UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K |
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31 2016
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________.
Commission File Number: 1-15288
NETWORK-1 TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 11-3027591 | |
(State or Other Jurisdiction | ||
| of Incorporation or Organization) | (I.R.S. Employer Identification Number) | |
65 Locust Avenue, Third Floor New Canaan, Connecticut06840 | ||
| (Address of Principal Executive Offices) | ||
Registrant's telephone number, including area code: (212) 829-5770
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of which registered |
| Common Stock $.01 par value | NTIP | NYSE |
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ☐No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
| -1- |
Indicate by check mark whether the registrant has submitted electronically Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in this filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D.1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold as of June 30, The number of shares outstanding of Registrant's common stock as of March NETWORK-1 TECHNOLOGIES, INC. 2023 FORM 10-K TABLE OF CONTENTS Page No. PART I PART II PART III PART IV PART I Forward-looking statements: THIS ANNUAL REPORT ON FORM 10-K CONTAINS STATEMENTS ABOUT FUTURE EVENTS AND EXPECTATIONS WHICH ARE ITEM 1. BUSINESS Overview Our principal business is the development, licensing and protection of our intellectual property assets. We presently own among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine, and other mobile devices, including We have Our current strategy includes continuing our We have been dependent upon our Remote Power Patent for a significant portion of our revenue. Our Remote Power Patent has generated We have pending litigation involving our assertion of infringement claims concerning certain patents within our Cox Patent Portfolio and our Remote Power Patent. In addition, we have a pending appeal to the U.S. Court of Appeals for the Federal Circuit of the District Court judgment of non-infringement dismissing our case against Meta Platforms, Inc. (formerly Facebook, Inc.) involving certain patents within our Mirror Worlds Patent Portfolio At December 31, 2023, we had cash and cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000. Based on our current cash position, we believe that we will have Overview of Our Patents We currently own one hundred (100) U.S. patents and Cox Patent Portfolio Our Cox Patent Portfolio, acquired from Dr. Ingemar Cox in February 2013, currently consists of thirty-nine (39) U.S. patents relating to enabling technology for identifying media content on the Internet, such as audio and video, and taking further actions to be performed based on such identification. All of the patents within our Cox patent portfolio have expired. We have pending litigation against Google Inc. and YouTube, LLC involving assertion of certain patents within our Cox Patent Portfolio (see We are obligated to pay Dr. Cox 12.5% of the net proceeds generated by us from licensing, sale or enforcement of the Cox Patent Portfolio. Dr. Cox provides consulting services to us with respect to the Cox Patent Portfolio and assists our efforts to develop the patent portfolio. Dr. Cox is currently a Professor at the University of Copenhagen and University College London where he is head of its Information and Decision Systems Group. Dr. Cox was formerly a member of the Technical Staff at AT&T Bell Labs and a Fellow at NEC Research Institute. He is a Fellow of the ACM, IEEE, the IET (formerly IEE), and the British Computer Society and is a member of the UK Computing Research Committee. In 2019, Dr. Cox was the recipient of the Tony Kent Strix Award in recognition of his contribution to the field of information retrieval. He was founding co-editor in chief of the IEE Proc. on Information Security and was an associate editor of the IEEE Trans. on Information Forensics and Security. He is co-author of a book entitled “Digital Watermarking” and its second edition “Digital Watermarking and Steganography”. He is an inventor or co-inventor of over seventy (70) U.S. patents. M2M/IoT Patent Portfolio Our We have an obligation to pay M2M 14% of the first $100 million of net proceeds (after deduction of expenses) and 5% of net proceeds greater than $100 million from Monetization Activities (as defined) related to our M2M/IoT Patent Portfolio. In addition, M2M will be entitled to receive from us $250,000 of additional consideration upon the occurrence of certain future events related to the patent portfolio. John Nix, the Managing Member of M2M, provides consulting services to us with respect to our M2M/IoT Patent Portfolio. Mr. Nix is an entrepreneur and inventor, and founder and Chief Executive Officer of Vobal Technologies, LLC. In 2016, Mr. Nix was recognized as HFT Patent Portfolio On March 25, 2022, we acquired the HFT Patent Portfolio. This portfolio covers certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds. The HFT Patent Portfolio currently includes nine issued U.S. patents and two pending U.S. patents. In addition to the purchase price that we paid at closing, we have an obligation to pay the seller an additional cash payment of $500,000 and $375,000 of our common stock contingent upon achieving certain milestones with respect to the HFT Patent Portfolio. We also have an obligation to pay the seller 15% of the first $50 million of net proceeds (after deduction of expenses) generated from the patent portfolio and 17.5% of net proceeds greater than $50 million. Mirror Worlds Patent Portfolio Our Mirror Worlds Patent Portfolio, acquired in May 2013, consists of ten (10) U.S. patents and covers foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system. The inventions relating to document stream operating systems covered by As part of our acquisition of the Mirror Worlds Patent Remote Power Patent Our Remote Power Patent (U.S. Patent No. 6,218,930) covers the delivery of On June 13, 2003, the Institute of Electrical Engineers (IEEE), a non-profit, technical professional association, approved the 802.3af Power over Ethernet standard (the “Standard”), which covers technologies deployed in delivering power over Ethernet networks. The Standard provides for the Power Sourcing Equipment (PSE) to bedeployed in switches or Network-1 Strategy Our strategy is to capitalize on our intellectual property assets by entering into licensing arrangements with third parties In connection with our activities relating to the protection of our intellectual property assets, or the intellectual property assets of third parties with whom we may have strategic relationships in the future, it may be necessary to assert patent infringement claims against third parties whom we believe are infringing our patents or those of our strategic partners. We are currently involved in several litigations to protect our patents including Revenue Concentration Revenue from our Remote Power Patent We anticipate that our future revenue will continue to Competition With respect to our ability to acquire additional intellectual property assets or enter into strategic relationships with third parties to monetize their intellectual property assets, we face considerable competition from other companies, many of which have significantly greater financial and other resources than we have. The patent licensing and enforcement industry has grown We may also compete with litigation funding firms such as Burford Capital Limited, Validity Finance, LLC, Fortress Investment Group, Regulatory Environment If new legislation, regulations or rules are implemented either by Congress, the In addition, future changes in patent law could adversely impact our business. Such changes may not be advantageous to us and may make it more difficult to obtain adequate patent protection to enforce our patents. Increased focus on the growing number of patent lawsuits, particularly by non-practicing entities (NPEs), may result in legislative changes which increase the risk and costs of asserting patent litigation. Investment in ILiAD Biotechnologies During the period December 2018 to date, we made aggregate investments of $7,000,000 in ILiAD, a privately held clinical stage biotechnology company dedicated to the prevention and treatment of human disease caused by Bordetella pertussis. ILiAD is currently focused on validating its proprietary intranasal vaccine, BPZE1, for the prevention of pertussis (whooping cough). Pertussis is a life-threatening disease caused by the highly contagious respiratory bacterium Bordetella pertussis. ILiAD has the exclusive license to seventy (70) issued patents and has forty-nine (49) pending patent applications. On December 31, 2023, we owned approximately 6.7% of the outstanding units of ILiAD on a non-fully diluted basis and 5.4% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options, and warrants). In connection with our investment, Corey Horowitz, our Chairman and Chief Executive Officer, became a member of ILiAD’s Board of Managers and receives the same compensation for service on the Board as the other non-management Board members. BPZE1 was developed in the laboratory of Camille Locht, PhD, at the Institut Pasteur de Lille (IPL) and French National Institute of Health and Medical research. BPZE1 is a live-attenuated intranasal vaccine designed to overcome deficiencies of current pertussis vaccines, including poor durability of protection and failure to prevent nasopharyngeal Bordetella pertussis infections that lead to escape mutants and transmission to vulnerable infants. On August 24, 2022, ILiAD consummated a private financing of $42,800,000 of its Class D units, of which a multi-national pharmaceutical company invested $30,000,000. As a result of the financing, we recognized a gain in 2022 of $3,883,000 on our equity investment and a gain of $271,000 with respect to the conversion of our convertible note in the principal amount of $1,000,000 plus interest into equity of ILiAD. Corporate Information We were incorporated under the laws of the State of Delaware in July 1990. Our principal executive offices are located at Available Information We file or furnish various reports, such as registration statements, quarterly and current reports, proxy statements and other materials with the SEC. Our In addition to the materials that are posted on our website, you may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and other information statements, and other information regarding issuers, including us, that file electronically with the SEC. The Employees and Consultants We currently have two full-time employees ITEM 1A. RISK FACTORS Our operations and Risks Related to Our Business Our revenue is uncertain as it is dependent upon litigation outcomes involving our Our If we are We believe our patents are The outcome of our 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 We have Our Remote Power Patent has generated We may not achieve successful outcomes of We are currently enforcing certain patents within our Cox Patent We may not be able to capitalize in the future on our strategy to acquire high quality patents with significant licensing opportunities or enter into strategic relationships with third parties to license or otherwise monetize their intellectual property. Based upon the success we The patent monetization cycle is long, costly and unpredictable. There is generally a significant time lag between acquiring a patent portfolio and recognizing revenue from those patent assets. During this time lag, significant costs are likely to be incurred which may have a negative impact on our results of operations, cash flow and financial position. Furthermore, the outcome of our efforts to monetize our patents is uncertain and we may not be successful. Our quarterly and annual operating and financial results, including our revenue, are difficult to predict and are likely to fluctuate significantly in future periods. 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 In the future we could be classified as a Personal Holding Company resulting in a 20% tax on our PHC Income that we do not distribute to our shareholders. The personal holding company We are dependent upon our CEO and Chairman. Our success is largely dependent upon the personal efforts of Corey M. Horowitz, our Chairman, Chief Executive Officer and Chairman of our Board of Directors. On Cash dividends may not be continued to be paid. Our dividend policy consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which have been paid in March and September of each year. We have paid such semi-annual dividends since our dividend policy was enacted in December 2016. At this time, we anticipate continuing to pay dividends consistent with our policy. However, our dividend policy undergoes a periodic review by our Board of Directors and is subject to change at any time depending upon our earnings, financial requirements and other factors existing at the time. We may not be in a position to continue to pay dividends in the future. Legislation, regulations, court rulings and actions by the USPTO have materially increased the risk and cost of enforcement of patents and may continue to do so in the future. 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, including Inter Partes Review (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 The increasing development of artificial intelligence could materially impact our business. Our patents are central to our business strategy of licensing our intellectual property rights or enforcing such rights against those that we 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 Changes in patent law could adversely impact our business. Patent laws may continue to change and may alter the protections afforded to owners of patent rights. Such changes may not be advantageous to us and may make it more difficult to obtain adequate patent protection to enforce our patents. Increased focus on the growing number of patent lawsuits, particularly by non-practicing entities (NPEs), may result in further legislative changes which increase the risk and costs of asserting patent litigation. Our pending patent infringement litigations are time consuming and costly. We have pending litigations involving our Cox Patent Portfolio, Mirror Worlds Patent Portfolio (pending appeal to the Federal Circuit of dismissal of our We face intense competition to With respect to our We may also compete with strategic corporate buyers, litigation funding firms, venture capital firms and hedge funds for intellectual property acquisitions and licensing Our markets are subject to rapid technological change and our technologies face potential technology obsolescence. The markets covered by our intellectual property are characterized by rapid technological changes, changing customer requirements, frequent new product introductions and enhancements, and evolving industry standards. The introduction of products embodying new technologies and the emergence of new industry standards may render our technologies obsolete or less marketable. In addition, other companies may develop competing technologies that offer better or less expensive alternatives to The burdens of being a public company may adversely affect us including our ability to pursue litigation. As a public company, our management must devote substantial time, attention and financial resources to comply with U.S. securities laws. This may have a material adverse effect on management's ability to effectively and efficiently pursue its business. In addition, our disclosure obligations under U.S. securities laws require us to disclose information publicly that will be available to litigation opponents. We may, from time to time, be required to disclose information that may have a material adverse General Risk Factors Investors may have limited influence on stockholder decisions because ownership of our common stock is concentrated. As of Our common stock may be delisted from the NYSE Our common stock is currently traded on the NYSE There are inherent uncertainties involved in estimates, judgments and The preparation of Provisions in our corporate charter, by-laws and in Delaware law could make it more difficult for a third party to acquire us, Our certificate of incorporation authorizes the We are also subject to the In addition, our By-laws contain advance notice requirements for director nominations and for new business to be brought up at stockholder meetings. Stockholders wishing to submit director nominations or raise matters to a vote of stockholders must provide notice to us within specified date windows and in very specific forms in order to have that matter voted on at a stockholders meeting. The aforementioned provisions could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over the then current market Our stock price may be volatile. The market price of our common stock may be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including, but not limited to, the following: 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. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY Based on our small size (two employees and two consultants), we rely extensively on information technology systems managed by third party major service providers to securely process, store and transmit our data to conduct business. Our employees and consultants utilize end point security tools, such as firewalls and anti-virus protection, to protect our data. We have recently implemented overall risk procedures which incorporate certain uniform processes. To date, we have not engaged any consultants, auditors or other third parties in connection with our risk management system or processes. In connection with our use of third party services providers, we have certain processes in place to oversee and identify cybersecurity risks from threats and incidents. To date, we have not been materially impacted by risks from cybersecurity threats or incidents and we are not aware of cybersecurity threats or incidents that are reasonably likely to materially affect our business. However, there could be cybersecurity threats or incidents in the future that may adversely affect our business. Our Executive Vice President oversees risks of cybersecurity threats and reports quarterly, and as necessary, to the Board of Directors, including promptly reporting any cybersecurity incidents that may pose a significant risk to us. Our Executive Vice President has over ten years of experience with developers of access management, network security and data protection solutions. ITEM 2. PROPERTIES Our principal executive offices are located in New ITEM 3. LEGAL PROCEEDINGS Cox Patent Portfolio Litigation On April 4, 2014 and December 3, 2014, we initiated litigation against Google Inc. The litigations against Google and YouTube were subject to court ordered stays which were in effect from July 2, 2015 until January 2, 2019 as a result of proceedings then pending at the Patent Trial and Appeal Board (PTAB) and appeals to the U.S. District Court of Appeals for the Federal Circuit. Pursuant to a joint stipulation and order, entered on January 2, 2019, the parties agreed, among other things, that the stays with respect to the litigations were lifted. In January 2019, the two litigations against Google and YouTube were consolidated. Discovery is complete and the parties have each submitted summary judgment motions which are pending. A trial date has not yet been set. Mirror Worlds Patent Portfolio Litigation Meta (Facebook) Litigation On May 9, 2017, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, initiated litigation against Facebook, Inc. (“now Meta Platforms, Inc., “Meta”) in the On August 11, 2018, the On March 7, 2022, the District Court entered a ruling granting in part and denying in part a motion for summary judgment by Meta. In its ruling the Court (i) denied Meta’s motion that the asserted patents were invalid by concluding that all asserted claims were patent eligible under §101 of the Patent Act and (ii) granted summary judgment of non-infringement in favor of Meta and dismissed the case. We strongly disagree with the decision on non-infringement and on April 4, 2022, we filed an appeal to the U.S. Court of Appeals for the Federal Circuit. The Remote Power Patent Litigation October-November 2022 Litigation In October and November 2022, we initiated nine separate litigations During the year ended December 31, 2023, we entered into settlement agreements with Arista Networks, Inc., Antaira Technologies, LLC, Dahua Technology USA, Inc., Fortinet, Inc., Hikvision USA, Inc., Panasonic Holdings Corporation and Netgear Litigation On December 15, 2020, we filed a lawsuit against Netgear in the Supreme Court of the ITEM 4. MINE SAFETY DISCLOSURES None. PART II Market Information Dividend Policy As of December 31, 2023, we accrued dividends of $99,000 for unvested restricted stock units with dividend equivalent rights. Recent Issuances of Unregistered Securities Stock Repurchases. On June During the months of October, November and December Period $4,561,139 During the year ended December 31, Since inception of our Share Repurchase Program (August 2011) On December 29, 2023, we entered into a written trading plan( the “10b5-1 Plan”) under Rule 10b5-1 of the Securities Exchange Act of 1934 (the” Exchange Act”). Adopting a trading plan that satisfies the conditions of Rule 10b5-1 allows a company to repurchase its shares at times when it might otherwise be prevented from doing so due to self-imposed trading black-outs or pursuant to insider trading laws. Purchases under the 10b5-1 Plan may be made during the following periods: (1) beginning on January 9, 2024 until two trading days after we issue a press release announcing our financial results for the year ended December 31, 2023, and (2) beginning on April 1, 2024 until two trading days after we issue a press release announcing our financial results for the quarter ended March 31, 2024. Under the 10b5-1 Plan, our third party broker may purchase up to 1,000,000 shares of our common stock, subject to certain price, market, volume and timing constraints, in accordance with the terms of the plan and subject to Rule 10b5-1 and Rule 10b-18 of the Exchange Act. Equity Compensation Plan Information The following table summarizes share and exercise price information Number of securities to be issued upon exercise of outstanding options and rights Weighted-average exercise price of outstanding options and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) 587,500 (1) 2,180,000 (3) $ — $ — _______________ (1) Consists of shares issuable upon vesting of outstanding restricted stock units issued under the 2022 Stock Incentive Plan and the 2013 Stock Incentive Plan. (3) Represents shares of common stock reserved for issuance under our 2022 Stock Incentive Plan. We have discontinued issuing awards under our Our 2022 Stock Incentive Plan (“2022 Plan”) provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock units (c) ITEM 6. Not applicable. