Network-1 Reports Second Quarter 2010 Results

NEW YORK, Aug. 16 /PRNewswire-FirstCall/ -- Network-1 Security Solutions, Inc. (OTC Bulletin Board: NSSI) today announced financial results for the quarter ended June 30, 2010.  Network-1 had revenues of $174,000 and $292,000 for the three and six months ended June 30, 2010 as compared with revenues of $487,000 and $514,000 for the three and six months ended June 30, 2009, respectively.  The decreased revenue of $313,000 for the three months ended June 30, 2010 as compared to the three month period ended June 30, 2009 was due primarily to an initial payment of $350,000 in 2009 from the settlement of our litigation with Netgear, Inc.

Network-1 reported a net loss of ($1,157,000) or $(0.05) per share for the second quarter ended June 30, 2010 as compared to a net loss of ($297,000) or $(.01) per share for the second quarter ended June 30, 2009.   Included in the net loss for the quarter ended June 30, 2010 and June 30, 2009 were non-cash compensation expenses of $269,000 and $191,000, respectively.

Network-1 reported a net loss for the six months ended June 30, 2010 of $(1,815,000) or $(0.08) per share, compared with a net loss of $(1,263,000), or $(0.05) per share for the six months ended June 30, 2009.  Included in the net loss for the six months ended June 30, 2010 and June 30, 2009 were non-cash compensation expenses of $316,000 and $746,000, respectively.

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 and agreed to enter into non-exclusive licenses for the Remote Power Patent (the "Licensed Defendants").  Under the terms of the licenses, the Licensed Defendants agreed to pay to Network-1 an aggregate upfront payment of approximately $32 million and have 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 Network-1's Remote Power Patent, and the actual royalty amounts received may be less than the caps 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 Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2010.

As of August 16, 2010 Network-1 has received approximately $31 million as part of the settlements.

The Remote Power Patent relates to, among other things, the delivery of power over Ethernet cables in order to remotely power network connected devices including, among others, wireless switches, wireless access points, RFID card readers, VOIP telephones and network cameras.  In June 2003, the Institute of Electrical and Electronic Engineers (IEEE) approved the IEEE 802.3af Power over Ethernet standard which has led to the rapid adoption of PoE.

By taking advantage of PoE technology, companies can deploy next generation solutions such as Voice over IP and Wireless LAN's without having to run separate power cables.  PoE technology provides numerous benefits including significant deployment savings and increased service reliability through centralized backup power. These benefits have caused analysts to identify PoE as a "must have" technology and vendors have responded with a wealth of new product offerings.  

Indeed, industry analysts expect PoE to become a defacto technology embedded in LAN Ethernet switches that power devices such as wireless access points, VOIP telephones, and network cameras, among others. Industry analysts project that in 2010 fully 20% of all Ethernet switch ports were PoE enabled and between 90 and 95% of IP Phones and Wireless Access Points were also so enabled.

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.

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.

SOURCE Network-1 Security Solutions, Inc.