Network-1 Reports Third Quarter 2011 Results

NEW YORK, Nov. 14, 2011 /PRNewswire/ -- Network-1 Security Solutions, Inc. (OTC BB: NSSI) today announced financial results for the quarter ended September 30, 2011.  

Network-1 had revenue of $1,222,000 and $6,611,000 for the three and nine months ended September 30, 2011, respectively, as compared with revenue 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 one time aggregate payments of $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 $248,000 or $0.01 per share (basic) and $0.01 (diluted) for the third quarter ended September 30, 2011 as compared to a net income of $21,805,000 or $0.89 per share (basic) and $0.76 (diluted) for the third quarter ended September 30, 2010.

Network-1 reported net income for the nine months ended September 30, 2011 of $8,580,000 or $0.33 per share (basic) and $0.28 per share (diluted), compared with a net income of $19,991,000 or $0.82 per share (basic) and $0.70 (diluted) for the nine months ended September 30, 2010.  

At September 30, 2011, Network-1 had net operating loss carryforwards (NOLs) totaling approximately $25,900,000 expiring between 2020 and 2030, with a future tax benefit of approximately $6,860,000.  During the second quarter of 2011, as a result of the Company's recent results and projected future operating results, management determined that a portion of the NOL was more likely than not to be utilized resulting in a tax benefit of $7,000,000.  Accordingly, $7,000,000 was recorded as a deferred tax benefit on the Company's balance sheet at June 30, 2011 and the Company recorded income of $7,000,000 or $0.29 per share (basic) for the six month period ended June 30, 2011 from the recording of this one-time, non-cash, income tax benefit.  During the three month period ended September 30, 2011 as a result of income (before taxes) for the period of $421,000, $173,000 was recorded as income tax expense, of which $140,000 was a non-cash expense, and accordingly the deferred tax asset was reduced by $140,000 to $6,860,000.  To the extent that the Company earns income in the future, it will report income tax expense and such expense attributable to federal income taxes will reduce the recorded income tax asset reflected on the balance sheet.  Management will continue to evaluate the recoverability of the NOL and adjust the deferred tax asset appropriately.

On September 19, 2011, the Company announced that it had 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 our Remote Power Patent.  Named as defendants in the lawsuit, excluding related parties, are Alcatel-Lucent USA, Inc., Allied Telesis, Inc., Avaya Inc., AXIS Communications Inc., Dell, Inc., GarrettCom, Inc., Hewlett-Packard Company, Huawei Technologies USA, Juniper Networks, Inx., Motorola Solutions, Inc., NEC Corporation, Polycom Inc., Samsung Electronics Co., Ltd., ShoreTel, Inc., Sony Electronics, Inc., and Transitions Networks, Inc.  Network-1 seeks monetary damages based upon reasonable royalties.

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 nine 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 the Network-1's Annual Report on Form 10-K for the year ended December 31, 2010 including, among others, 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.



Three Months Ended
September 30,

Nine Months Ended
September 30,


2011

2010

2011

2010






Royalty Revenue

$1,222,000

$32,560,000

$6,611,000

$32,850,000

Cost of Revenue

341,000

9,507,000

1,883,000

9,522,000

    Gross Profit

881,000

23,053,000

4,728,000

23,328,000

Operating Expenses:





   General and Administrative

411,000

1,176,000

1,693,000

2,949,000

   Additional Patent Expense

1,000,000

   Non-Cash compensation

59,000

43,000

268,000

359,000






      Total Operating Expenses

470,000

1,219,000

2,961,000

3,308,000






Operating Income (Loss)

411,000

21,834,000

1,767,000

20,020,000
















Other Income (Expenses):





   Interest income, net

10,000

19,000

42,000

19,000
















Income (Loss) before income taxes

421,000

21,853,000

1,809,000

20,039,000











Income Taxes (Benefit)





   Current

33,000

48,000

89,000

48,000

   Deferred

140,000

(6,860,000)

   Total Income Taxes (Benefit)

173,000

48,000

(6,771,000)

48,000

Net Income (Loss)

$248,000

$21,805,000

$8,580,000

$19,991,000











Net Income (loss) per share -Basic

$0.01

$0.89

$0.33

$0.82

                      -   Diluted

$0.01

$0.76

$0.28

$0.70











Weighted average number of common shares outstanding:










             -     Basic

26,014,578

24,409,660

25,979,596

24,266,390

             -     Diluted

30,991,041

28,848,659

30,956,059

28,705,389




Condensed Balance Sheet as of September 30, 2011


Cash and cash equivalents

$  23,072,000



  Total current assets

$  24,244,000



  Total assets

$ 31,199,000



  Total current liabilities

$  1,955,000



  Total long term liabilities

$  - 0 -



  Total stockholders' equity

$29,244,000






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

SOURCE Network-1 Security Solutions, Inc.



RELATED LINKS
http://www.network-1.com

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