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the “Risk Factors” Section on pages 10 - OVERVIEW Our principal business is the development, licensing and protection of our intellectual property assets. We presently own With respect to our one hundred (100) U.S. patents, fifty-four (54) of such patents have expired. However, we can assert expired patents against third parties but only for past damages up to the patent expiration date. We currently have pending litigation involving expired patents including our Remote Power Patent and certain patents within our Cox and Mirror Worlds Patent At December 31, 2023, our principal sources of To date we have invested $7,000,000 in ILiAD, a clinical stage biotechnology company with an exclusive license to seventy(70) patents (see Note H to our consolidated financial statements included herein). Our investment continues to involve significant risk and the outcome is uncertain. We have been In addition, we have pending litigation involving certain patents within our Cox Patent Portfolio and have appealed the judgment of the District Court dismissing our litigation against Meta (Facebook) on the grounds of non-infringement involving certain patents within our Mirror Worlds Portfolio. We may not achieve successful outcomes of such litigation, the appeal, or future litigation involving our patent assets. Our current strategy includes continuing our licensing efforts with respect to our The significant components of expenses, when revenue Our annual and quarterly operating and financial results may fluctuate significantly from period to period as a result of a variety of factors that are outside our control, including the timing and our ability to achieve successful outcomes of our patent litigation, our ability and timing of consummating future license agreements for our intellectual property, and whether we will achieve a return on our investment in ILiAD and the timing of any such return. Our future operating results may also be materially impacted by our ability to acquire high quality patents which management believes have the potential to generate significant licensing opportunities. In the future, we may not be able to identify or consummate such patent acquisitions or, if consummated, achieve significant licensing revenue with respect to such acquisitions. In 2024, and future years we could be classified as a Personal Holding Company. If this is the case, we would be subject to a 20% tax on the amount of any undistributed personal holding company income (as defined) for such year that we do not distribute to our shareholders (see Note E to our consolidated financial statements included in this Annual Report). Our current dividend policy consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which have been paid in March and September of each year. In 2023 and 2022, we paid semi-annual cash dividends in accordance with our dividend policy. At this time, we anticipate continuing to pay dividends consistent with our policy. However, our dividend policy undergoes a periodic review by our Board of Directors and is subject to change at any time depending upon our financial requirements, earnings and other factors existing at the time (see Note N to our consolidated financial statements included herein). RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue. We had revenue of $2,601,000 for the year ended December 31, 2023 (“2023”) as compared to no revenue for the year ended December 31, 2022 (“2022”). Our revenue for 2023 was from litigation settlements involving our Remote Power Patent (see Note K[4] to our consolidated financial statements included herein). Operating Expenses. Operating expenses for 2023 were $4,836,000 as compared to $3,903,000 for 2022. The increase in operating expenses of $933,000 was primarily due to increases in costs of revenue of $874,000 related to contingent legal fees and incentive bonus compensation in connection with the litigation settlements and increases in general and administrative expenses of $111,000, offset somewhat by a reduction in amortization of patents of $50,000. We had costs of revenue of $874,000 and $-0- for 2023 and 2022, respectively. Included in the costs of revenue for General and Operating Loss. We had an operating loss of $2,235,000 for 2023 compared with an operating loss of $3,903,000 for 2022. The operating loss decrease of $1,668,000 was due to revenue of $2,601,000 from litigation settlements offset by increased operating expenses of $933,000. Interest and Dividend Income. Interest and dividend income for 2023 was $1,868,000 as compared to interest and dividend income of $1,020,000 for 2022. The increase in interest and dividend income of $848,000 for 2023 was primarily due to higher yielding fixed income investments due to generally higher interest rates during 2023. Gain on Equity Method Investment. For 2022, we recorded a gain on our equity method investment in ILiAD of $3,883,000, as compared to none for 2023, as a result of an observable price transaction relating to ILiAD’s private offering in August 2022( see Note H to our consolidated financial statements included herein). Gain on Conversion of Note. For 2022, we recorded a gain on conversion of our Realized and Unrealized Loss on Marketable Securities. For 2023, we recorded realized and unrealized gains on marketable securities of $525,000 as compared to realized and unrealized losses on marketable securities of $1,351,000 in 2022, primarily due to the more favorable interest rate environment for fixed income securities in 2023 as compared to 2022. Income Taxes. For 2023, we had a current tax expense for federal, state and local income taxes of $11,000 and a deferred tax benefit of $399,000. For 2022, we had no current income tax for federal, state and local income taxes and a deferred tax expense of Share of Net Losses of Equity Method Investee. We recognized $2,003,000 of net losses during 2023 related to our equity share of ILiAD net losses, as compared to recognized net losses of $1,639,000 for 2022 (see Note Net We have financed our operations primarily from revenue from licensing our patents. At December 31, Working capital Net cash provided by (used in) operating activities for 2023 increased by $5,767,000 from $(5,436,000) for 2022 to $331,000 for 2023, primarily as a result of lower income taxes paid in 2023 of $2,722,000 and increased interest and dividend income of $1,868,000. Also, non-cash gains on equity method investment of $3,883,000 and on conversion of the ILiAD note of $271,000 represented uses of cash in 2022 compared to no such transactions in 2023. Net cash provided by (used in) investing activities during 2023 increased by $28,808,000 to $6,537,000 as compared to $(22,271,000) for 2022, primarily as a result of a significant shift to investments in marketable securities in 2022 from investments in securities previously classified as cash and cash equivalents. Net cash used in financing activities for We maintain our cash OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements. CONTRACTUAL OBLIGATIONS We do not have any long-term debt, capital lease obligations, CRITICAL ACCOUNTING ESTIMATES We prepare our consolidated financial statements We For a detailed discussion of our significant accounting policies and related judgments, see Note B to ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements required hereby are located on pages F-1 through ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON None. ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this Annual Report on Form 10-K. Based upon this review, our executive officers concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in applicable rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. (b) (i) Our management is also responsible for establishing and maintaining adequate accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, (ii) We are a (iii) Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following information includes information each director and executive officer has given us about his or her age, all positions he or she holds, his or her principal occupation and business experience for at least the past five years, and the names of other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented regarding each Information about the number of shares of our common stock beneficially owned by each executive officer and director appears in this Annual Report under the heading Corey M. Horowitz Jonathan E. Greene Robert M. Mahan became our Chief Financial Officer in December 2022. Mr. Mahan currently serves as President of Management and Financial Services, Inc., a consulting firm that he founded in 2011 which provides general management, financial and operations consulting services to private and public companies. In March 2023, he also became and continues to serve as Chief Financial Officer of Back Office Staffing Solutions, LLC, a private company providing back office processing services for staffing firms. From Emanuel R. Pearlman has been a Niv Harizman Allison Hoffman Committees of the Board of Directors Our Board of Directors currently has four standing committees: an Audit Committee; a Compensation Committee; a Nominating and Corporate Governance Committee and a Strategic Development Committee. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee has a charter. These charters are available on our website at: http:// Audit Committee Our Board of Directors has a separately standing audit committee in accordance with Section The Audit Committee is appointed by our Board of Directors to provide assistance to the Board in fulfilling its oversight responsibility with respect to, among other things, (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) selecting and evaluating the qualifications and independence of our independent registered public accounting firm, (iv) evaluating the performance of our internal audit function and independent registered public accounting firm, and (v) our internal controls and procedures. Compensation Committee The Compensation Committee consists of Allison Hoffman Nominating and Corporate Governance Committee Our Board has a Nominating and Corporate Governance Committee consisting of Niv Harizman Strategic Development Committee We also have a Strategic Development Committee to assist our Chairman and Chief Executive Officer in strategic development and planning of our business relating to identifying potential strategic partners, the acquisition of new IP and other Code of We have adopted a Code of Insider Trading Policies and Procedures We have adopted insider trading policies and procedures governing the purchase, sale and/or other disposition of our securities by directors, officers, employees and consultants(who have access to material non-public information) or us, that are reasonably designed to promote compliance with ITEM 11. EXECUTIVE COMPENSATION The following table summarizes compensation for the years ended December 31, Summary Compensation Table _____________________________ (1) We have concluded that the aggregate amount of perquisites and other personal benefits paid in 2023 and 2022 to either Mr. Horowitz, Mr. Mahan or Mr. Greene did not exceed $10,000. (2) Mr. Horowitz received the following cash incentive bonus payments for 2023: (i) an annual discretionary bonus of $175,000 and (ii) incentive bonus compensation of $130,000 pursuant to his employment agreement (see “Employment Agreements – Termination of Employment Agreement and Change in Control Arrangements” below). Mr. Horowitz received for 2022 an annual discretionary bonus of $175,000. (3) The amounts in this column represent the aggregate grant date fair value of restricted stock unit awards granted to the Named Executive Officers computed in accordance with FASB ASC Topic 718. In accordance with SEC rules, the grant date fair value of an award that is subject to a performance condition is based on the probable outcome of the performance condition. See Note B[10] to our consolidated financial statements included in this Annual Report for a discussion of the assumptions made by the Company in determining the grant date fair value. (4) Includes 401(k) matching funds contributions by the Company and profit sharing under the Company's 401(k) Plan for the benefit of Mr. Horowitz of $ 43,500 for 2023 and $40,500 for 2022, respectively. Also includes dividends (dividend equivalent rights) earned or paid upon vesting of restricted stock units owned by Mr. Horowitz in 2023 of $10,000 and $69,175 in 2022. (5) Mr. Mahan became Chief Financial Officer of the Company on December 21, 2022. (6) Includes 401(k) matching funds contributions by the Company and profit sharing under the Company's 401(k) Plan for the benefit of Mr. Greene of $29,659 for 2023 and $20,419 for 2022. Also includes dividend (dividend equivalent rights) earned upon vesting of restricted stock units owned by Mr. Greene in 2023 of $750. Narrative Disclosure to Summary Compensation Table Employment Agreements, Termination of Employment and Change-In-Control Arrangements On In addition, pursuant to the Agreement, we granted to Under the terms of the Agreement, so long as Mr. Horowitz continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, Mr. Horowitz shall also receive incentive compensation in an amount equal to 5% of The Incentive Compensation shall continue to be paid to Mr. Horowitz for the life of each of our patents with respect to licenses entered into with third parties during the In connection with the Agreement, Mr. Horowitz has also agreed not to compete with us as follows: (i) during the Jonathan Greene serves as our Executive Vice President and Secretary on an at-will basis at an annual base salary of $200,000. Mr. Greene received Robert Mahan serves as our Chief Financial Officer Profit Sharing 401(k) Plan We offer all employees who have completed a year of service (as defined) participation in a 401(k) retirement savings plan, Director Compensation In The following table sets forth the compensation awarded to, earned by or paid to all persons who served as members of our Name Fees earned or paid in cash ($)(1) Stock Awards All other compensation ($)(4) Total ___________________________ Outstanding Equity Awards at December 31, The following table sets forth information relating to 2023 (there were no outstanding stock options): Option Awards Stock Awards Name Option Exercise Option Expiration Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested Equity incentive plan awards: Market value of unearned shares, units or other rights that have not vested(1) ($) Unexercisable Corey M. Horowitz Chairman and CEO — — — — — — — Jonathan Greene ________________________________ Policies and Procedures for Equity Grant Awards/ Material Non- Public Information Under our equity award policy, the Compensation Committee generally grants equity awards to our executive officers, directors on an annual basis with the exception of our Chairman and Chief Executive Officer who typically receives awards at the time of renewal of his employment agreement. For a number of years, we have awarded restricted stock units to our executive officers, directors and consultants and have not awarded stock options. In the event that the Compensation Committee were to make awards of stock options in the future, it will take into account material non-public information when determining the timing and terms of such option awards by generally making such awards on an annual basis on a pre-determined schedule. We do not time the disclosure of material non-public information for the purpose of affecting executive compensation. The following table sets forth information regarding the beneficial ownership of our common stock as of NAME AND ADDRESS AMOUNT AND NATURE Executive Officers and Directors: Corey M. Horowitz(3) 6,895,942 29.2% 32% _____________________________________ *Less than 1%. Review, Approval or Ratification of Transactions with Related Persons The Audit Committee has responsibility for reviewing and approving related-persons transactions in accordance with its charter. A related person is any executive officer, director, nominee for director or more than 5% stockholder of the Company, including immediate family members, and any entity owned or controlled by such persons. In addition, pursuant to our Director Independence Three of our five directors, Emanuel Pearlman, Niv Harizman and Allison Hoffman, are considered independent directors in compliance with the standard of independence in Section 803A(2) of the NYSE ITEM 14. PRINCIPAL Audit Fees Marcum LLP, our independent registered public accounting firm as of October 11, 2022, billed us aggregate fees of Tax Fees and Marcum LLP provided various tax and compliance services for which it billed us Audit Committee Pre-Approval Policies and Procedures Our audit committee charter provides that our audit committee must comply with SEC rules to maintain auditor independence as set forth in Rule 2-01(c)(7)(i) of Regulation S-X. The Audit Committee has a policy to pre-approve all audit and permissible non-audit services to be provided by our independent registered public accounting firm. All the services above were approved in advance by our Board of Directors. NETWORK-1 TECHNOLOGIES, INC. Index to Consolidated Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Network-1 Technologies, Inc. (the “Company”) as of December 31, Basis for Opinion These financial We conducted our audits in accordance with the standards of the Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence F-1 Critical Audit Matters Critical audit matters are matters arising from the /s/ Marcum llp Marcum llp We have served as New York, New York F-2 NETWORK-1 TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS The accompanying notes are an integral part of the consolidated financial statements F-3 NETWORK-1 TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) BEFORE SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE: The accompanying notes are an integral part of the consolidated financial statements F-4 NETWORK-1 TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN Total Stockholders’ Equity The accompanying notes are an integral part of the consolidated financial statements F-5 NETWORK-1 TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, The accompanying notes are an integral part of the consolidated financial statements F-6 NETWORK-1 TECHNOLOGIES, INC. Note A – Business Network-1 Technologies, Inc. (the The The Company has made equity investments totaling $7,000,000 in ILiAD Biotechnologies, LLC (“ILiAD”), a clinical stage biotechnology company (see Note H hereof). Note B – Summary of The The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The Certain amounts recorded to reflect the Company’s share of the income or losses of its equity method investee, accounted for under the equity method, are based on estimates and the unaudited results of operations of the equity method investee, and may require adjustment in the future when the audit is complete. The Company reports its share of the results of its equity method investee on a one quarter lag basis. F-7 NETWORK-1 TECHNOLOGIES, INC. Note B – Summary of Significant Accounting Policies (continued) The Company The Company considers all highly liquid short-term investments, including certificates of deposit and money market funds, which are purchased with an original maturity of three months or less to be cash equivalents. The Company’s marketable securities are comprised of certificates of deposit with an original maturity greater than three months from date of purchase, government securities and Under ASC 606, revenue is recognized when the Company completes the licensing of its intellectual property to its licensees or enters into a litigation settlement agreement involving any of its expired patents. With respect to licensing its intellectual property or such litigation settlement agreement, revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for licensing its intellectual property or in settlement of the litigation. The Company determines revenue recognition through the following steps: Revenue disaggregated by source is as follows: See Note K[4] hereof for further discussion of revenue recognized. F-8 NETWORK-1 TECHNOLOGIES, INC. Note B – Summary of Significant Accounting Policies (continued) Revenue from Fully-paid licenses provide for a non-refundable up-front payment for which the Company has no future obligations or performance requirements, revenue is generally recognized when the Company has obtained the signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from fully-paid licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations. Equity method investments are equity securities in entities the Company does not control but over which it has the ability to exercise significant influence. These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures (see Note H hereof). Equity method investments are measured at cost minus impairment, if any, plus or minus the Company’s share of an investee’s income or loss. The Company’s proportionate share of the income or loss from equity method investments is recognized on a one-quarter lag. When the Company’s carrying value in an equity method investment is reduced to Upon a sale of an equity method investment by the Company, the difference between sales proceeds and the carrying amount of the equity investment is recognized in profit or loss. Upon the issuance of securities in an observable price transaction, the Company will account for the share issuance by the equity method investee as if the Company had sold a proportionate share of its investment in the observable price transaction. The Company will record a gain or loss associated with the dilution of its investment to reflect third party investments in the investee and will increase or decrease its basis in the equity method investee accordingly. The gain or loss is recorded within other income or The The Company owns patents that relate to various technologies. The