording

Our patents are central to our business strategy of licensing our intellectual property rights or enforcing such rights against those that we believe are infringing. However, rapid advancements in the field of artificial intelligence (AI) and machine learning (ML) have the potential to disrupt our current business model in various ways. AI technologies are increasingly capable of developing solutions that either design around existing patents or create alternative technologies that may not infringe on our intellectual property. As AI evolves, it may accelerate the pace at which our patents become obsolete or irrelevant, reducing our ability to monetize our patent portfolio effectively. Furthermore, the proliferation of AI may lead to the emergence of new market participants with innovative solutions that challenge our patents' validity or enforceability. Such challenges could result in lengthy legal battles or the invalidation of our patents, thereby impacting our potential future revenue.

Current wording

Our patents are central to our business strategy of licensing our intellectual property rights or enforcing such rights against those that we believe are infringing. However, rapid advancements in the field of artificial intelligence (AI) and machine learning (ML) have the potential to impact our current business model in various ways. AI technologies are increasingly capable of developing solutions that either design around existing patents or create alternative technologies that may not infringe our intellectual property. Furthermore, the proliferation of AI may lead to the emergence of new market participants with innovative solutions that challenge our patents' validity or enforceability. Such challenges could result in lengthy legal battles or the invalidation of our patents, thereby impacting our potential future revenue.

Previous wording

AI driven legal analytics tools can also empower potential infringers with sophisticated insights into the strengths and weaknesses of our patent claims, potentially reducing our leverage in litigation and licensing negotiations. The integration of AI technologies into the products and services of the companies we may assert claims against could also complicate infringement analyses and legal arguments, potentially affecting the outcomes of our enforcement actions. Investors are advised that our financial results could be adversely affected if we are unable to adapt to the rapid changes brought about by AI and ML technologies, and our ability to enforce our patent rights is consequently diminished.

Current wording

AI driven legal analytics tools can also empower potential infringers with sophisticated insights into the strengths and weaknesses of our patent claims, potentially reducing our leverage in litigation and licensing negotiations. Investors are advised that our financial results could be adversely affected if we are unable to adapt to the rapid changes brought about by AI and ML technologies, and our ability to enforce our patent rights is consequently diminished.

Previous wording

We have pending litigations involving our Cox Patent Portfolio, Mirror Worlds Patent Portfolio (pending appeal to the Federal Circuit of dismissal of our Facebook (Meta Platforms, Inc.) litigation) and Remote Power Patent (see “Legal Proceedings” at pages 19 - 21 of this Annual Report). While we have contingent legal fee arrangements, or a contingency plus a fixed cash amount arrangement, with our patent litigation counsel in each litigation, we are responsible for all or a portion of the expenses which are anticipated to be material. In addition, the time and effort required of our management to effectively pursue these litigations is likely to be significant and it may adversely affect other business opportunities.

Current wording

We have pending litigations involving our HFT Patent Portfolio and a pending appeal to the Federal Circuit of dismissal of our litigation against Google and YouTube involving certain patents within our Cox Patent Portfolio (see “Legal Proceedings” at page 20 of this Annual Report). While we have contingent legal fee arrangements, or a contingency plus a fixed cash amount arrangement, with our patent litigation counsel in each litigation, we are responsible for all or a portion of the expenses which are anticipated to be material. In addition, the time and effort required of our management to effectively pursue these litigations is likely to be significant and it may adversely affect other business opportunities.

Previous wording

We may also compete with strategic corporate buyers, litigation funding firms, venture capital firms and hedge funds for intellectual property acquisitions and licensing opportunities. Many of these competitors have greater financial resources and human resources than us.

Current wording

We may also compete with strategic corporate buyers, litigation funding firms, venture capital firms and hedge funds for intellectual property acquisitions and licensing opportunities. Many of these competitors also have greater financial resources and human resources than us.

Previous wording

As of February 15**,** 2024, our executive officers and directors beneficially owned 32% of our outstanding common stock. As a result, these stockholders may be able to exercise substantial control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership will limit other stockholders' ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

Current wording

As of February 15**,** 2025, our executive officers and directors beneficially owned 31.9% of our outstanding common stock. As a result, these stockholders may be able to exercise substantial control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership will limit other stockholders' ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

Previous wording

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance ofparticular companies. These market fluctuations may also have a material and adverse effect on the market price of our common stock.

Current wording

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also have a material and adverse effect on the market price of our common stock.