Network-1 Reports Record Third Quarter 2010 Results
NEW YORK, Nov. 15, 2010 /PRNewswire-FirstCall/ -- Network-1 Security Solutions, Inc. (OTC Bulletin Board: NSSI) today announced financial results and operating highlights for the quarter ended September 30, 2010.
Company Highlights for Third Quarter ending September 30, 2010
During the third quarter Network-1 announced that it agreed to settle its patent litigation against Adtran, Inc, Cisco Systems, Inc. and Cisco-Linksys, LLC, (collectively, "Cisco"), Enterasys Networks, Inc., Extreme Networks, Inc., Foundry Networks, Inc., and 3Com Corporation, Inc. for aggregate upfront payments of approximately $32 million and also agreed to license Network-1's Remote Power Patent for its full term, which expires in March 2020. Additionally, Cisco agreed to pay royalties, beginning in 2011, based on its sales of Power over Ethernet ("PoE") products up to maximum royalty payments per year of $8 million through 2015 and $9 million per year through 2020 (See Business Update below for more details).
"It was a very notable quarter for Network-1," commented Corey M. Horowitz, Chairman and CEO of Network-1. "We successfully resolved our second litigation over our Remote Power Patent and now have 11 licensees to this important technology, including some of the largest technology companies in the world," he continued. "There are over two hundred companies selling PoE equipment and we look forward to successfully licensing them as we have demonstrated the quality of our intellectual property as well as our perseverance in defending it.'
Financial Highlights for Three and Nine Month Period ending September 30, 2010
Network-1 had revenues of $32,560,000 and $32,850,000 for the three and nine months ended September 30, 2010, respectively. Revenues for the three and nine months ended September 30, 2010 include $32,320,000 received from the settlement of our patent litigation in July 2010 against seven major data networking manufacturers.
Network-1 reported net income of $21,805,000 or $0.89 per share ($.76 per share on a diluted basis) for the three months ended September 30, 2010 as compared to a net loss of ($457,000) or $(0.07) per share for the three months ended September 30, 2009. Included in the expenses for the quarter ended September 30, 2010 and September 30, 2009 were non-cash compensation expenses of $43,000 and $51,000, respectively.
Network-1 reported net income of $19,991,000 or $0.82 per share ($.70 per share on a diluted basis), for the nine months ended September 30, 2010 , compared with a net loss of $(1,716,000), or $(0.07) per share for the nine months ended September 30, 2009. Included in the expenses for the nine months ended September 30, 2010 and September 30, 2009 were non-cash compensation expenses of $359,000 and $797,000, respectively. At September 30, 2010, Network-1 had approximately $24 million in cash.
"We continue to be presented with exciting opportunities in the IP commercialization and monetization space," said Mr. Horowitz. "Our knowledge, discipline and experience combined with our resources opens many doors in this fast growing business," continued Mr. Horowitz. "Increasingly, companies are seeking to monetize their intellectual property portfolios, resulting in some large and well-publicized transactions, and Network-1 believes that it can be an effective participant in such endeavors."
On July 19, 2010, Network-1 announced that it agreed to settle its patent litigation against Adtran, Inc, Cisco Systems, Inc. and Cisco-Linksys, LLC, (collectively, "Cisco"), Enterasys Networks, Inc., Extreme Networks, Inc., Foundry Networks, Inc., and 3Com Corporation, Inc., pending in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of the Company's Remote Power Patent, U.S. Patent No. 6,218,930 ("Remote Power Patent"). As part of the settlement, Adtran, Cisco, Enterasys, Extreme Networks and Foundry Networks each entered into a settlement agreement with Network-1 that included non-exclusive licenses for the Remote Power Patent (the "Licensed Defendants"). Under the terms of the licenses, the Licensed Defendants paid Network-1 aggregate upfront payments of approximately $32 million and also agreed to license the Remote Power Patent for its full term, which expires in March 2020.