Company capitalizes the costs associated with acquisition, registration and maintenance of its acquired patents and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the patents would be capitalized and amortized over the balance of the useful life for the patents. F-9 NETWORK-1 TECHNOLOGIES, INC. Note B – Summary of Significant Accounting Policies (continued) The Company includes in costs of revenue for the year ended December 31, The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) ASC 740-10, U.S. federal, state and local income tax returns prior to The Company accounts for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718, Compensation expense related to awards to employees is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. The Company reports earnings per share in accordance with U.S. GAAP, which requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share F-10 NETWORK-1 TECHNOLOGIES, INC. Note ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value There are three levels of inputs Level 1: Observable inputs such as Level Level 3: Unobservable inputs that are The carrying value of the Company’s financial instruments, including cash The Company’s marketable securities are classified within Level 1 because they are valued using quoted market prices in an active market. The Company’s equity method investment is measured on a non-recurring basis and is classified within Level 2 as it is valued using an observable price transaction for similar assets in a market that is not active (see Note B[6] and Note H hereof). An impairment loss shall be recognized only if the The Company’s equity investment in ILiAD is evaluated on a non-recurring basis for impairment, when and if a triggering event occurs. F-11 NETWORK-1 TECHNOLOGIES, INC. Note B – Summary of Significant Accounting Policies (continued) Under ASC 842, the Company Cash dividends are recorded when declared by the Current Expected Credit Loss In Segments In F-12 NETWORK-1 TECHNOLOGIES, INC. Note C – Patents The Amortization expense for the years ended December 31, The expiration dates for the M2M/IoT Portfolio range from September 2033 to May 2034. The expiration dates within the Company’s HFT Patent Portfolio range from October 31, 2039 to November 1, 2039. All of the patents within the Basic F-13 NETWORK-1 TECHNOLOGIES, INC. Note Significant components of the income taxes Significant components of deferred tax assets (liability) as of December 31, _________________________ (1) Deferred tax liability primarily as a result of a temporary difference related to the Company’s equity method investment. As of December 31, F-14 NETWORK-1 TECHNOLOGIES, INC. Note E – Income Taxes (continued) The reconciliation between the taxes as shown and the amount that would be computed by applying the statutory federal income tax rate to the net income before income taxes is as follows: On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax The personal holding company Note F – The F-15 NETWORK-1 TECHNOLOGIES, INC. Note F – Stockholders’ equity (continued) As of December 31, Restricted Stock Units A summary of restricted stock units granted during the year ended December 31, Restricted stock unit compensation expense was The Company has an aggregate of The fair value of restricted stock units is determined based on the number of shares granted and the quoted market price of the Company’s common stock on the date of grant for time-based and performance-based awards and fair value at grant date using the Monte Carlo simulation model for market-based awards(see Note B[10] hereof). The key inputs into the Monte Carlo simulation used to value the restricted stock units was a risk free rate of , expected term of years, expected volatility of and a stock price of (see Note B[10] hereof). All of the Company’s issued restricted stock units have dividend equivalent rights. As of December 31, 2023 and 2022, there was $99,000 and $37,000 accrued for dividend equivalent rights which were included in other accrued expenses. F-16 NETWORK-1 TECHNOLOGIES, INC. Note G – Marketable Securities Marketable securities as of December 31, 2023 and 2022 were composed of: Note H – Equity Investment During the period December 2018 through August 2022, the Company made aggregate investments of $7,000,000 in ILiAD, a privately held clinical stage biotechnology company dedicated to the prevention and treatment of human disease caused by Bordetella pertussis. ILiAD is focused on validating its proprietary intranasal vaccine, BPZE1, for the prevention of Pertussis (whooping cough). At December 31, On August 24, 2022, ILiAD completed a private financing of $42,836,000 of its Class D units, of which a multi-national pharmaceutical company invested $30,000,000 (the “Financing”). As part of the In addition, as part of the For the years ended December F-17 NETWORK-1 TECHNOLOGIES, INC. Note H – Equity Investment (continued) The difference between the Company’s share of equity in ILiAD’s net assets and the purchase price of the investment is due to an excess amount paid over the book value of the investment of $5,515,000 which is accounted for as equity method goodwill. The Company performed an assessment to determine significance of its equity investee using the investment, asset and income tests. The Company concluded the income test threshold was met for the year ended December 31, Note Russ, August & Kabat provides legal services to the Company with respect to its pending patent Russ, August & Kabat also provides legal services to the Company with respect to its pending patent litigations filed in April 2014 and December 2014 against Google Inc. and YouTube, LLC in the U.S. District Court for the Southern District of New York relating to certain patents within the Cox Patent Portfolio acquired by the Company from Dr. Cox (see Note K[1] hereof). The terms of the Company’s agreement with Russ, August & Kabat provide for legal fees on a full contingency basis ranging from 15% to 30% of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all expenses incurred with respect to this litigation. Dovel & Luner, LLP (“Dovel”) provided and continues to provide legal services to the Company with respect to its patent litigation F-18 NETWORK-1 TECHNOLOGIES, INC. Note On In connection with the Company’s acquisition of its Cox Patent Portfolio, As part of the acquisition of the Mirror Worlds Patent Portfolio, the Company also entered into an agreement with Recognition Interface, LLC In connection with the Company’s acquisition of its M2M/IoT Patent Portfolio, the Company is obligated to pay M2M14% of the first $100 million of net proceeds (after deduction of expenses) and The Company has a Savings and Investment Plan which allows participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code of 1986. The Company also may make discretionary annual matching The Company has one operating lease for its principal office space in New Canaan, Connecticut that was to expire on April 30, 2025. On September 29, 2023 ,the Company exercised its early termination right under the lease to terminate the lease as of December 31, 2023 which was extended on December 27, 2023 until March 31, 2024. There are no material residual guarantees associated with the Company’s lease and there are no significant restrictions or covenants included in the Company’s lease. The calculated incremental borrowing rate was approximately 4.2%, which was calculated based on the remaining lease term of 3 years as of May 1, 2022. The remaining lease term as of December 31, 2023 was approximately 3 months. There was no sublease rental income for the year ended December 31, 2023, and the Company is not the lessor in any lease arrangement, and there were no related-party lease agreements. F-19 NETWORK-1 TECHNOLOGIES, INC. Note I Right-of-use lease assets and related lease obligations for the Company’s operating leases were recorded in the consolidated balance sheet as follows: The table below presents certain information related to the Company’s lease costs for the year ended December 31, 2023 and 2022: Future lease payments included in the measurement of lease liabilities on the consolidated balance sheet as of December 31, 2023, were as follows: Note J – Employment Arrangements and Other Agreements [1] On March 22, 2022, the Company entered into an employment agreement (“Agreement”) with its Chairman and Chief Executive Officer, pursuant to which he continues to serve as the Company’s Chairman and Chief Executive Officer for a four-year term (“Term”), at an annual base salary of $535,000 which shall be increased by 3% per annum during the Term. The Agreement established an annual target bonus of $175,000 for the Chairman and Chief Executive Officer based upon performance. For each of the years ended December 31, 2023 and 2022, the Chairman and Chief Executive Officer received an annual discretionary bonus of $175,000. F-20 NETWORK-1 TECHNOLOGIES, INC. Note In addition, pursuant to the Agreement, the Company granted the Chairman and Chief Executive Officer, under its 2013 Plan, 600,000 restricted stock units (the “RSUs”, each RSU awarded by the Company to its officers, directors and consultants represents a contingent right to receive one share of the Company’s common stock) which terms provided for vesting in four tranches, as follows: (1) RSUs which vested RSUs on March 22, 2023 and RSUs will vest on March 22, 2024, subject to the Chairman and Chief Executive Officer’s continued employment by the Company through Under the terms of the Agreement, so long as the The Incentive Compensation shall continue to be paid to the Chairman and Chief Executive Officer for the life of each of the In connection with the Agreement, F-21 NETWORK-1 TECHNOLOGIES, INC. Note [2] The Company’s Executive Vice President serves on an at-will basis at an annual base salary [3] In December 2022, the Company’s Board of Directors elected a new Chief Financial Officer who serves on a consulting basis at an annual base salary of $175,000. On September 8, 2023, the Company’s Chief Financial Officer was granted 50,000 RSUs under the 2022 Plan, 50% of such RSUs vest on the one year anniversary date of the grant (September 8, 2024) and 50% of such RSUs vest on the two year anniversary of the date of the grant (September 8, 2025), subject to continued services. Note K – Legal Proceedings [1] On April 4, 2014 and December 3, 2014, the Company initiated litigation against Google Inc. (“Google”) and YouTube, LLC (“YouTube”) in the [2] On F-22 NETWORK-1 TECHNOLOGIES, INC. Note K – Legal Proceedings (continued) On March 7, 2022, the District Court entered a ruling granting in part and denying in part a motion for summary judgment by Meta. In its ruling the Court (i) denied Meta’s motion that the asserted patents were invalid by concluding that all asserted claims were patent eligible under §101 of the Patent Act and (ii) granted summary judgment of non-infringement in favor of Meta and dismissed the case. The Company strongly disagrees with the decision on non-infringement and on April 4, 2022, the Company filed an appeal to the U.S. Court of Appeals for the Federal Circuit, which is pending. [3] On [4] In October and November 2022, the Company initiated nine separate litigation against ten defendants for infringement of its During the Note L – Concentrations Revenue from the On June During the year ended December 31, F-23 NETWORK-1 TECHNOLOGIES, INC. Note M – Stock Repurchase Program (continued) Since inception of the Share Repurchase Program (August 2011) through On December 27, 2023, the Company entered into a written trading plan (the “10b5-1 Plan”) under Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”). Adopting a trading plan that satisfies the conditions of Rule 10b5-1 allows a company to repurchase its shares at times when it might otherwise be prevented from doing so due to self-imposed trading black-outs or pursuant to insider trading laws. Purchases under the 10b5-1 Plan may be made during the following periods: (1) beginning on January 9,2024 until two trading days after the Company issues a press release announcing its financial results for the year ended December 31, 2023, and (2) beginning on April 1, 2024 until two trading days after the Company issues a press release announcing its financial results for the quarter ended March 31, 2024. Under the 10b5-1 Plan, the Company’s third party broker may purchase up to 1,0000,000 shares of the Company’s common stock, subject to certain price, market, volume and timing constraints, in accordance with the terms of the plan and subject to Rule 10b5-1 and Rule 10b-18 of the Exchange Act. Note N – The Company’s dividend policy consists of a Note O – Subsequent Events [1] On February 23, 2024, the Company’s Board of Directors declared a semi-annual [2] On February 23, 2024, the Company’s Board of Directors approved the grant of 15,000 RSUs to each of the F-24 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements: The following are included under Item 8 Report of Independent Registered Public Accounting Firm Consolidated balance sheets as of December 31, Consolidated statements of Consolidated statements of changes in stockholders' equity for the years ended December 31, Consolidated statements of cash flows for the years ended December 31, Notes to consolidated financial statements (a)(2) Financial Statements Schedules: Financial statement schedules are omitted because the information is not applicable. (a)(3) 101* 101.INS XBRL Instance 101.SCH XBRL Scheme 101.CAL XBRL Calculation Linkbase 101.DEF XBRL Definition Linkbase 101.LAB XBRL Label Linkbase 101.PRE XBRL Presentation Linkbase Document _____________________ * +Management contract or compensatory plan or arrangement SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly NETWORK-1 TECHNOLOGIES, INC. By /s/ Corey M. Horowitz Corey M. Horowitz Chairman and Chief Executive Officer March Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/ Corey M. Horowitz Corey M. Horowitz Chairman and Chief Executive Officer, Chairman of the Board of Directors (principal executive officer) March /s/ Robert Mahan Robert Mahan Chief Financial Officer March /s/ Jonathan Greene Jonathan Greene Executive Vice President, Secretary and a Director March 8, 2024 /s/ Emanuel Pearlman Emanuel Pearlman Director March 8, 2024 /s/ Niv Harizman Niv Harizman Director March 8, 2024 /s/ Allison Hoffman Allison Hoffman Director March -50-and posted on its Corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐or a smaller reporting company or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer”, “smaller reporting company” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐ Non-accelerated filer ☐ ☒Emerging growth company ☐ 20162023 was $36,872,337.approximately $38,052,926 based on the closing price as reported on NYSE American Exchange. Shares of voting stock held by each officer and director and by each person, who as of June 30, 2016,2023, the last business day of the Registrant’s most recently completed second quarter, may be deemed to have beneficially owned more than 10% of the voting stock have been excluded. This determination of affiliate status is not necessarily a conclusive determination of affiliate status for any other purpose.16, 20171, 2024 was 24,204,954..-2- 2016PART IItem 1. Business2 Item 1.1A. Risk FactorsBusiness110Item 1A.Risk Factors16Item 1B. Unresolved Staff Comments 2619Item 2.1C. CybersecurityProperties2619Item 3.2. PropertiesLegal Proceedings2719Item 3. Legal Proceedings 19 Item 4. Mine Safety Disclosures 3021PART IIItem 5. Market For Registrant'sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities3122Item 6. (Reserved) Selected Financial Data3324Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 3425Item 7A. Quantitative and Qualitative Disclosures About Market Risk 4332Item 8. Financial Statements and Supplementary Data 4332Item 9. Changes Inin and Disagreements With Accountants on Accounting and Financial Disclosure4332Item 9A. Controls and Procedures 4332Item 9B. Other Information 4433Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 34 PART IIIItem 10. Directors, Executive Officers and Corporate Governance 4534Item 11. Executive Compensation 4939Item 1212. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 5444Item 13. Certain Relationships and Related Transactions and Director Independence 5646Item 14. Principal AccountingAccountant Fees and Services5647PART IVItem 15. Exhibits and Financial Statement Schedules 5748Signatures 50 Signatures59-1- "FORWARD-LOOKING STATEMENTS."“FORWARD-LOOKING STATEMENTS”. ANY STATEMENT IN THIS 10-K THAT IS NOT A STATEMENT OF HISTORICAL FACT MAY BE DEEMED TO BE A FORWARD-LOOKING STATEMENT.FORWARD-LOOKINGSTATEMENT WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED, OR SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. FORWARD-LOOKING STATEMENTS REPRESENT OUR JUDGMENT ABOUT THEPROVIDE CURRENT EXPECTATIONS OF FUTURE AND ARE NOTEVENTS BASED ON CERTAIN ASSUMPTIONS AND INCLUDE ANY STATEMENT THAT DOES NOT DIRECTLY RELATE TO ANY HISTORICAL FACTS.OR CURRENT FACT. STATEMENTS CONTAINING SUCH WORDS AS "MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "COULD," "ESTIMATE," "CONTINUE"“MAY,” “WILL,” “EXPECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “COULD,” “ESTIMATE,” “CONTINUE” OR "PLAN"“PLAN” AND SIMILAR EXPRESSIONS OR VARIATIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECTARE BASED ON THE BELIEFS AND ASSUMPTIONS OF OUR MANAGEMENT BASED ON INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CURRENT RISKS, UNCERTAINTIES AND ASSUMPTIONS RELATED TO VARIOUS FACTORS SET FORTH IN THIS REPORT AND IN OTHER FILINGS MADE BY US WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC").COMMISSION. BASED UPON CHANGING CONDITIONS, SHOULD ANY ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, INCLUDING THOSE DISCUSSED AS "RISK FACTORS"“RISK FACTORS” IN ITEM 1A AND ELSEWHERE IN THIS REPORT, OR SHOULD ANY OF OUR UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS REPORT. WE UNDERTAKE NO OBLIGATION TO UPDATE, AND WE DO NOT HAVE A POLICY OF UPDATING OR REVISING THESE FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THE STATEMENT WAS MADE. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS "NETWORK-1," "COMPANY," "WE," "OUR," "US"“NETWORK-1”,“COMPANY”,“WE,” “OUR,” “US” MEAN NETWORK-1 TECHNOLOGIES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY,SUBSIDIARIES, MIRROR WORLDS TECHNOLOGIES, LLC AND HFT SOLUTIONS, LLC.thirty-three (33)one hundred (100) U.S. patents, fifty-four (54) of such patents have expired, and fifteen (15) foreign patents relating to (i) our Cox patent portfolio (the “Cox Patent Portfolio”) relating to enabling technology for identifying media content on the Internet and taking further actions to be performed after such identification;(ii) our M2M/IoT patent portfolio (the “M2M/IoT Patent Portfolio”) relating to,-2- (i)smartphones, tablets and computers, as well as automobiles; (iii) our HFT patent portfolio (the “HFT Patent Portfolio”) covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) our Mirror Worlds patent portfolio (the “Mirror Worlds Patent Portfolio”) relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) our remote power patent ("Remote(the “Remote Power Patent"Patent”) covering the delivery of powerPower over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras; (ii) the Mirror Worlds patent portfolio (the "Mirror Worlds Patent Portfolio") relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system;(iii) the Cox patent portfolio (the "Cox Patent Portfolio") relating to enabling technology for identifying media content on the Internet and taking further action to be performed based on such identification; and (iv) the QoS patents (the "QoS Patents") covering systems and methods for the transmission of audio, video and data in order to achieve high quality of service (QoS) over computer and telephony networks.cameras. In addition, we continually review opportunities to acquire or license additional intellectual property.been actively engagedinvested $7,000,000 in ILiAD Biotechnologies, LLC (“ILiAD”), a clinical stage biotechnology company with an exclusive license to seventy (70) patents. On December 31, 2023, we owned approximately 6.7% of the licensingoutstanding units of our Remote Power Patent (U.S. Patent No. 6,218,930). AsILiAD on a non-fully diluted basis and 5.4% of March 1, 2017, we have entered into twenty-four (24) license agreements with respectthe outstanding units on a fully diluted basis (after giving effect to our Remote Power Patent which, among others, include license agreements with Cisco Systems, Inc., Dell Inc., Extreme Networks, Inc., Netgear, Inc., Microsemi Corporation, Motorola Solutions, Inc., NEC Corporation, Samsung Electronics Co., Ltd, Huawei Technologies Co., Ltd., ShoreTel, Inc.the exercise of all outstanding options and Polycom, Inc. (see Notes J[1] and J[2] to our consolidated financial statements included in this Annual Report)warrants). We have also entered into license agreements with Apple Inc. and Microsoft Corporation with respect to our Mirror Worlds Patent Portfolio (see Note J[4] to our consolidated financial statements included in this Annual Report). licensing efforts with respect to monetize our intellectual property assets.property. In addition, we continue to seek to acquire additional intellectual property assets to develop, commercialize, license or otherwise monetize. Our strategy includes working with inventors and patent owners to assist in the development and monetization of their patented technologies. We 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 differ depending upon the opportunityOur patent acquisition and may include, among other things, a strategic investment in such third party, the provision of financing to such third party or the formation of a joint venture with such third party or others for the purpose of monetizing their intellectual property assets.Our acquisitiondevelopment strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as we have achieved with respect to our Remote Power Patent and our Mirror Worlds Patent Portfolio. In addition, we may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.licensing revenue in excess of $105,000,000$188,000,000 from May 2007 through December 31, 2016. As2023. We no longer receive revenue for our Remote Power Patent for any period subsequent to March 7, 2020 (the expiration date of the patent). During the year ended December 31, 2023, our Remote Power Patent generated all of our revenue of $2,601,000 as a result of litigation settlements relating to periods prior to March 7, 2020 (see “Legal Proceedings at pages 20 - 21. Our future revenue is largely dependent on our acquisitionability to monetize our other patent assets.in May 2013,(see “Legal Proceedings” at pages 19 - 21 of this Annual Report).received licensingsufficient cash to fund our operations for the foreseeable future.