2014

Network-1 Reports Second Quarter 2012 Results

NEW YORK, Aug. 14, 2012 /PRNewswire/ -- Network-1 Security Solutions, Inc. (OTC BB: NSSI) today announced financial results for the quarter ended June 30, 2012.  Network-1 had revenue of $1,966,000 and $6,391,000 for the three and six months ended June 30, 2012, respectively, as compared with revenue of $1,814,000 and $5,390,000 for the three and six months ended June 30, 2011, respectively.

Network-1 reported net income of $737,000 or $0.03 per share (basic) and $0.02 (diluted) for the second quarter ended June 30, 2012 as compared $6,666,000 or $0.26 per share (basic) and $0.21 (diluted) for the second quarter ended June 30, 2011.

Network-1 reported net income for the six months ended June 30, 2012 of $2,660,000 or $0.10 per share (basic) and $0.09 per share (diluted), compared with a net income $8,332,000 or $0.32 per share (basic) and $0.27 per share (diluted) for the six months ended June 30, 2011. 

Included in the net income for three and the six month period ended June 30, 2011 were (i) a one-time, non-cash income tax benefit of $7,000,000 and (ii)  $1,000,000 of additional patent expense payable to a third party because Network-1 achieved $25 million in net royalties from licensing its Remote Power Patent.  Before consideration of the one-time income tax benefit and patent expense, net income for the three month period end June 30, 2011 was $666,000 or $0.03 per share (basic) and $0.02 per share (diluted) and for the six months ended June 30, 2011, net income was $2,332,000 or $0.09 per share (basic) and $0.07 per share (diluted).

At June 30, 2012, the Company had net operating loss carry forwards (NOLs) totaling approximately $25,300,000 expiring through 2029, with a future tax benefit of approximately $8,880,000.  During the three month period ended June 30, 2011, based on recent results and projected future operating results, management determined that a portion of the NOL was more likely than not to be utilized.  Accordingly, included in the quarter and six-month periods ended June 30, 2011 was the recognition of a $7,000,000 deferred tax benefit which resulted in a one-time, non-cash income tax benefit of $7,000,000 as well as a direct increase to shareholders equity of $7,000,000. As of June 30, 2012 the remaining deferred tax asset balance was $6,335,000.

"It was a quarter of continued growth for Network-1," commented Corey M. Horowitz, Chairman and CEO of Network-1.  "Our royalty revenues from our Remote Power Patent for the quarter were higher from each of our royalty paying licensees as compared with the second quarter of 2011.  We now have 13 licensees to this important technology, including some of the largest technology companies in the world," he continued.

In September 2011, Network-1 initiated patent litigation against 16 data networking equipment manufacturers in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of the Remote Power Patent.  Named as defendants in the lawsuit, excluding related parties, were Alcatel-Lucent USA, Inc., Allied Telesis, Inc., Avaya Inc., AXIS Communications Inc., Dell, Inc., GarrettCom, Inc., Hewlett-Packard Company, Huawei Technologies USA, Juniper Networks, Inc., Motorola Solutions, Inc., NEC Corporation, Polycom Inc., Samsung Electronics Co., Ltd., ShoreTel, Inc., Sony Electronics, Inc., and Transition Networks, Inc.  Network-1 seeks monetary damages based upon reasonable royalties.  In March 2012, Network-1 reached settlement agreements with defendants Motorola Solutions, Inc. ("Motorola") and Transition Networks, Inc. ("Transition Networks").  As part of the settlements, Motorola and Transition Networks each entered into a non-exclusive license agreement for Network-1's Remote Power Patent pursuant to which each such defendant agreed to license the Remote Power Patent for its full term (which expires in March 2020) and pay a license initiation fee and quarterly royalties based on their sales of PoE products. 

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, 2011 including, among others, the continued validity of Network-1's Remote Power Patent, the ability of Network-1 to enter into additional license agreements with third parties for its intellectual property or the intellectual property of its strategic partners, the ability of Network-1 to receive significant royalties from its existing license agreements, the uncertainty of patent litigation, Network-1's ability to achieve revenues and profits from its intellectual property or the intellectual property of its strategic partners, Network-1's ability to execute its strategy to acquire additional patents or enter into strategic relationships with third parties to license or otherwise monetize their intellectual property, the continued viability of the PoE market, 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

June 30, 

Six Months Ended

June 30,


2012

2011

2012

2011






ROYALTY REVENUE

$   1,966,000

$  1,814,000

$    6,391,000

$  5,390,000

COST OF REVENUE

562,000

514,000

1,948,000

1,542,000

    GROSS PROFIT

1,404,000

1,300,000

4,443,000

3,848,000

OPERATING EXPENSES:





   General and Administrative

446,000

537,000

1,036,000

1,283,000

   Additional Patent Expense

1,000,000

1,000,000

   Non-Cash compensation

74,000

113,000

165,000

209,000






                TOTAL OPERATING EXPENSES

520,000

1,650,000

1,201,000

2,492,000






OPERATING INCOME (LOSS)

884,000

(350,000)

3,242,000

1,356,000
















OTHER INCOME (EXPENSES):





   Interest income, net

10,000

16,000

19,000

32,000
















INCOME (LOSS) BEFORE INCOME TAXES

894,000

(334,000)

3,261,000

1,388,000











INCOME TAXES (BENEFIT)





   Current

9,000

33,000

56,000

   Deferred

148,000

(7,000,000)

568,000

(7,000,000)

   Total Income Taxes (Benefit)

157,000

(7,000,000)

601,000

(6,944,000)

NET INCOME

$      737,000

$ 6,666,000

$    2,660,000

$  8,332,000











Net Income per share -  Basic

$             0.03

$          0.26

$             0.10

$           0.32

                                   Diluted

$             0.02

$          0.21

$             0.09

$           0.27











Weighted average number of common shares outstanding:










                                -     Basic

26,192,920

25,974,609

25,595,913

25,961,815

                                -     Diluted

28,819,929

31,195,523

28,729,256

31,182,729






NET INCOME

$      737,000

$  6,666,000

$   2,660,000

$  8,332,000






OTHER COMPREHENSIVE INCOME NET OF TAX: 

    Unrealized gain (loss) arising during period

3,000

2,000






COMPREHENSIVE INCOME

 

$      740,000

$  6,666,000

$   2,662,000

$  8,332,000

 

 

Condensed Balance Sheet as of June 30, 2012

 

Cash and cash equivalents

$  21,279,000



   Total current assets

$  23,969,000



   Total assets

$ 30,392,000



   Total current liabilities

$     706,000



   Total long term liabilities

$  0



   Total stockholders' equity

$29,686,000




 

Corey M. Horowitz, Chairman and CEO 
Network-1 Security Solutions, Inc.
(212) 829-5770
 

 


 

SOURCE Network-1 Security Solutions, Inc.



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