In addition, Cisco agreed to pay royalties (beginning in 2011) based on its sales of Power over Ethernet ("PoE") products up to maximum royalty payments per year of $8 million through 2015 and $9 million per year thereafter for the remaining term of the patent. The royalty payments are subject to certain conditions including the continued validity of the Remote Power Patent and the actual royalty amounts received may be less than the maximums stated above. The settlement with 3Com provides for a dismissal of the litigation without prejudice. The release covers sales of certain 3Com Power over Ethernet products sold through the date of the settlement. In addition, Network-1 and 3Com's parent, Hewlett Packard Corporation, agreed that the dismissal does not apply to Hewlett-Packard Power over Ethernet products and that any future litigation involving Network-1 and Hewlett Packard concerning the Remote Power Patent will be in the United States District Court for the Eastern District of Texas. For additional details of the settlement, please see Network-1's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2010.
Consistent with its activities over the past several years, Network-1 plans on continuing its licensing activities relating to the Remote Power Patent. In addition, Network-1 may acquire additional intellectual property assets in order to develop, commercialize, license or otherwise monetize such intellectual property. Network-1 continually reviews opportunities to acquire or license additional intellectual property for the purpose of pursuing licensing opportunities related to its existing intellectual property portfolio or otherwise. Network-1 may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property. The form of such relationships may vary depending upon the opportunity and may include, among other things, financial support, a strategic investment in such third party or the formation of a joint venture for the purpose of commercializing or monetizing such third party's intellectual property assets.
ABOUT NETWORK-1 SECURITY SOLUTIONS, INC.
Network-1 Security Solutions, Inc. is engaged in the acquisition, development, licensing and protection of its intellectual property and proprietary technologies. It currently owns six patents covering various telecommunications and data networking technologies and is currently focusing its licensing efforts on its Remote Power Patent (U.S. Patent No. 6,218,930) covering the remote delivery of power over Ethernet networks. The Remote Power Patent was granted by the U.S. Office of Patents and Trademarks on April 21, 2001 and expires on March 11, 2020. Network-1 continually reviews opportunities to acquire or license additional intellectual property for the purpose of pursuing licensing opportunities related to its existing intellectual property portfolio or otherwise.
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 Network-1's Annual Report on Form 10-K for the year ended December 31, 2009 including, among others, the ability of Network-1 to obtain license agreements from third parties for its patent portfolio, uncertainty of patent litigation, Network-1's ability to achieve revenues and profits from its patent portfolio, Network-1's ability to raise capital when needed, 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.
The condensed statements of operations and condensed balance sheets are attached.
Network-1 Security Solutions, Inc. Condensed Statements of Operations Three Months Ended Nine Months Ended September 30, September 30, 2010 2009 2010 2009 Royalty Revenue $32,560,000 $141,000 $32,850,000 655,000 Cost of Revenue 9,507,000 4,000 9,522,000 69,000 Gross Profit 23,053,000 137,000 23,328,000 586,000 Operating expenses: General and administrative 1,176,000 542,000 2,949,000 1,505,000 Non-Cash Compensation 43,000 51,000 359,000 797,000 Total Operating Expense 1,219,000 593,000 3,308,000 2,302,000 Operating Income (Loss) 21,834,000 (456,000) 20,020,000 (1,716,000) Other Income (Expenses: Interest income (expense), net 19,000 (1,000) 19,000 — Income (Loss) before income taxes 21,835,000 (457,000) 20,039,000 (1,716,000) Income Taxes: 48,000 - 48,000 - Net Income (Loss) $21,805,000 $(457,000) $19,991,000 $(1,716,000) Net Income (Loss) Per Share: Basic $0.89 $(0.07) $0.82 $(0.07) Diluted $0.76 $(0.07) $0.70 $(0.07) Weighted Average Common Shares Outstanding: Basic 24,409,660 24,135,557 24,266,390 24,135,557 Diluted 28,848,659 24,135,557 28,705,389 24,135,557
Condensed Balance Sheet as of September 30, 2010 Cash and cash equivalents $ 24,322,000 Total current assets $ 26,060,000 Total assets $ 26,151,000 Total current liabilities $ 2,790,000 Total long term liabilities $ -0- Total stockholders' equity $23,361,000
Corey M. Horowitz, Chairman and CEO Network-1 Security Solutions, Inc. (212) 829-5770
SOURCE Network-1 Security Solutions, Inc.
Released November 15, 2010