-3- other revenuefifteen(15) foreign patents relating to patents within our Cox Patent Portfolio, M2M/IoT Patent Portfolio, HFT Patent Portfolio, Mirror World Patent Portfolio and our Remote Power Patent. With respect to our one hundred (100) U.S. patents, fifty-four (54) of $47,150,000 through December 2016.litigations for infringement oflitigation involving expired patents including our Remote Power Patent, and certain patents within Our Cox and Mirror Worlds Patent Portfolios (see “Legal Proceedings” at pages 19 - 21 hereof)."Legal Proceedings"“Legal Proceedings” at pages 27 – 3019 - 20 hereof). The patents within our Cox Patent Portfolio are based on a patent application filed in 2000. Since the acquisition of the Cox Patent Portfolio in February 2013, we have been issued thirty-four (34) additional patents relating to this Annual Report)portfolio. The claims in these thirty-four (34) additional patents are generally directed towards systems of content identification and performing actions following therefrom.-4- - 2 -PatentsOur intellectual propertyM2M/IoT Patent Portfolio, acquired in December 2017 from M2M and IoT Technologies, LLC (“M2M”), relates to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine and other mobile devices including smartphones, tablets and computers, as well as automobiles. The M2M/IoT Patent Portfolio currently consists of thirty-three (33)thirty-seven (37) issued U.S. patents, nine (9) pending U.S. patent applications, fourteen (14) registered foreign patents and one (1) additional pending non-U.S. patent applications. Since we acquired the M2M/IoT Patent Portfolio in December 2017, we have been issued twenty-three (23) additional U.S. patents with respect to the portfolio. We anticipate further issuances of additional claims for this portfolio. The expiration dates of the thirty-seven (37) issued U.S. patents currently within our M2M/IoT Patent Portfolio range from September 2033 to May 2034.follows:“Creator of the Year” by the Intellectual Property Law Association of Chicago for his intellectual property related to eSIM technology.-5- Remote Power PatentPatent covering the delivery of power over Ethernet cables for the purpose of remotely powering network devices such as wireless access ports, IP phones and network based cameras.•U.S. Patent No. 6,218,930: Apparatus And Method For Remotely Powering Access Equipment Over A 10/100 Switched Ethernet Network;Our Remote Power Patent expires in March 2020.Patents covering•U.S. Patent No. 6,006,227: Document Stream Operating System;•U.S. Patent No. 6,638,313: Document Stream Operating System;•U.S. Patent No. 6,725,427: Document Stream Operating System With Document Organizing And Display Facilities;•U.S. Patent No 6,496,857: Delivering Targeted, Enhanced Advertisements Across Electronic Networks;•U.S. Patent No. 6,768,999: Enterprise, Stream, Information Management System;•U.S. Patent No. 7,865,538: Desktop,Stream-Based, Information Management System;•U.S. Patent No. 7,849,105: Desktop, Stream-Based, Information Management System;•U.S. Patent No. 8,255,439: Desktop, Stream-Based, Information Management System;•U.S. Patent No. 8,280,931: Desktop, Stream-Based, Information Management System; and•U.S. Patent No. 8,572,139: Desktop, Stream-Based, Information Management System.The expiration dates All of the patents within the Mirror Worlds Patent Portfolio range from August 2017 to February 2020. Sixour patents within our Mirror Worlds Patent Portfolio expired as of June 30, 2016 includinghave expired. The Mirror Worlds Patent Portfolio includes U.S. Patent No. 6,006,227 (the “227 Patent”), U.S. Patent No. 7,865,538 and U.S. Patent No. 8,255,439 which are currently being asserted in our litigation against Meta Platforms, Inc. (formerly Facebook, Inc.) (see “Legal Proceedings” at page 20 hereof). Our 227 Patent was the subject of our successful litigationpreviously asserted in litigations against Apple Inc. and Microsoft Corporation. (see "Legal Proceedings" at pages 28-29 hereof).- 3 -Cox Patent PortfolioIdentificationCorporation which were settled resulting in aggregate payments to us of Media Content on the Internet•U.S. Patent No. 7,058,223: Identifying Works For Initiating A Work-Based Action, Such As An Action On The Internet;•U.S. Patent No. 8,010,998: Using Features Extracted From An Audio And/Or Video Work To Obtain Information About The Work;•U.S. Patent No. 8,020,187: Identifying Works, Using A Sub-Linear Time Search Or A Non Exhaustive Search, For Initiating A Work-Based Action, Such As An Action On The Internet;•U.S. Patent No. 8,205,237: Identifying Works, Using A Sub-Linear Time Search, Such As An Approximate Nearest Neighbor Search, For Initiating A Work- Based Action, Such As An Action On The Internet;•U.S. Patent No. 8,640,179: Method For Using Extracted Features From An Electronic Work;•U.S. Patent No. 8,656,441: Systems For Using Extracted Features From An Electronic Work;•U.S. Patent No. 8,782,726: Method For Taking Action Based On A Request Related To An Electronic Media Work;•U.S. Patent No. 8,904,464: Method For Tagging An Electronic Media Work To Perform Action;•U.S. Patent No. 8,904,465: System For Taking Action Based On A Request Related To An Electronic Media Work;•U.S. Patent No. 9,256,885: Method for Linking an Electronic Media Work To Perform an Action;•U.S. Patent No. 9,282,359: System and Method for Taking Action with Respect to a Media Work From a Second Device;•U.S. Patent No. 9,348,820: System and Method for Taking Action With Respect to an Electronic Media Work and Logging Event Information Related Thereto;•U.S. Patent No. 9,529,870: Methods for Linking an Electronic Media Work to Perform an Action;•U.S. Patent No. 9,536,253: Methods for Linking an Electronic Media Work to Perform an Action;•U.S. Patent No. 9,538,216: System for Taking Action with Respect to a Media Work;- 4 -•U.S. Patent No. 9,544,663: System for Taking Action with Respect to a Media Work; and•U.S. Patent No. 9,558,190: System and Method for Taking Action with Respect to an Electronic Media Work.The expiration dates of the patents within the Cox Patent Portfolio range from September 2021 to November 2023. We currently have six pending patent applications with the USPTO relating to the Cox Patent Portfolio.QoS PatentsTransmission of Audio, Video and Data•U.S. Patent No. 6,574,242: Method For The Transmission And Control Of Audio, Video, And C Data Over A Single Network Fabric;•U.S. Patent No. 6,570,890: Method For The Transmission And Control Of Audio, Video, And Computer Data Over A Single Network Fabric Using Ethernet Packets;•U.S. Patent No. 6,539,011: Method For Initializing And Allocating Bandwidth In A Permanent Virtual Connection For The Transmission And Control Of Audio, Video, And Computer Data Over A Single Network Fabric; and•U.S. Patent No. 6,215,789: Local Area Network For The Transmission And Control Of Audio, Video, And Computer Data.The expiration date for the patents within the QoS family of patents is June 2019. In August 2008, we were issued European Patent No.1086556 titled "Integrated Voice and Data Communications over a Local Area Network" which covers the same technology as covered by our QoS Patents. The patent has issued in France, Germany, Spain, the United Kingdom, Ireland and Canada.Our future success is largely dependent upon our proprietary technologies, our ability to protect our intellectual property assets and to consummate license agreements with respect to our intellectual property assets as well as our ability to acquire additional intellectual property assets or enter into strategic relationships with third parties to license or otherwise monetize their intellectual property. The complexity of patent law and the inherent risk and uncertainty of litigation creates risks that our efforts to protect our intellectual property assets, or those of our strategic partners, may not be successful. We cannot be assured that our intellectual property assets will be upheld, or that third parties will not invalidate such intellectual property assets. In addition, we may not be able to (i) acquire additional intellectual property assets or successfully license such assets or (ii) successfully enter into strategic relationships with third parties to license or otherwise monetize their intellectual property.- 5 -Remote Power Patent- Market OverviewOur Remote Power Patent (U.S. Patent No. 6,218,930) relates to several technologies which describe a methodology for controlling the delivery of power to certain devices over an Ethernet network.The Institute of Electrical and Electronic Engineers (IEEE) is a non-profit, technical professional association of more than 420,000 members. The Standards Association of the IEEE is responsible for the creation of global industry standards for a broad range of technology industries. In 2000, at the urging of several industry vendors, the IEEE formed a task force to facilitate the adoption of a standardized methodology for the delivery of remote power over Ethernet networks which would insure interoperability among vendors of switches and terminal devices. On June 13, 2003, the IEEE Standards Association approved the 802.3af Power over Ethernet standard (the "Standard"), which covers technologies deployed in delivering power over Ethernet networks. The Standard provides for the Power Sourcing Equipment (PSE) to be deployed in switches or as standalone midspan hubs to provide power to remote devices such as wireless access points, IP phones and network-based cameras. The technology is commonly referred to as Power over Ethernet ("PoE"). In 2009, the IEEE Standards Association approved 802.3 at, a new PoE standard which, among other things, increased the available power for delivery over Ethernet networks. We believe that our Remote Power Patent covers several of the key technologies covered by both the 802.3af and 802.3at standards.Ethernet is the leading local area networking technology in use today. PoE technology allows for the delivery of PoE cables rather than by separate power cords. As a result, a variety of network devices, including IP telephones, wireless LAN Access Points, web-based network security cameras, data collection terminals and other network devices, are able to receive power over existing data cables without the need to modify the existing infrastructure to facilitate the provision of power for such devices through traditional AC outlets. Advantages such as lower installation costs, remote management capabilities, lower maintenance costs, centralized power backup, and flexibility of device location as well as the advent of worldwide power compatibility, led to PoE becoming widely adopted in networks throughout the world.PoE provides numerous benefits including quantifiable returns on investment. The cost of hiring electricians to pull power cables to remote locations used for access points or security cameras can rival or exceed the cost of the devices. Another key benefit is the need for Voice over IP power reliability in the face of power failures. Using PoE enables data center power supply systems to ensure ongoing power - a function that would be difficult and expensive to implement if each phone required AC outlets.These and other advantages such as remote management capabilities, lower maintenance costs, and flexibility of device location have resulted in PoE technology being widely adopted in networks throughout the world.- 6 -Mirror Worlds Patent Portfolio - Patents Covering Document Stream Operating SystemsOn May 21, 2013, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, acquired all of the patents previously owned by Mirror Worlds, LLC (which subsequently changed its name to Looking Glass LLC), consisting of nine issued United States patents and five pending applications (one of which was issued in November 2013) covering foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system. As consideration for the acquisition of the Mirror Worlds Patent Portfolio, we paid Mirror Worlds, LLC $3,000,000 in cash, and issued 5-year warrants to purchase an aggregate of 1,750,000 shares of our common stock (875,000 shares of our common stock at an exercise price of $1.40 per share and 875,000 shares of our common stock at an exercise price of $2.10 per share).In June 2014, we repurchased from Looking Glass LLC for $505,000 all of the aforementioned warrants to purchase an aggregate of 1,750,000 shares of our common stock. In November 2013, we received a new patent (U.S. Patent No. 8,572,139) from the USPTO entitled "Desktop Streamed-Based, Information Management System". This new patent issuance related to one of the pending applications acquired as part of the Mirror Worlds Patent Portfolio in May 2013.theour Mirror Worlds Patent Portfolio resulted from the work done by Yale University computer scientist, Professor David Gelernter, and his then graduate student, Dr. Eric Freeman, in the mid-1990s. Certain aspects of the technologies developed by David Gelernter were commercialized in their company's product offering called "Scopeware."“Scopeware.” Technologies embodied in Scopeware are now common in various computer and web-based operating systems. Professor Gelernter and Dr. Freeman each entered into consulting agreements with us asPortfolio.As part of the acquisition of the Mirror Worlds Patent Portfolio in 2013, we also entered into an agreement with Recognition Interlace,Interface, LLC ("Recognition"(“Recognition”), an entity that financed the commercialization of the Mirror Worlds Patent Portfoliopatent portfolio prior to its sale to Mirror Worlds, LLC and also retained an interest in the licensing proceeds of the Mirror Worlds Patent Portfolio.patent portfolio. Pursuant to the terms of the agreement with us, Recognition received (i) 5-year warrantswe are obligated to purchase 250,000 shares of our common stock at an exercise price of $1.40 per share, and (ii) 5-year warrants to purchase 250,000 shares of our common stock at an exercise price of $2.10 per share. also receives from us an interest in the net proceeds realized from our monetization of the Mirror Worlds Patent Portfolio as follows: (i) 10% of the first $125 million of net proceeds; (ii) 15% of the next $125 million of net proceeds; and (iii) 20% of any portion of the net proceeds in excess of $250 million. DuringSince entering into the year ended December 31, 2016 and December 31, 2015,agreement with Recognition received from us $2,909,000 and $218,000, respectively,in May 2013, we have paid Recognition an aggregate of $3,127,000 with respect to theirsuch net proceeds interest in the net proceeds realized from our Mirror Worlds Patent Portfolio.- 7 -In addition, in connection with our agreement with Recognition, AbacusPortfolio (no such payments were made during the years 2023 and Associates, Inc., an entity affiliated with Recognition, received a 60-day warrant to purchase 500,000 shares2022).our common stock at $2.05 per share (the "60 Day Warrant"). In accordance with the Recognition Agreement, as a result of the exercise of the 60 Day Warrant on July 22, 2013 and the Company's receipt of the aggregate exercise price of $1,250,000, we issued to Recognition additional 5-year warrants to purchase 250,000 shares of our common stock consisting of (i) warrants to purchase 125,000 shares of common stock at an exercise price of $1.40 per share and (ii) warrants to purchase 125,000 shares of common stock at an exercise price of $2.10 per share.In November and December 2016 and January 2017, Recognition exercised warrants to purchase an aggregate of 750,000 shares of our common stock resulting in gross proceeds to us of $1,312,500.Cox Patent Portfolio - Patents Related to Identification of Media Content on the InternetOn February 28, 2013, we acquired from Dr. Ingemar Cox four patents (as well as a pending patent application) pertaining to enabling technology for identifying media content on the Internet (the "Cox Patent Portfolio") for a purchase price of $1,000,000 in cash and 403,226 shares of our common stock. In addition, we are obligated to pay Dr. Cox 12.5% of the net proceeds generated by us from licensing, sale or enforcement of the Cox Patent Portfolio. Dr. Cox provides consulting services to us with respect to the Cox Patent Portfolio and future patent applications and assists our efforts to develop the patent portfolio.The Cox Patent Portfolio, currently consisting of seventeen (17) patents, relates to enabling technology for identifying media content on the Internet, such as audio and video, and taking further action to be performed based on such identification. The patents within our Cox Patent Portfolio are based on a patent application filed in 2000 and have patent terms extending into 2023. Since the acquisition of the Cox Patent Portfolio in February 2013, we have filed eighteen (18) additional patent applications twelve (12) of which have been issued and six of which are pending) relating to the Cox Patent Portfolio. The claims in these twelve (12) additional issued patents are generally directed towards systems of content identification and performing actions following therefrom.There has been significant growth in the uploading of media content to the Internetpower over the past decade. We plan on further developing the technology with Dr. Cox and pursuing licensing opportunities for these technologies.Dr. Cox is currently a Professor at the University of Copenhagen and University College London where he is head of its Media Futures Group. Dr. Cox was formerly a member of the Technical Staff at AT&T Bell Labs and a Fellow at NEC Research Institute. He is a Fellow of the ACM, IEEE, the JET (formerly lEE), and the British Computer Society and is a member of the UK Computing Research Committee. He was founding co-editor in chief of the lEE Proc. On Information Security and was an associate editor of the IEEE Trans. on Information Forensics and Security. He is co-author of a book entitled "Digital Watermarking" and its second edition "Digital Watermarking and Steganography". He is an inventor on forty-six (46) United States Patents.- 8 -QoS PatentsWe also own five additional patents as part of our QoS Patents, covering various methodologies that provide for allocating bandwidth and establishing QoS for delay sensitive data, such as voice, on packet data networks. QoS issues become important when data networks carry packets that contain audio and video which may require priority over data packets traveling over the same network. Covered within these patents are also technologies that establish bi-directional communications control channels between network-connected devices in order to support advanced applications on traditional data networks.Patent Acquisitions or Strategic RelationshipsWe continually seek to acquire additional intellectual property assets in order to develop, commercialize, license or otherwise monetize such intellectual property. We continually review opportunities to acquire or license additional intellectual property assets from individual inventors, technology companies and othersEthernet cables for the purpose of pursuing licensing opportunities relatedremotely powering network devices such as wireless access ports, IP phones and network based cameras. Our Remote Power Patent expired on March 7, 2020. Notwithstanding the expiration of the Remote Power Patent in March 2020, in October and November 2022, we asserted the patent in nine separate actions against ten defendants for damages prior to our existing intellectual property portfolioMarch 7, 2020 and have reached settlement agreements with eight of the defendants (see “Legal Proceedings” at pages 20 - 21 hereof).otherwise.as standalone midspan hubs to provide power to remote devices such as wireless access points, IP phones and network-based cameras. The technology is commonly referred to as Power over Ethernet (“PoE”). In addition, we may enter into strategic relationships with such parties to develop, commercialize, license or otherwise monetize their intellectual property. The form of such relationships may vary depending upon2009, the opportunity and may include,IEEE Standards Association approved 802.3at, a new PoE standard which, among other things, a strategic investment in such third party,increased the provisionavailable power for delivery over Ethernet networks. We believe that our Remote Power Patent covers several of financing to such third party or the formation of a joint venture forkey technologies covered by both the purpose of monetizing such third party's intellectual property assets.802.3af and 802.3at standards.-6- including manufacturers and users that utilize our intellectual property's proprietary technologies as well as any additional proprietary technologies covered by patents which may be acquired by us in the future. Our current patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as has been the case with our Remote Power Patent and Mirror Worlds Patent Portfolio. Our Remote Power Patent has generated licensing revenue in excess of $105,000,000$188,000,000 from May 2007 through December 31, 2016. As a result of2023. Since the acquisition of our Mirror Worlds Patent Portfolio in May 2013, we have received licensing and other revenue of $47,150,000 through December 31, 2016.2023. In addition, we may enter into third party strategic relationships with inventors and patent owners to assist in the development and monetization of their patent technologies.our Remote Power Patent and certain patents within our Cox Patent Portfolio, Mirror Worlds Patent Portfolio and Remote Power Patent (see "Legal Proceedings"“Legal Proceedings” at pages 27-3019 - 21 hereof). We have in the pastpreviously successfully asserted litigation with respect to protect our Remote Power Patent and our Mirror Worlds Patent Portfolio and have also been successful in defending proceedings at the USPTO challenging the validity of our Remote Power Patent and certain patents within our Cox Patent Portfolio (see "Legal Proceedings" at pages 27-30 of this Annual Report).Portfolio.-7- - 9 -Licensing - Remote Power PatentTo date we have entered into twenty-four (24) license agreements with respect to our Remote Power Patent. Sixteen (16) of the twenty-four (24) license agreements are royalty bearing (either on a quarterly or monthly basis) for the life of the Remote Power Patent (March 2020). Licensees ofinclude major data network equipment manufacturers and others as follows:● Cisco Systems, Inc.*● Motorola Solutions, Inc.*● Microsemi Corporation*● NEC Corporation*● Dell, Inc.*● Polycom, Inc.*● Extreme Networks, Inc.*● Adtran, Inc.● Samsung Electronics Co., Ltd● Huawei Technologies Co., Ltd.● Netgear, Inc.*● Allied Telesis, Inc.*● Transition Networks, Inc.*● Enterasys Networks, Inc.● GarretCom,Inc.*● Foundry Networks, Inc.● Shoretel,Inc.*● SEH Technology, Inc.*● D-Link Corporation and D-Link Systems, Inc.*● Buffalo Technology (USA), Inc.*● BRG Precision Products, Inc.*● Sony Corporation● Alcatel-Lucent USA/Alcatel-Lucent Holdings, Inc.● ALE USA Inc. __________________________* Indicates licensee has an obligation pursuant to its license agreement with the Company to pay us ongoing royalties on a quarterly or monthly basis based on its salesresult of PoE products.Cisco License Agreement and July 2010 SettlementIn July 2010, we settled our patent litigation pending in the United States District Court for the Eastern District of Texas, Tyler Division, 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. As part of the settlement, Adtran, Cisco, Enterasys, Extreme Networks and Foundry Networks each entered into a settlement agreement with us and entered into non-exclusive licenses for our Remote Power Patent (the "Licensed Defendants"). Under the terms of the licenses, the Licensed Defendants paid us aggregate payments of approximately $32 million upon settlement and also agreed to- 10 -license our Remote Power Patent for its full term, which expires in March 2020. In accordance with our Settlement and License Agreement, dated May 25, 2011 (the "Agreement"), Cisco is obligated to pay us royalties (which began in the first quarter of 2011) based on its sales of PoE products up to maximum royalty payments per year of $9 million per year beginning in 2016 ($8 million through 2015) for the remaining term of the patent (March 2020). The royalty payments are subject to certain conditions including the continued validity of certain claims our Remote Power Patent, and the actual royalty amounts received may be less than the cap stated above. Under the terms of the Agreement, if we grant other licenses with lower royalty rates to third parties (as defined in the Agreement), Cisco shall be entitled to the benefit of the lower royalty rates provided it agrees to the material terms of such other license. Due to our annual royalty rate structure with Cisco which includes declining rates as the volume of PoE product sales increase during the year, royalties from Cisco are anticipated to be highest in the first quarter of the calendar year and decline for each of the remaining calendar quarters of the year. Under the terms of the Agreement, we have certain obligations to Cisco and if we materially breach such terms, Cisco will be entitled to stop paying royalties to us. This would have a material adverse effect on our business, financial condition and results of operations.Licensing – Mirror Worlds Patent PortfolioWe have entered into fully paid non-exclusive license agreements with respect to our Mirror Worlds Patent Portfolio with Apple Inc. and Microsoft Corporation pursuant to which we received aggregate licensing revenue of $29,650,000.On July 8, 2016, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, entered into a settlement agreement with Apple Inc. in connection with litigation in the United States District Court for the Eastern District of Texas for infringement of onesettlements constituted 100% of our patents (U.S. Patent No. 6,006,227 (the "'227 Patent")) included within our Mirror Worlds Patent Portfolio. Under the terms of the settlement agreement, Apple received a fully paid non-exclusive license to our '227 Patentrevenue for its full term (which expired in June 2016), along with certain rights to other patents in our patent portfolio. We received $25,000,000 from Apple for the settlement and the non-exclusive license.On November 6, 2015, we entered into a settlement with Microsoft with respect to litigation pending in the United States District Court for the Eastern District of Texas for infringement of our '227 Patent. Under the terms of the settlement, Microsoft (including its customers) received a fully paid non-exclusive license to our Mirror Worlds Patent Portfolio for their remaining life in consideration for a lump sum payment of $4,650,000 to us. In addition, as customers of Microsoft the pending litigation was also dismissed against Hewlett-Packard Corporation, Lenovo Group, Ltd, Lenovo (United States), Inc., Dell Inc., Best Buy Co., Inc., Samsung Electronics of America, Inc. and Samsung Telecommunications America, LLC.Professional Liability SettlementOn April 22, 2016, Mirror Worlds Technologies, LLC, ("MWT"), our wholly-owned subsidiary, entered into an agreement pursuant to which it received $17,500,000 in connection with the settlement of a professional liability claim relating to services rendered in 2008-2010. MWT acquired the claim in May 2013 as part of its acquisition of its Mirror Worlds Patent Portfolio.- 11 -Significant LicenseesFor the year ended December 31, 2016, three licensees2023, of which four defendants constituted an aggregate of 83% of our revenue (exclusive of non-licensing revenue from our professional liability settlement – see Note K to our consolidated financial statements included herein) including Apple Inc. (53%), Cisco Systems, Inc. ("Cisco") (17%) and Dell Inc. (13%). For the year ended December 31, 2016, Cisco constituted 76% of our ongoing royalty revenue from royalty bearing license agreements. For the year ended December 31, 2015, Cisco accounted for 51% of our revenue and Microsoft Corporation accounted for 28% of our licensing revenue. For the year ended December 31, 2015, Cisco constituted 76% of our ongoing royalty revenue from royalty bearing license agreements. It is anticipated that one or a few of our licensees will continue to constitute a significant portion90% of our revenue for the foreseeable future.Legal Representation – Contingency Fees/Patent LitigationRuss, August & Kabat provides legal servicessuch year.us with respect to our pending patent litigations filed in April 2014 and December 2014 against Google Inc. and YouTube LLC in the United States District Court for the Southern District of New York relating to certain patents within our Cox Patent Portfolio (see "Legal Proceedings'' at pages 29-30 of this Annual Report). The terms of our agreement with Russ, August & Kabat provide for legal fees onbe derived from a full contingency basis ranging from 15% to 30% of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. We are responsible for all of the expenses incurred with respect to this litigation.Dovel & Luner, LLP provided legal services to us with respect to our patent litigation commenced in May 2013 against Apple, Inc., Microsoft, Inc. and other major vendors of document system software and computer systems in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of U.S. Patent No. 6,006,227 which is part of our Mirror Worlds Patent Portfolio (see Note J[4] to our consolidated financial statements included in this Annual Report). The terms of our agreement with Dovel & Luner LLP provide for legal fees on a contingency basis ranging from 25% to 40% of the net recovery (after deduction of expenses) depending upon the stage of proceeding in which a result (settlement or judgment) is achieved, subject to certain agreed upon contingency fee caps depending upon the amount of the net recovery. We paid a certain portion of the expenses incurred with respect to the litigation. For the year ended December 31, 2016, we incurred contingent legal fees of $9,567,000 and expenses of $1,082,000 to Dovel & Luner with respect to the litigation. For the year ended December 31, 2015, we incurred contingent legal fees of $1,439,000 and expenses of $862,000 to Dovel & Luner with respect to the litigation.- 12 -Dovel & Luner, LLP provides legal services to us with respect to our pending patent litigation filed in September 2011 against sixteen (16) data networking equipment manufacturers in the United States District Court for the Eastern District of Texas, Tyler Division, relating to our Remote Power Patent (see Note J[1] to our consolidated financial statements included in this Annual Report). The terms of our agreement with Dovel & Luner LLP essentially provide for legal fees on a full contingency basis ranging from 12.5% to 35% of the net recovery (after deduction for expenses) depending on the stage of the proceeding in which a result (settlement or judgment) is achieved. We are responsible for a certain portion of the expenses incurred with respect to the litigation. During the year ended December 31, 2016 and December 31, 2015, we incurred legal fees and expenses of $4,626,000 and $745,000, respectively, to Dovel & Luner LLP with respect to this matter.Dovel & Luner, LLP also provided legal services to us with respect to our litigation settled in July 2010 against Cisco and several other major data networking equipment manufacturers relating to our Remote Power Patent (see Note J[2] to our consolidated financial statements included in this Annual Report). The terms of our agreement with Dovel & Luner, LLP provided for us to pay legal fees of up to a maximum aggregate cash payment of $1.5 million plus a contingency fee of up to 24% (based on the settlement being achieved at the trial stage). Accordingly, we have a continuing obligation to pay Dovel & Luner LLP a contingency fee of 24% with respect to the ongoing royalties we receive from Cisco. During the year ended December 31, 2016 and December 31, 2015, we incurred total contingency fees and expenses of $2,117,000 and $2,157,000, respectively, to Dovel & Luner, LLP with respect to this matter (which included legal fees of local counsel).over the past several years and there has been a material increase in the number of companies seeking to acquire intellectual property assets from third parties or to provide financing to third parties seeking to monetize their intellectual property. Entities including, among others, Acacia Research Corporation (NASDAQ:ACTG), Intellectual Ventures, WiLanWI-LAN Inc. (NASDAQ:WILN), VirnetX Holdings Corp.Corporation (NYSE MKT:VHC), Marathon Patent Group, Inc. (NASDAQ:MARA) and RPX Corporation, (NASDAQ:RPXC), seek to acquire intellectual property or partner with third parties to license or enforce intellectual property rights. In addition, we also compete with strategic corporate buyers with respect to the acquisition of intellectual property assets. It is expected that others will enter this market as well. Many of these competitors have significantly greater financial and human resources than us. Gerchen Keller Capital, LLC, Parabellum Capital LLC and BethamBentham Capital LLC, 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.- 13 -The industries and markets covered by our intellectual property are characterized by intense competition and rapidly changing business conditions, customer requirements and technologies. Other companies may develop competing technologies that offer better or less expensive alternatives to PoE (covered by our Remote Power Patent) or the technologies covered by our other intellectual property assets. Such competing technologies may adversely impact our licensing revenue. Moreover, technological advances or entirely different approaches developed by one or more of our competitors or adopted by various standards groups could render our Remote Power Patent and our other intellectual property assets obsolete, less marketable or unenforceable.U.S. Patent and Trademark OfficeUSPTO or the courts that impact the patent application process, the patent enforcement process or the rights of patent holders, these changes could negatively affect our business, financial condition and results of operations. Certain legislation, regulations,, and rulings by the courts and actions by the U.S. Patent and Trademark OfficeUSPTO have materially increased the risk and cost of enforcement of patents. United Statespatents. U.S. patent laws were amended by the Leahy-Smith America Invents Act, referred to as the "America“America Invents Act"Act”, which became effective on March 16, 2013. The America Invents Act includesincluded a number of significant changes to U.S. patent law. In general, it attempts to addressaddressed 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, including Inter Partes Review (IPR) and Covered Business Method Review (CBM) proceedings which provide third parties a timely and cost effective alternative to district court litigation to challenge the validity of an issued patent. The America Invents Act and its implementation has increased the uncertainties and costs surrounding the enforcement of patent rights which could have a material adverse effect onhas made it more difficult to successfully enforce our business, financial condition and results of operations.patents.-8- -9- 445 Park65 Locust Avenue, Suite 912,Third Floor, New York, New York 10022Canaan, Connecticut 06840 and our telephone number is (212) 829-5770.- 14 -Internet website address is www.network-1.com. You may obtain, free of charge on our Internet website, copies of our annual reportreports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, Section 16 filings and amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information we post on our website is intended for reference purposes only; none of the information posted on our website is part of this Annual Report or incorporated by reference herein.Internet address of the SEC'sSEC’s Internet site is http://www.sec.gov.As of March 15, 2017, we had one part-time employee and two consultants providing monthly services to us.- 15 -We operate in a changing environment that involves numerous knownunknownfinancial results are subject to various material risks and uncertainties, thatincluding those described below, which could materially adversely affect our business, financial condition, results of operations, cash flow, and the trading price of our common stock. You should carefully consider the material risks and uncertainties described below in addition to the other information set forth in this Annual Report on Form 10-K, including, but not limited to, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The material risks described below are not the only risks we face. Additional risks that we do not know of or that we currently believe are immaterial may also impair our business operations. The following highlights someIf any of the factors that havefollowing risks actually occur, our business, financial condition, results of operations and cash flow could be materially adversely affected, and in the futuretrading price of our common stock could affect, our operations.decline significantly.-10- Businesssuccessrevenue is dependent upon our ability to protect our patents.Our success is substantially dependent upon our proprietary technologies and our ability to protect our intellectual property rights.litigation outcomes. We currently own thirty-three (33) patents that relate to various technologies including (i)have pending litigation involving our Cox Patent Portfolio and Mirror Worlds Patent Portfolio as well as our Remote Power Patent covering the delivery of power to certain devices over PoE networks, (ii) our Mirror Worlds Patent Portfolio relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system, (iii) our Cox Patent Portfolio relating to identification of media content, and (iv) our QoS patents covering the transmission of audio, voice and data in order to achieve high quality of service (QoS) over computer and telephony networks. We have successfully defended several challenges to certain claims of our Remote Power Patent and our Cox Patent Portfolio at the USPTO (see "Legal Proceedings"“Legal Proceedings” at pages 27-3019 - 21 hereof) However, the validity of our Remote Power Patent and certain patents within our Cox Patent Portfolio are currently being challenged in patent infringement litigation pending in the courts (see "Legal Proceedings" at pages 27-30 of this Annual Report). We rely upon our patents and trade secret laws, non-disclosure agreements with our employees, consultants and third parties to protect our intellectual property assets. The complexity of patent and common law and the uncertainty of the outcome of litigation create risk that our efforts to protect our intellectual property assets may not be successful. We cannot assure you that our patents will be upheld or that third parties will not invalidate our patent assets. If our intellectual property assets are not upheld, particularly our Remote Power Patent, such an event would have a material adverse effect on our business, financial condition and results of operations as our revenue stream is largely dependent upon the continued validity of our Remote Power Patent.If we are unsuccessful in legal proceedings involving our intellectual property, including if any of the claims of defendants to invalidate our patents are successful, such a result would have a material adverse effect on our business.We currently have several litigations pending in the courts against parties whom we believe require a license to our patents including (i) litigation relating to our Remote Power Patent against four data networking equipment manufacturers and (ii) two litigations against Google and YouTube with respect to certain patents within our Cox Patent Portfolio. In addition, in the future we may commence patent litigation against third parties alleging infringement of our patents. We are also likely to face future proceedings (as we have in the past) at the United States Patent and Trademark Office ("USPTO") challenging the validity of our intellectual property assets. Patent litigation is inherently risky and theuncertain 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. The defendants in our pending litigations are all large, well financed companies with- 16 -substantially greater resources than us. We may not be successful in such litigation and the outcome of such litigation could be harmful to us. In addition, it is customary for defendants in patent litigation to assert claims seeking to invalidate our patents including commencement of proceedings at the USPTO. unsuccessful in enforcing and validatingunable to protect our patents, and/or if third party claims against us seeking to invalidateour business would be negatively impacted.successful, theyvalid, 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 ablesubject to obtain injunctiveUSPTO post-grant inter partes review proceedings (IPRs) which could result in all or other equitable relief, which effectively could blocka part of our patents being invalidated or the claims being limited. Unfavorable outcomes in our litigation or IPRs may reduce our ability to licenseenforce our patents or have other adverse consequences. If we are unable to protect our patents or otherwise capitalize onrealize value for them, our proprietary technologies. Furthermore, then existing licenseesbusiness would be negatively impacted.patents will no longer be obligatedsubstantial investment in ILiAD is uncertain.pay royalties to us. Successful litigation against us resulting in a determination that our patents, particularly our Remote Power Patent, are not valid or enforceable, and/or that third parties do not infringe, wouldsubstantial risks.a material adverse effect on our business, financial condition and results of operations.We dependbeen dependent upon our Remote Power Patent which expires in March 2020 for a significant portion of our revenue and profit.licensing revenue for us in excess of $105,000,000$188,000,000 from May 2007 through December 31, 2016. We currently have sixteen (16) royalty bearing license agreements for2023. Revenue from our Remote Power Patent pursuant to which licensees have an obligation to pay us royalties onconstituted 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 monthly or quarterly basis for the liferesult of the patent (which expires March 2020). Such royalty bearing licenses include, among others, agreements with Cisco Systems, Inc., Dell, Inc., Microsemi Corporation, Netgear, Inc., Motorola Solutions, Inc., NEC Corporation, Polycom, Inc. and ShoreTel Inc. The obligation of licenseesexpiration of our Remote Power Patent on March 7, 2020, we no longer receive revenue from such patent for any period subsequent to continuethe expiration date. Our failure to make royalty payments to us is contingent upon the continued validity of certain claims ofsuccessfully monetize our Remote Power Patent. The validity and infringement of our Remote Power Patent is currently at issue in our pending litigation against four data equipment manufacturers in the United States District Court for the Eastern District of Texas (see "Legal Proceedings" at pages 27-28 hereof). In the event certain claims of our Remote Power Patent are determined to be invalid in such pending litigation, licensees of our Remote Power Patent would have no further obligation to make royalty payments to us whichother patents would have a material adverse effectnegative impact on our business, financial condition and resultsoperating results.-11- operations. In addition, upon the expiration of the Remote Powerour pending or future litigation which would have a negative impact on our business.in March 2020, licensees ofPortfolio against Google and YouTube, who are challenging these patents and we are also asserting our Remote Power Patent willagainst Ubiquity Inc. and Honeywell International Inc. We have no further obligationsappealed to pay us royalties. Such royalty bearing licenses consistingthe Federal Circuit the District Court decision granting Facebook (Meta Platforms, Inc.), summary judgment of quarterlynon-infringement and dismissing our case involving certain patents within our Mirror Worlds Patent Portfolio (see “Legal Proceedings” at pages 19 - 20 hereof). In addition, our M2M/IoT Patent Portfolio and HFT Patent Portfolio are not currently being asserted. We may not have success in enforcing or monthly royalties resulted in $10,788,000 of revenue in 2016. Accordingly, if we are unable to enter into royalty bearing license agreements by March 2020 with respect to otherdefending our patents, owned by us, we will receive no regular ongoing royalty revenue.have achieved to date from licensing our Remote Power Patent (twenty-four (24)(twenty-eight (28) license agreements which have generatedand in excess of $105,000,000 in revenue)$188,000,000 of revenue through December 31, 2023), the revenue we have generated from our Mirror Worlds Patent Portfolio ($47,150,000) and establishing a patent portfolio currently consisting of thirty-threeone hundred (100) U.S. patents and fifteen (15) foreign patents as well as our cash position, we believe we have the expertise and sufficient- 17 -intellectual propertypatent monetization market and to enter strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property. However, we may not be able to acquire additional intellectual property or, if acquired, we may not achieve material revenue or profit from such intellectual property. Acquisitions of patent assets are competitive, time consuming, complex and costly to consummate.patents. Our strategy is to focus on acquiring high quality patent assets which management believes have the potential for significant licensing opportunities. Theseopportunities. 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.We are largely dependent upon our license agreement with Cisco for a significant portion of our revenue. The loss of Cisco as a licensee would have a material adverse effect on our business.Cisco Systems, Inc. ("Cisco) accounted for 17% and 87%of our licensing revenue for the years ended December 31, 2016 and December 31, 2015, respectively. In addition, Cisco accounted for 76% and 71% of our revenue from royalty bearing license agreements for the years ended December 31, 2016 and December 31, 2015, respectively. In accordance with our Settlement and License Agreement, dated May 25, 2011, with Cisco (the "Agreement"), Cisco is obligated to pay us royalties on a quarterly basis (which began in the first quarter of 2011) based on its sale of PoE products in the United States, up to the maximum royalties per year of $9 million ($8 million per year through 2015) for the remaining term of our Remote Power Patent (March 2020). The royalty payments are subject to certain conditions including the continued validity of certain claims of our Remote Power Patent. The actual royalty payments may be less than the cap stated above. Under the terms of the Agreement, if we grant other licenses with lower royalty rates to third parties (as defined in the Agreement), Cisco shall be entitled to the benefit of the lower royalty rates provided it agrees to the material terms of such other license. Under the terms of the Agreement, we have certain obligations to Cisco and if we materially breach such terms, Cisco will be entitled to stop paying royalties to us. Furthermore, if certain claims of our Remote Power Patent are declared invalid, Cisco would have no further obligation to pay us royalties. The aforementioned event would have a material adverse effect on our business, financial condition and results of operations.- 18 -We may not be successful in enforcing or defending our Cox Patent Portfolio or generating additional revenue from our Mirror Worlds Patent Portfolio.We acquired our Cox Patent Portfolio in 2013, which currently consists of seventeen (17) patents. We have not yet achieved any revenue from our Cox Patent Portfolio. We are currently enforcing patents within our Cox Patent Portfolio against Google and YouTube, who are challenging these patents (see "Legal Proceedings" at pages 29-30 hereof). We may not be successful in enforcing or defending our Cox Patent Portfolio, which would have a negative impact on our future revenue growth and profits.In addition, while we have achieved revenue of $47,150,000 related to our Mirror Worlds Patent Portfolio to date, it is uncertain whether we will be able to generate additional revenue from this patent portfolio.A limited number of our licensees account for a significant portion of our licensing revenue.For the year ended December 31, 2016, three licensees constituted 83% of our licensing revenue including Apple, Inc. (53%), Cisco Systems, Inc. (17%) and Dell, Inc. (13%). For the year ended December 31, 2015, Cisco accounted for 51% of our licensing revenue and Microsoft accounted for 28% of our licensing revenue. It is anticipated that a few licensees will continue to constitute a significant portion of our revenue for the foreseeable future. To the extent sales of PoE products by our significant licensees of our Remote Power Patent are adversely affected our revenues will be significantly impacted.Legislation, regulations, court rulings and actions by the U.S. Patent and Trademark Office have materially increased the risk and cost of enforcement of patents and may continue to do so in the future.Legislation, regulations, court rulings and actions by the U.S. Patent and Trademark Office have materially increased the risk and cost of enforcing patents. United States 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 includes a number of significant changes to U.S. patent law. In general, it attempts to address 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, including Inter Partes Review (IPR) and Covered Business Method Review (CBM) 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 changes the way that parties may be joined in patent infringement actions, increasing 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 has increased the uncertainties and costs surrounding the enforcement of patent rights, which could have a material adverse effect on our business, financial condition and results of operations.- 19 -In addition, changes in patent law could adversely impact our business. Such changes may not be advantageous to us and may make it more difficult to obtain adequate patent protection to enforce our patents. Increased focus on the growing number of patent lawsuits, particularly by non-practicing entities (NPEs), may result in legislative changes which increase the risk and costs of asserting patent litigation.Our pending patent infringement litigations in the courts involving our Remote Power Patent and the Cox Patent Portfolio are time consuming and costly.We have a pending litigation in the United States District Court for the Eastern District of Texas, Tyler Division against four data networking equipment manufacturers for infringement of our Remote Power Patent (commenced in September 2011 and currently scheduled for trial in November 2017). In April 2014 and December 2014, we initiated patent litigation in the United States District Court for the Southern District of New York against Google and YouTube for infringement of several of our patents within our Cox Patent Portfolio. The litigation pertaining to our Cox Patent Portfolio is currently stayed pending appeal of Final Written Decisions of the Patent Trial and Appeal Board of the USPTO to the United States Court of Appeals for the Federal Circuit (see "Legal Proceedings" at pages 29-30 of this Annual Report).While we have contingent legal fee arrangements with our patent litigation counsel in each litigation (excluding proceedings at the USPTO), we are responsible for 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.We face intense competition to acquire intellectual property and enter into strategic relationships.With respect to our ability to acquire additional intellectual property or enter into strategic relationships with third parties to monetize their intellectual property, we face considerable competition from other companies, many of which have significantly greater financial and other resources than we have. The patent licensing and enforcement business has grown significantly over the past several years and there has been an increase in the number of companies seeking to acquire intellectual property rights from third parties. Companies including, among others, Acacia Research Corporation (NASDAQ:ACTG), Intellectual Ventures, WiLan Inc. (NASDAQ:WILN), VirnetX Holdings Corp. (NYSE MKT:VHC), Marathon Patent Group, Inc. (NASDAQ:MARA) and RPX Corporation (NASDAQ:RPXC) seek to acquire or partner with third parties to license or enforce intellectual property rights. It is expected that others will enter this market as well. Many of these competitors have significantly more financial and human resources than us.We may also compete with strategic corporate buyers, litigation funding firms such as Burford Capital Limited, Fortress Investment Group, Parabellum Capital LLC and Bentham Capital LLC, 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.- 20 -Our quarterly and annual operating and financial results and our revenue are difficult to predict and are likely to fluctuate significantly in future periods.Our quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period to period. Our revenue and net income was $65,088,000 and $23,223,000, respectively, for the year ended December 31, 2016 as compared to $16,565,000 and $4,107,000, respectively, for the year ended December 31, 2015. Our revenue and net income was $12,309,000 and $1,766,000, respectively, for the year ended December 31, 2014 and $8,017,000 and $1,016,000 for the year ended December 31, 2013. Accordingly, our revenue, net income and results of operations may fluctuate as a result of a variety of factors that are outside our control including, but not limited to, 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, the timing and our ability to achieve successful outcomes from current and future patent litigation, and the timing and our ability to achieve revenue from future strategic relationships.-12- need to pursue litigation to protect our patent rights as we have done in the past (see "Legal Proceedings" at pages 27-30 hereof). Such litigation is typically protracted and complex. The costs are typically substantial, and the outcomes are unpredictable. In addition, the Federal courts are becoming more crowded andwidely 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, is taking longer.("PHC"(“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC'sPHC’s undistributed personal holding company income ("PHC Income"(“UPHCI”), which means, in general, taxable income subject to certain adjustments).adjustments and reduced by certain distributions to shareholders. For a corporation to be classified as a PHC, it must satisfy two teststests: (1) that (i) more than 50% in value of its outstanding shares must be owned directly or indirectly by 5five or fewer individuals at anytimeany time during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the "Ownership Test"“Ownership Test”) and (ii)(2) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities and rents (the "Income Test"“Income Test”). During the second half of 2016 through the date of this Annual Report (as well as prior years),2023, based on available information concerning our shareholder ownership, we did not meetsatisfy the Ownership Test. DueIn addition, we did not satisfy the Income Test for 2023. Thus, we were not a PHC for 2023. However, we may be determined to be a PHC in the significant number of shares held by our largest shareholders,future. If we will continually assess our share ownership to determine whether it meets the Ownership Test. If the Ownership Test were met and the income generated by us were determined to constitute "royalties" within the meaning of the Income Test, we would constitutebe a PHC andin 2024 or any future year, we would be subject to aan additional 20% tax on the amount of any PHC Income thatour UPHCI. In such event, we do not distributemay issue a special cash dividend to our shareholders.- 21 -Dependenceshareholders in an amount equal to the UPHCI rather than incur the 20% tax.July 14, 2016,March 22, 2022, we entered into a new four year employment agreement with Mr. Horowitz pursuant to which he continues to serve as our Chairman and Chief Executive Officer for a five year term.Officer. The loss of the services of Mr. Horowitz would have a material adverse effect on our business and prospects. We do not maintain key-man life insurance on the life of Mr. Horowitz.-13- Itdifficult for us to verify royalty amounts owed to us under our license agreements with our licensees including Cisco,joined in patent infringement actions, and this may cause us to lose potential revenue.The standard terms of our royalty bearing license agreements require our licensees to report the sale of licensed products and report this data to us in most cases on a quarterly basis. Although our standard license terms give us the right to audit books and records of our licensees to verify this information, audits can be expensive, time consuming, incomplete and subject to dispute. From time to time, we may audit certain of our licensees (as we did with Cisco in 2014 resulting in additional licensing revenue of $3,281,000) to verify independently the accuracy of the information contained in their royalty reports in an effort to decreaseincreased 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.willbelieve 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 receiveinfringe on our intellectual property. As AI evolves, it may accelerate the revenuepace at which our patents become obsolete or irrelevant, reducing our ability to whichmonetize 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.-14- entitled underunable to adapt to the termsrapid changes brought about by AI and ML technologies, and our ability to enforce our patent rights is consequently diminished.license agreements. However, we cannot give assurances that these audits will be frequent enough and/or effective to that end. There is no certainty that we will receive additional revenue from an auditFacebook (Meta Platforms, Inc.) litigation) and in some cases there may be an over-payment which will be credited against future royalties under our license agreements.Our current licenses for our Remote Power Patent may not continue(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 result in significant revenuebe material. In addition, the time and do not necessarily mean we will achieve additional license agreements.For the year ended December 31, 2016 and December 31, 2015, we achieved revenue of $22,588,000 and $11,915,000 from royalty bearing license agreements for our Remote Power Patent, respectively. We currently have royalty bearing license agreements for our Remote Power Patent with sixteen (16) licensees including, among others, Cisco Systems, Inc., Dell Inc., Netgear, Inc., Microsemi Corporation, Motorola Solutions, Inc., NEC Corporation, ShoreTel Inc. and Polycom, Inc., pursuant to which such parties are obligated to pay us on-going royalties on a monthly or quarterly basis for the lifeeffort required of our Remote Power Patent (March 2020). Notwithstanding such royalty bearing license agreements, wemanagement to effectively pursue these litigations is likely to be significant and it may not continueadversely affect other business opportunities.achieve significant revenue from such license agreements. Our failure to continue to achieve significant revenue from our existing license agreements would have a material adverse effect on our business, financial conditionacquire intellectual property and results of operations. In addition, we may not be able to consummate additional licensing agreements resulting in material revenue withenter into strategic relationships.Remote Power Patent.- 22 -Our current licensing revenueability to acquire additional intellectual property or enter into strategic relationships with third parties to monetize their intellectual property, we face considerable competition from royalty bearing license agreements depends upon the continued viabilityother companies, many of the PoE market.Ethernet is the leading local area networking technology in use today. PoE technology allows for the delivery of power over Ethernet ("PoE") cables rather than by separate power cords. As a result a wide variety of network devices, including IP telephones, wireless LAN access points, web-based network security cameras, data collection terminalswhich have significantly greater financial and other network devices are ableresources than we have. We face a number of competitors in the patent licensing and enforcement business seeking to receive power over existing data cables. The failureacquire intellectual property rights from third parties. Many of the PoE market to remain viable wouldthese competitors have a material adverse effect onsignificantly more financial and human resources than us.revenue for our Remote Power Patent which is currently our sole patent generating regular on-going licensing revenue.opportunities. Many of these competitors have greater financial resources and human resources than us.-15- PoE and the other technologies covered by our intellectual property. Moreover, technological advances or entirely different approaches developed by other companies or adopted by various standards groups could render our Remote Power Patent and our other patents obsolete, less marketable or unenforceable.affecteffect on our litigation strategies. This information may enable our litigation opponents to develop effective litigation strategies that are contrary to our interests.- 23 -Risks Related to Our Common StockMarchFebruary 15, 2017, 2024, our executive officers and directors beneficially owned 30.8%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.-16- MKT LLCAmerican exchange if we fail to comply with continued listing standards.MKT LLC marketAmerican exchange under the symbol "NTIP"“NTIP”. If we fail to meet any of the continued listing standards of the NYSE MKT LLC,American exchange, our common stock could be delisted from NYSE MKT LLC.delisted. Such delisting could adversely affect the price and trading (including liquidity) of our common stock.The significant number of optionsrestricted stock units outstanding may adversely affect the market price for our common stock.As of March 15, 2017, there were outstanding options to purchase an aggregate of 2,235,000 shares of our common stock at exercise prices ranging from $0.83 to $2.34. In addition, we have outstanding restricted stock units which if fully vested resultassumptions used in the issuancepreparation of an additional 930,500 sharesfinancial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition, and operating results.common stock. To the extent that outstanding options are exercised and restricted stock units become vested, existing stockholder percentage ownership will be diluted and any salesfinancial statements in accordance with accounting principles generally accepted in the public marketUnited States involves making estimates, judgments and assumptions that affect reported amounts of the common stock underlying such options or restricted stock units may adversely affect prevailing market prices for our common stock.We may seekassets (including intangible assets), liabilities and related reserves, revenues, expenses, and income. Estimates, judgments, and assumptions are inherently subject to raise additional funds, finance intellectual property acquisitions or develop strategic relationships by issuing capital stock that would dilute your ownership.We may elect to raise financing by issuing equity securities, which, if conductedchange in the future, would materially reduceand any such changes could result in corresponding changes to the percentage ownershipamounts of our existing stockholders. Furthermore, any newly issued securitiesassets, liabilities, expenses, and income. Any such changes could have rights, preferencesa material adverse effect on our business, financial condition, and privileges senior to those of our existing common stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our common shares. The holders of any debt securities or instruments we may issue could have rights superior to the rights of our common stockholders.- 24 -Future sales of shares of our common stock may cause the prevailing market price of our shares to decline and could harm our ability to raise additional capital.We have previously issued a substantial number of shares of restricted common stock, which are eligible for resale under Rule 144 of the Securities Act of 1933, and may become freely tradable. We have also registered a substantial number of shares including shares that are issuable upon the exercise of options and pursuant to restricted stock units. In addition, if holders of options choose to exercise their purchase rights or restricted stock units vest, and such parties sell shares of common stock in the public market or if holders of currently restricted common stock or registered common stock sell such shares in the public market, or attempt to publicly sell such shares in a short time period, the prevailing market price for our common stock may decline. Such decline in the price of our common stock may also adversely affect our ability to raise additional capital.could discourage a takeover and adversely affect existing stockholders.boardBoard of directorsDirectors to issue up to 10,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our boardBoard of directors,Directors, without further action by stockholders, and may include, among other things, voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions, any of which could adversely affect holders of our common stock. Although there are currently no shares of preferred stock outstanding, future holders of preferred stock may have rights superior to our common stock and such rights could also be used to restrict our ability to merge with or sell our assets to third parties."anti takeover"“anti-takeover” provisions of Section 203 of the Delaware General Corporation Law, which could prevent us from engaging in a "business combination"“business combination” with a 15% or greater stockholder for a period of three years from the date such person acquired that status unless appropriate board or stockholder approvals are obtained.price.price. These provisions may also limit the ability of stockholders to delay, deter or prevent a change of control, or approve transactions that they may deem to be in their best interests.interests.-17- - 25 -·• the outcome of our legal proceedings;litigation against Google and YouTube involving certain patents within our Cox Patent Portfolio;·• our ability to continue to successfully enforce and/or defend our Remote Power Patent;·our ability to continue to receive material revenue from licensees of our Remote Power Patent;·our ability to continue to enter into new license agreements with third parties with respect to our Remote Power Patent;·our ability tofurther develop, license and monetize our CoxM2M/IoT Patent Portfolio;·• our ability to further develop, license orand monetize our Mirror WorldsHFT Patent Portfolio;·• our ability to achieve a successful outcome of our investment in ILiAD; • our ability to acquire additional intellectual property; ·• our ability to continue to achieve material revenue and profits;·our ability to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property; ·• variations in our quarterly and annual operating results; ·• our ability to continue to pay cash dividends; • our ability to raise capital whenif needed;·• sales of our common stock; ·• technology changes; ·• legislative, regulatory and competitive developments; and ·• economic and other external factors. -18- We currently lease office spaceYork CityCanaan, Connecticut, where we lease approximately 2,000 square feet of office space at a base rent of $3,700$5,500 per month underpursuant to a lease amendment, dated May 1, 2022, which term expires on May 31, 2017.April 30, 2025. On June 16, 2011,September 29, 2023, we entered into a four-year lease commencing July 18, 2011 for offices in New Canaan, Connecticut. In accordance withexercised our early termination right under the lease we paid a base rent of $6,400 per month for the first two years, $6,800 per month for the third year and $7,000 per month for the fourth year. Effective August 1, 2015, we entered into an agreement to extendterminate the lease for a four year period (expiring September 30, 2019) at a base rent of $7,000 per month for the first year (increasing $100 per month each year)on December 31, 2023, which has been extended to March 31, 2024. We believe that our office facility is subjectsuitable and appropriate to annual adjustments to reflect increases in real estate taxes and operating expenses. Mirror Worlds Technologies, LLC,support our wholly-owned subsidiary, entered into a one year lease (expiring April 30, 2017), at a base rent of $620 per month, to rent office space consisting of approximately 420 square feet in Tyler, Texas.- 26 -Remote Power Patent Legal ProceedingsIn September 2011, we initiated patent litigation against sixteen (16) data networking equipment manufacturers (and affiliated entities) 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 affiliated 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. We seek monetary damages based upon reasonable royalties.In March 2012, we reached settlement agreements with defendants Motorola Solutions, Inc. ("Motorola") and Transition Networks, Inc. ("Transition Networks"). In October 2012, we reached a settlement with defendant GarretCom, Inc ("GarretCom"). In February 2013, we reached settlement agreements with Allied Telesis, Inc. ("Allied Telesis") and NEC Corporation ("NEC"). As part of the settlements, Motorola, Transition Networks, GarretCom, Allied Telesis and NEC each entered into a non-exclusive license agreement for our Remote Power Patent pursuant to which each such defendant agreed to license our Remote Power Patent for its full term (which expires in March 2020) and pay a license initiation fee and ongoing royalties based on their sales of PoE products. In March 2015 and July 2015, we reached settlements with defendants Samsung Electronics Co., Ltd. ("Samsung"), Huawei Technologies Co., Ltd. ("Huawei") and ShoreTel, Inc. ("ShoreTel"). Samsung and Huawei each entered into a non-exclusive fully paid license agreement for our Remote Power Patent for its full term. ShoreTel entered into a non-exclusive license agreement for our Remote Power Patent for its full term and paid a license initiation fee and agreed to pay quarterly royalties based upon its sales of PoE products.In June 2016, we reached a settlement with Sony Corporation and affiliated entities ("Sony"). With respect to the settlement, Sony received a non-exclusive fully-paid license for our Remote Power Patent for its remaining life.In July 2016, we reached a settlement with Dell, Inc. Under the terms of the settlement, Dell received a non-exclusive license for our Remote Power Patent for its full term, Dell paid a license initiation fee of $6,000,000 and agreed to pay quarterly royalties based on its sales of PoE products.In July 2016, we also reached settlement agreements with Alcatel-Lucent USA, Inc. and Alcatel-Lucent Holdings Inc. (collectively, "Alcatel") and ALE, USA, Inc. ("ALE"). Under the terms of the settlement agreements, Alcatel and ALE received a non-exclusive fully paid license for our Remote Power Patent for its remaining life. The aggregate consideration to be received by us from Alcatel and ALE for the fully-paid license is $4,200,000 of which $1,900,000 has been paid and the balance of $2,300,000 is payable in three equal quarterly payments beginning sixty (60) days after a ruling (which is pending) by the Court confirming the report and recommendation rendered by the Magistrate which found all of the asserted claims of our Remote Power Patent were not invalid.- 27 -On October 3, 2016, we entered a settlement agreement with Polycom, Inc. ("Polycom"). Under the terms of the settlement, Polycom entered into a non-exclusive license for our Remote Power Patent for its full term and is obligated to pay a license initiation fee of $5,000,000 for past sales of its Power over Ethernet ("PoE") products and ongoing royalties based on its sales of PoE products. $2,000,000 of the license initiation fee was paid within 30 days and the balance will be paid in three annual installments of $1,000,000 beginning in October, 2017. Payments due in October 2018 and October 2019 need not be paid by Polycom if all asserted claims of the Remote Power Patent have been found invalid. Such payments in October 2018 and October 2019 have not been included in our revenue for the year ended December 31, 2016.As a result of the aforementioned settlements, the remaining four defendants in the litigation pending in the United States District Court for the Eastern District of Texas are Hewlett Packard Company, Inc., Juniper Networks, Inc., AXIS Communications Inc. and Avaya Inc. The litigation is consolidated for pre-trial purposes and there will be a separate trial for each defendant. On June 2, 2016, a Markman hearing on claim construction was held and oral argument also took place on defendants' motion for summary judgment that all asserted claims of our Remote Power Patent are invalid under 35 U.S.C. §325 for improper broadening. On November 2, 2016, the Court issued its ruling on the Markman hearing and defendants' motion for summary judgment (the motion asserted that all claims of the Remote Power Patent were invalid for improper claim broadening). The Court found that all of the original asserted claims of the Remote Power Patent survived the challenge and only one claim (Claim 23 obtained during a Reexamination of the Remote Power Patent at the USPTO in 2014) was invalid due to improper claim broadening. On January 19, 2017, defendant Avaya Inc. filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. As a result of the filing, our litigation against Avaya Inc. is currently subject to an automatic stay. The litigation will continue against the three other remaining defendants. On March 7, 2017, we made a motion for relief from the automatic stay in the United States District Court for the Southern District of New York which is pending. The first of the trials for the defendants is scheduled to commence on November 6, 2017.Mirror WorldsOn May 23, 2013, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, initiated patent litigation in the United States District Court for the Eastern District of Texas, Tyler Division, against Apple Inc., Microsoft Corporation, Hewlett-Packard Company, Lenovo Group Ltd., Lenovo (United States), Inc., Dell, Inc., Best Buy Co., Inc., Samsung Electronics America, Inc. and Samsung Telecommunications America L.L.C., for infringement of U.S. Patent No. 6,006,227 (the "'227 Patent") (one of the patents we acquired as part of our acquisition of the Mirror Worlds Patent Portfolio – see Note H[2] to our financial statements included in this Annual Report). We sought, among other things, monetary damages based upon reasonable royalties. The lawsuit alleged that the defendants have infringed and continue to infringe the claims of the '227 Patent by making, selling, offering to sell and using infringing- 28 -products including Mac OS and Windows operating systems and personal computers and tablets that include versions of those operating systems, and by encouraging others to make, sell, and use these products. On December 10, 2013, the litigation was severed into two consolidated actions, Mirror Worlds v. Apple, Inc. (Case No. 6:13-cv-419), and Mirror Worlds v. Microsoft, et al. (Case No. 6:13-cv-941).On November 6, 2015, we entered into a settlement agreement with Microsoft pursuant to which Microsoft (including its customers) received a non-exclusive fully paid license for our Mirror Worlds Patent Portfolio for its remaining life in consideration of a lump sum payment to us of $4,650,000. In addition, as customers of Microsoft, the pending litigation was also dismissed against Hewlett-Packard Corporation, Lenovo Group Ltd., Lenovo, Inc., Dell, Inc., Best Buy Co., Inc., Samsung Electronics of America, Inc. and Samsung Telecommunications America L.L.C.On July 8, 2016, we entered into a settlement agreement with Apple Inc. in connection with litigation in the United States District Court for the Eastern District of Texas, for infringement of our '227 Patent. Under the terms of the settlement agreement, Apple received a fully paid non-exclusive license to the '227 Patent for its full term (which expired in June 2016), along with certain rights to other patents in our patent portfolio. We received $25,000,000 from Apple for the settlement and fully paid non-exclusive license.Cox Patent Portfolio – Google and YouTube Legal Proceedings("Google"(“Google”) and YouTube, LLC ("YouTube"(“YouTube”) in the United StatesU.S. District Court for the Southern District of New York for infringement of several of our patents within our Cox Patent Portfolio which relate to the identification of media content on the Internet. The lawsuit alleges that Google and YouTube have infringed and continue to infringe certain of our patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube'sYouTube’s Content ID system. In May 2014, the defendants filed an answer to our complaint and asserted defenses of non-infringement and invalidity.-19- On December 3, 2014, we initiated a second litigationUnited StatesU.S. District Court for the Southern District of New York, for infringement of U.S. Patent No. 6,006,227, U.S. Patent No. 7,865,538 and U.S. Patent No. 8,255,439 (among the patents within our then newly issued patent (part of the CoxMirror Worlds Patent Portfolio) relating to the identification and tagging of media content (U.S. Patent No. 8,904,464). The lawsuit alleges that Googlethe asserted patents are infringed by Meta’s core technologies that enable Meta’s Newsfeed and YouTube have infringed and continue to infringeTimeline features. We seek, among other things, monetary damages based upon reasonable royalties.patent by making, using, selling and offering to sell unlicensed systems and products and services related thereto, which include YouTube's content ID system. In January 2015, the defendants filedCourt issued an answer to our complaint and asserted defensesorder granting Meta’s motion for summary judgment of non-infringement and invalidity.above referencedappeal is pending.thatagainst ten defendants for infringement of our Remote Power Patent seeking monetary damages based upon reasonable royalties, as follows: (i) on October 6, 2022, we commencedinitiated such litigation against Arista Networks, Inc., Fortinet, Inc., Honeywell International Inc. and Ubiquiti Inc. in the United States District Court, District of Delaware; (ii) on October 27, 2022, and November 3, 2022, we initiated such litigation against TP-Link USA Corporation and Hikvision USA, Inc. in the United States District Court for the SouthernCentral District of New York in April 2014California;(iii) on November 4, 2022, we initiated such litigation against Panasonic Holdings Corporation and December 2014 against Google and YouTube are currently subject to a court ordered stay which has been in effect since July 2015 as a resultPanasonic Corporation of proceedings at the Patent Trial and Appeal Board (PTAB) and the pending appeals of PTAB Final Written Decisions to the United States District Court of Appeals for the Federal Circuit as described below.- 29 -In December 2014, Google filed four petitions to institute Inter Partes Review proceedings (the "IPRs") at the PTAB pertaining to certain patents within our Cox Patent Portfolio. In each of the IPRs, Google sought to invalidate certain claims of our patents within our Cox Patent Portfolio which have been asserted in our litigations against Google and YouTube pendingNorth America in the United States District Court for the SouthernEastern District of New York as described above. On June 23, 2015, the PTAB issued an order instituting each of the four IPR petitions for oral hearing. The consolidated oral hearing was heldTexas (Marshall Division); and (iv) on March 9, 2016. On June 20, 2016, the PTAB issued its Final Written DecisionsNovember 8, 2022 and November 16, 2022, we initiated such litigation against Antaira Technologies, LLC and Dahua Technology USA in the four pending IPRs finding eighty-six (86) claims "not unpatentable" (valid) and in total, one hundred nineteen (119) out of one hundred and twenty-nine (129) or 92% of the challenged claims of the patents survived. None of our asserted claims in the pending litigations against Google and YouTube were found invalid. On August 18, 2016, Google filed Notices of Appeal to appeal the PTAB's Final Written Decisions on the IPRs to the United States District Court of Appeals for the Federal CircuitCentral District of California.-20- the appeal is pending.On April 13, 2015, Google filed a Petition for Covered Business Method Review (CBM) at the PTAB seeking to invalidate claims pertaining to our U.S. Patent No. 8,904,464, the patent asserted in our litigation against Google and YouTube filed on December 3, 2014 as referenced above. On October 19, 2015, the PTAB issued an order instituting the Covered Business Method Review for oral hearing. The oral hearing was held on May 11, 2016. On October 18, 2016, the PTAB issued its Final Written Decision in favor of usTP-Link USA Corporation with respect to the CBMabove referenced litigations resulting in aggregate settlement payments to us of $2,601,000 and ruled that Google had failed to show that anya conditional payment of $150,000. Our litigations against Ubiquity Inc and Honeywell International Inc. remain pending.thirty-four (34) claimsState of our U.S. Patent 8,904,464 were unpatentable.New York, County of New York, for breach of a Settlement and License Agreement, dated May 22, 2009, with us for Netgear’s failure to make royalty payments, and provide corresponding royalty reports to us based on sales of Netgear’s PoE products. On December 20, 2016, GoogleOctober 22, 2021, Netgear filed a NoticeDemand for Arbitration with the American Arbitration Association (“AAA”) seeking to arbitrate certain issues raised in the litigation in the Supreme Court, State of AppealNew York, County of New York. We have objected to appealjurisdiction at the PTAB's Final Written DecisionAAA. On April 22, 2022, Netgear filed a counterclaim in the New York court action alleging that we breached the license agreement by not offering Netgear lower royalties. On September 22, 2022, the arbitration brought by Netgear was dismissed by the AAA on jurisdiction grounds. On August 27, 2023, the CBMCourt granted Netgear’s cross-motion for summary judgment and dismissed our claims and also denied our summary judgment motion with respect to Netgear’s counterclaim for breach of the United States Courtlicense agreement. We appealed the court’s decision. On February 20, 2024, the Appellate Division, First Department, upheld the lower court decision dismissing our complaint and granted our motion to dismiss Netgear’s counterclaim that we breached the most favored license provision concerning two licensees, but said there was a triable issue of Appeals for the Federal Circuit and the appeal is pending.-21- None.- 30 -ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MKT marketAmerican exchange under the symbol "NTIP"“NTIP”. The following table sets forth, for the periods indicated, the range of the high and low sales prices for our common stock as reported by the NYSE MKT market.YEAR ENDED DECEMBER 31, 2016 HIGH LOW Fourth Quarter $3.50 $2.50 Third Quarter $3.29 $2.33 Second Quarter $2.96 $1.90 First Quarter $2.17 $1.70 YEAR ENDING DECEMBER 31, 2015 HIGH LOW Fourth Quarter $2.32 $1.74 Third Quarter $2.99 $1.49 Second Quarter $2.40 $1.59 First Quarter $2.39 $2.01 16, 2017,1, 2024, the closing price for our common stock as reported on the NYSE MKT marketAmerican exchange was $4.40$2.15 per share. The number of record holders of our common stock was 5137 as of March 15, 2017.1, 2024. In addition, we believe there arewere in excess of approximately 1,4001,000 holders of our common stock in "street name"“street name” as of March 15, 2017.We did not pay any dividends to our stockholders during the year ended December 31, 2016 or in any prior years except for a special dividend of $0.10 per share paid in December 2010. On December 8, 2016, our Board of Directors approved the initiation of a dividend policy. TheOur dividend policy provides for the paymentconsists of a regular semi-annual dividendcash dividends of $0.05 per common share ($0.10 per common share annually) commencing in 2017. We anticipate paying the semi-annual dividendswhich have been paid in March and September of each year. It is anticipated that the semi-annual regular dividend will continue to be paid throughOn March 2020 (the expiration of our Remote Power Patent) provided that we continue to receive royalties from licensees of our Remote Power Patent. On February 2, 2017,3, 2023, our Board of Directors declared the initiala semi-annual cash dividend to be paid onof $0.05 per share with a payment date of March 24, 201731, 2023 to all holderscommon shareholders of record as of March 3, 2017.2016.- 31 -Issuer Purchases of Equity Securities. On August 22, 2011, we announced that our Board of Directors approved a share repurchase program to repurchase up to $2,000,000 of shares of our common stock over the next 12 months ("Share Repurchase Program"). 2023.9, 2015,14, 2023, our Board of Directors authorized its fifthan extension and increase to our of the share repurchase program (“Share Repurchase ProgramProgram”) to repurchase up to an additional $2,000,000 of our common stock over the subsequent 12 month period (for a total of up to $14,000,000 since inception of the Share Repurchase Program). On June 9, 2016, our Board of Directors authorized the extension of the Share Repurchase Program to repurchase up to $2,654,000$5,000,000 of shares of our common stock over the subsequent 1224 month period. The common stock may be repurchased from time to time in open market transactions or privately negotiated transactions in our discretion. The timing and amount of the shares repurchased will beis determined by management based on its evaluation of market conditions and other factors. The repurchase programShare Repurchase Program may be increased, suspended or discontinued at any time.-22- 2016,2023, we repurchased common stock pursuant to our Share Repurchase Program as indicated below:Period Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares) that May Yet Be Purchased Under the Plans or Programs
October 31, 2016— — — $2,654,102 42,900 $2.75 42,900 $2,536,127 — — — $2,536,127 Total 42,900 $2.75 42,900 Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares) that May Yet Be Purchased Under the Plans or Programs October 1, 2023 to
October 31, 202331,146 $2.22 31,146 November 1, 2023 to
November 30, 202377,087 $2.20 77,087 $4,391,365 December 1, 2023 to
December 31, 20238,581 $2.17 8,581 $4,372,705 Total 116,814 $2.20 116,814 2016,2023, we repurchased an aggregate of 43,400428,132 shares of our common stock pursuant to our Share Repurchase Program at a cost of $119,045$955,182 (exclusive of commissions) or an average price per share of $2.74.through March 1, 2017,to December 31, 2023, we have repurchased an aggregate of 6,926,0049,523,982 shares of our common stock at a cost of $11,463,873$18,712,916 (exclusive of commissions) or an average per share price of $1.66.$1.94.-23- - 32 -aboutfor our equity compensation plans as of December 31, 2016.(a)Number of securities to be issued upon exercise of outstanding options and rightsWeighted-average exercise price of outstanding options and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column) (a)Equity compensation plans approved by security holders1,275,000(1) $1.84(3) 1,325,000 Equity compensation plans not approved by security holders1,925,000(2)$1.18— Total3,200,000 $1.29 (3)1,325,000 (1)Includes 385,0002023. (a) (b) (c) Equity compensation plans
approved by security holders $ — (2) Equity compensation plans not
approved by security holders — Total 587,500 $ — 2,180,000
(2) Does not take into account outstanding restricted stock units as these awards have no exercise price. common stock issuable upon exercise of outstanding stock options and 890,000 shares issuable upon vesting of outstanding restricted stock units.(2)Represents aggregate individual option grants outside of, and prior to the establishment of, the 2013 Stock Incentive Plan in October 2013 referred to in the above table which represents individual option grants issued to our officers, directors, employees and consultants in consideration for certain services rendered to us. The option agreements pertaining to such individual option grants contain customary anti-dilution provisions.(3)Does not take into account outstanding restricted stock units as these awards have no exercise price.Our 2013 Stock Incentive Plan ("2013 Plan"as a result of adoption of the 2022 Stock Incentive Plan.deferredrestricted stock, (d) stock appreciation rights, (e) unrestricted stock awards, (f) cash based awards, and (e)(g) other stock-based awards including restricted stock units.awards. Awards under the 20132022 Plan may be granted singly, in combination, or in tandem. Subject to standard anti-dilution adjustments as provided in the 20132022 Plan, the 20132022 Plan provides for an aggregate of 2,600,0002,300,000 shares of the Company'sour common stock to be available for distribution pursuant to the 20132022 Plan. The Compensation Committee (or the Board of Directors) will generally have the authority to administer the 20132022 Plan, determine participants who will be granted awards under the 20132022 Plan, the size and types of awards, the terms and conditions of awards and the form and content of the award agreements representing awards. Awards under the 20132022 Plan may be granted to our employees, directors and consultants. As of December 31, 2016,2023, there were options to purchase an aggregate of 385,000 shares outstanding and 890,00075,000 shares issuable upon vesting of outstanding restricted stock units granted under theour 2022 Plan and 512,500 shares issuable upon vesting outstanding restricted stock units under our 2013 Plan.SELECTED FINANCIAL DATA-24- ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33 -ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSthirty-three (33)one hundred (100) U.S. patents includingand fifteen (15) foreign patents relating to: (i) our Remote PowerCox Patent Portfolio relating to enabling technology for identifying media content on the Internet and taking further action to be performed after such identification; (ii) our M2M/IoT Patent Portfolio relating to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine and other mobile devices, including smartphones, tablets and computers, as well as automobiles; (iii) our HFT Patent Portfolio covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the delivery of power over Ethernet cables for the purpose of remotely powering network devices, such as wireless access ports, IP phonesdifference between success and network based cameras; (ii)failure may be measured in nanoseconds; (iv) our Mirror Worlds Patent Portfolio relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; (iii)and (v) our Remote Power Patent covering the delivery of power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras.Portfolio relatingPortfolios (see Note K to enabling technology for identifying media content on the Internet and taking further action to be performed based on such identification; and (iv) our QoS Patents covering systems and methods for the transmission of audio, video and data in orderconsolidated financial statements included herein). Our revenue is dependent upon our ability to achieve high qualitysuccessful litigation outcomes.service (QoS) over computerliquidity consisted of cash and telephony networks. In addition,cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000. Based on our cash position, we continually review opportunities to acquire or license additional intellectual property.property as well as evaluate other strategic opportunities.-25- actively engaged in the licensing ofdependent upon our Remote Power Patent (U.S.for a significant portion of our revenue. Our Remote Power Patent No. 6,218,930). Ashas generated revenue in excess of March 1, 2017, we have twenty-four (24) licensees$188,000,000 from May 2007 through December 31, 2023. We no longer receive licensing revenue for our Remote Power Patent which, among others, include licensefor any period subsequent to March 7, 2020 (the expiration date of the patent). During the fourth quarter of 2022, we commenced nine separate litigations against ten defendants involving our Remote Power Patent for patent infringement for the period prior to March 7, 2020. During 2023, we entered into settlement agreements with Cisco Systems, Inc., Extreme Networks, Inc., Netgear, Inc., Microsemi Corporation, Motorola Solutions, Inc., NEC Corporation, Samsung Electronics Co., Ltd., Dell, Inc., Huawei Technologies Co., Ltd., ShoreTel, Inc.eight of the defendants with respect to the aforementioned litigation resulting in aggregate settlement payments made to us of $2,601,000 and Polycom, Inc.a future conditional payment of $150,000 (see Note K to our consolidated financial statements included herein). All of our revenue for 2023 was from these settlements involving our Remote Power Patent. If we are unable to successfully monetize our other patent portfolios or achieve a successful outcome of our investment in ILiAD, our business, financial condition and several other major data networking equipment manufacturers. results of operations will be negatively impacted.Remote Power Patentintellectual property assets and the monetization of our efforts to monetize our Cox Patent Portfolio and our Mirror Worlds Patent Portfolio which we acquired in 2013.patent portfolios. In addition, we continue to seek to acquire additional intellectual property assets to develop, commercialize, license or otherwise monetize such intellectual property.monetize. Our strategy includes working with inventors and patent owners to assist in the development and monetization of their patented technologies. We may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.focusesis to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as we have achieved with respect to our Remote Power Patent and Mirror Worlds Patent Portfolio. Our Remote Power Patent generated licensingin excess of $105,000,000 from May 2007 through December 31, 2016. As a result ofis recorded, that may impact our acquisition of the Mirror Worlds Patent Portfolio in May 2013, we achieved licensingnet income (loss) relate to contingent legal fees and other revenue of an aggregate of $47,150,000 through December 31, 2016 (see Note J[4] and Note K to our consolidated financial statements in this Annual Report).At December 31, 2016, our principal sources of liquidity consisted of cash and cash equivalents of $50,918,000 and working capital of $51,415,000. We believe based on our current cash position and projected licensing revenue from existing licensees that we will have sufficient cash to fund our operations for the foreseeable future. Based on our cash position, we continually review opportunities to acquire additional intellectual property as well as evaluate other strategic alternatives.- 34 -On December 9, 2016, we announced that our Board of Directors approved the initiation of a dividend policy. The policy provides for the payment of regular semi-annual dividends of $0.05 per common share ($0.10 per common share annually) which are anticipated to be paid in March and September of each year. It is anticipated that the semi-annual dividend will continue to be paid through March 2020 (expiration of Network-1's Remote Power Patent) provided that we continue to receive royalties from licensees of our Remote Power Patent. On February 2, 2017, our Board of Directors declared an initial semi-annual dividend $0.05 per common share which will be paid on March 24, 2017 to all shareholders of record on March 3, 2017.Our revenue from our patent licensing and enforcement business is generated from license agreements entered into as a result of settlements or judgments (after a jury verdict). Generally, in the event of settlement of litigationexpenses related to our assertion of patent infringement involving our intellectual property, defendants will either pay (i) a lump sum payment for a non-exclusive fully-paid license (a "Fully-Paid License"), or (ii) a lump sum payment (license initiation fee) together with an ongoing obligation to pay quarterly or monthly royalties to us for the life of the licensed patent (a "Royalty Bearing License").Royalty Bearing LicensesWe currently have Royalty Bearing Licenses for our Remote Power Patent with sixteen (16) licensees pursuant to which such licensees are obligated to pay us ongoing royalties on a quarterly or monthly basis for the life of our Remote Power Patent (March 2020). Revenue from ongoing royalties from our Royalty Bearing Licenses was $10,788,000 during the year ended December 31, 2016 as compared to $10,125,000 for the year ended December 31, 2015. Royalty Bearing Licensees increased from thirteen (13) to sixteen (16) licensees during the year ended December 31, 2016. Cisco is our largest Royalty Bearing Licensee. Cisco constituted 76% and 83% of our ongoing royalty revenue from our Royalty Bearing Licenses for the years ended December 31, 2016 and December 31, 2015. Due to our annual royalty rate structure with Cisco which includes declining rates as the volume of PoE products sales increase during the year, royalties from Cisco are typically highest in the first quarter of the calendar year and decline for each of the remaining calendar quarters of the year.The obligation of our licensees to continue to make ongoing royalty payments to us from Royalty Bearing Licenses is contingent upon the continued validity of certain claims of our Remote Power Patent. The validity of our Remote Power Patent is currently at issue in our pending litigation against four data equipment manufacturers in the United States District Court for the Eastern District of Texas (see "Legal Proceedings" at pages 27-28 hereof). If certain claims of our Remote Power Patent are ultimately determined to be invalid, such a determination would have a material adverse effect on our business, financial condition and results of operations as our revenue stream is largely dependent upon the continued validity of our Remote Power Patent.- 35 -Litigation SettlementsLicensing revenue from litigation settlements (exclusive of ongoing royalty obligations pursuant to Royalty Bearing Licenses) was $36,800,000 for the year ended December 31, 2016 as compared to $6,440,000 for the year ended December 31, 2015. With respect to litigation settlements (exclusive of ongoing royalty obligations pursuant to Royalty Bearing Licenses) related to our Remote Power Patent, for the year ended December 31, 2016 we recognized licensing revenue of $11,800,000 including settlement payments from Dell, Alcatel and ALE, USA Polycom, Inc. and Sony Corporation (See "Legal Proceedings at pages 27-28 hereof). With respect to litigation settlements related to our Mirror Worlds Patent Portfolio, for the year ended December 31, 2016 we received aggregate settlement payments of $42,500,000 consisting of a Fully Paid License with Apple Inc. of $25,000,000 (see "Legal Proceedings" at pages 28-29 hereof) and $17,500,000 in settlement of a professional liability claim (see page 21 hereof).Pending LitigationWe currently have pending patent infringement litigations involving our Remote Power Patent and certain patents within our Cox Patent Portfolio.In September 2011, we initiated patent litigation against sixteen (16) data equipment manufacturers in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of our Remote Power Patent. We have since settled the litigation against twelve (12) of the defendants. The remaining four defendants in the litigation are Hewlett Packard Company, Inc., Juniper Networks, Inc., Avaya Inc. and AXIS Communications, Inc. The first of the trials for the defendants is scheduled to commence on November 6, 2017 (see "Legal Proceedings" at pages 27-28 hereof).In April, 2014 and December, 2014, we initiated patent infringement litigation against Google Inc. and YouTube, LLC in the United States District Court for the Southern District of New York for infringement of several patents within our Cox Patent Portfolio (see "Legal Proceedings" at page 29 hereof). These litigations are currently subject to a court ordered stay pending appeal to the United States Court of Appeals for the Federal Circuit of Final Written Decisions of the Patent Trial and Appeal Board (PTAB) of the USPTO in our favor relating to four Inter Partes Review proceedings and a Covered Business Method Review (CBM) instituted by Google (see "Legal Proceedings" at page 30 of this Annual Report).TaxesWe utilized our remaining net operating loss carry-forwards ("NOLs") of approximately $20.7 million during the three month period ended September 30, 2016. Current federal, state and local income taxes of $4,187,000 were recorded for the year ended December 31, 2016. The remaining deferred tax assets of $207,000 relate to temporary (timing) differences with respect to options, warrants and restricted stock units.The personal holding company ("PHC") rules under the Internal Revenue Code impose a 20% tax on a PHC's undistributed personal holding company income ("PHC Income", which means, in general, taxable income subject to certain adjustments). For a corporation to be classified as a PHC, it must satisfy two tests: (i) that more than 50% in value of its outstanding shares must be owned directly or indirectly by 5 or fewer individuals at anytime during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the "Ownership Test") and (ii) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities and rents (the "Income Test"). During the second half of 2016 (as well as prior years), we did not meet the Ownership Test. Due to the significant number of shares held by our largest shareholders, we will continually assess our share ownership to determine whether it meets the Ownership Test. If the Ownership Test were met and the income generated by us were determined to constitute "royalties" within the meaning of the Income Test, we would constitute a PHC and we would be subject to a 20% tax on the amount of any PHC Income that we do not distribute to our shareholders.- 36 -RESULTS OF OPERATIONSYear Ended December 31, 2016 Compared to Year Ended December 31, 2015Revenue. We had revenue of $65,088,000 for the year ended December 31, 2016 ("2016") as compared to revenue of $16,565,000 for the year ended December 31, 2015 ("2015"). The increase in revenue of $48,523,000 for 2016 was due primarily to an increase in licensing revenue of $30,360,000 from license agreements related to litigation settlements (see Note J[I[1] and Note J[4] to our consolidated financial statements included in this Annual Report) as well as our $17,500,000 settlement of a professional liability claim (see Note K to our consolidated financial statements included in this Annual Report). Revenue from our ongoing Royalty Bearing Licenses (exclusive of lump sum payments or license initiation fees from litigation settlements) for our Remote Power Patent increased by $663,000 or 6.5% from $10,125,000 to $10,788,000 for 2016 compared to 2015.Operating Expenses. Operating expenses for 2016 were $32,988,000 as compared to $12,638,000 for 2015. The increase in operating expenses of $20,350,000 was primarily due to an increase in costs of revenue of $20,288,000 associated with increased litigation settlements of $30,360,000 and our $17,500,000 professional liability settlement (see Note J and Note K to our consolidated financial statements included in this Annual Report) We had costs of revenue of $25,794,000 and $5,506,000 for 2016 and 2015, respectively. Included in the costs of revenue for 2016 were contingent legal fees of $18,196,000 (see Note H[1] to our consolidated financial statements included herein), other contractual payments related to net proceeds from settlements of $3,345,000 (see Note H[2] to our consolidated financial statements included herein) and $4,252,000 of incentive bonus compensation payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note I[J[1] to our consolidated financial statements included herein). Both such components of expenses are based on a percentage of the revenue received by us as a result of litigation or otherwise.-26- -27- 20152023 were contingent legal fees of $4,564,000 payable to our patent litigation counsel$744,000 and $886,000 of incentive bonus compensation of $130,000 payable to our Chairman and Chief Executive Officer pursuant to his employment agreement.General and administrative expenses decreased by $92,000 from $2,874,000 for 2015 to $2,782,000 for 2016, due primarily to increased expenses during 2015 consisting of a write-off of our investment in Lifestreams of $576,000agreement (see Note DJ[1] to our consolidated financial statements included herein).terminationadministrative expenses were $2,889,000 for 2023 as compared to $2,778,000 for 2022. The increase in general and administrative expenses for 2023 was primarily due to an increase in state franchise taxes of $175,000 as well as increases in payroll taxes of $98,000 and NYSE American listing fees of $31,000. These increases were offset somewhat by reductions in office rent of $71,000 and employee benefits costs of $60,000.services agreement resultingILiAD convertible note of $271,000, as compared to none for 2023, as a result of an observable price transaction relating to ILiAD’s private offering in anAugust 2022( see Note H to our consolidated financial statements included herein).-28- $261,000$607,000. The net decrease in income tax expenses of $995,000 was primarily due to gains on our equity method investment and conversion of our ILiAD note in 2022 compared to no such transactions in 2023.H[4]H to our consolidated financial statements included herein). Amortization of patents was $813,000 for 2016 as compared to $1,655,000 for 2015. Stock-based compensation expense related to the issuance of restricted stock units and the vesting of stock options was $509,000 for 2016 as compared to $272,000 for the issuance of stock options for 2015. We also had contingent patent cost of $500,000 for 2016. Professional fees and related costs were $2,590,000 for the 2016 as compared to $2,331,000 for 2015.- 37 -Interest Income. Interest income for 2016 was $61,000 as compared to interest income of $58,000 for 2015.Operating Income. We had operating income of $32,100,000 for 2016 compared with operating income of $3,927,000 for 2015. The increased operating income of $28,173,000 for 2016 was primarily due to an increase in licensing revenueour equity share of $30,360,000the ILiAD net losses of $364,000 for 2023 includes an additional loss of $42,000 recorded on a one quarter lag basis as a result of audited financial information for 2022 received in 2023 from litigation settlements and revenue of $17,500,000 from settlement of a professional liability claimILiAD (see Note J and Note KB[2] to our consolidated financial statements included in this Annual Report)herein).Current Taxes. Current federal, state and local income taxes of $4,187,000 and $93,000 were recorded for 2016 and 2015, respectively.Deferred Tax Expense. We recorded deferred tax expense (benefit) of $4,751,000 and $(215,000) for 2016 and 2015, respectively. The increase for 2016 of $4,966,000 was due to utilization of NOLs in connection with the significant increase in taxable income. At December 31, 2015, we had deferred tax assets of $4,958,000 which was reduced by current tax provision of $7,031,000 and offset by full relief of the valuation allowance of $2,280,000 for the year ended December 31, 2016. At December 31, 2016, we had deferred tax assets of $207,000 relating to temporary (timing) differences on options, warrants and restricted stock units.Income$23,223,000 or $1.00 per share (basic)$848,000, and $0.93 per share (diluted) for 2016realized and unrealized gains on investments of $1,876,000, as compared with netto gains in 2022 of $3,727,000 on our equity investment in ILiAD and $271,000 on conversion of our ILiAD note. These increases in 2023 of revenue and income items were offset by an increase in operating expenses of $4,107,000 or $0.17 per share (basic$933,000 and diluted) for 2015.2016,2023, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $50,918,000$45,467,000 and working capital of $51,415,000. We believe based$44,850,000. Based on our current cash position, and projected licensing revenue from our existing license agreementswe believe that we will have sufficient cash to fund our operations for the next twelve months and the foreseeable future.- 38 -increaseddecreased by $29,704,000 to $51,415,000$2,509,000 at December 31, 2016 31,2023 to $44,850,000as compared to working capital of $21,711,000$47,359,000 at December 31, 2015.2022. The increasedecrease in working capital for 2016in 2023 was primarily due to an increaseour operating loss of $30,310,000$2,235,000, cash dividends payments of cash$2,371,000 and cash equivalents primarily as a resultshare repurchases of licensing revenue$966,000. These uses of $36,800,000 from litigation settlements (exclusive of ongoing royalty obligations)working capital were offset somewhat by interest and revenue of $17,500,000 from settlement of a professional liability claim.Net cash provided by operating activities for 2016 increased by $24,273,000 from $5,633,000 for 2015 to $29,906,000 for 2016. The increase in net cash provided by operating activities for 2016 was primarily due to netdividend income of $23,223,000, a reduction in our deferred taxes$1,868,000 and realized and unrealized gains on investment of $4,751,000 and an increase in accrued expenses of $3,002,000 offset by an increase in prepaid income taxes of $1,195,000 and an increase in royalty receivables of $1,342,000.$525,000.-29- Net cash used in investing activities for 2016 and 2015 was $42,000 and $75,000, respectively, related to the purchase of patents.20162023 and 20152022 was $446,000$3,420,000 and $(2,612,000), respectively,$3,342,000, respectively. The increase of $78,000 primarily resulted from an increase in repurchases of treasury shares of $432,000 in 2023, offset by a reduction in the exercisevalue of stock options and warrants in 2016 and our repurchaseshares delivered to fund withholding taxes of common stock as part of our share repurchase program in 2015.primarilyequivalents and marketable securities in money market accounts.funds, government securities, certificates of deposit and short-term fixed income securities. Accordingly, we do not believe that our investments have significant exposure to interest rate risk.operating lease obligations, purchase obligations or other long-term liabilities except for a lease obligation set forth in Note H[5] toliabilities.included in this Annual Report.CRITICAL ACCOUNTING POLICIESOur discussion and analysis of our financial condition, results of operations, and cash flows are based on our audited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, generally accepted in the United States. The preparation of financial statements included in this Annual Report on Form 10-K requireswhich require our management to make estimates and assumptions that affect the reported amounts of assets, and liabilities and disclosuredisclosures of contingent assets and liabilities at the date of the financial statements, andbalance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. The significantTo the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions made in the preparationthat we believe are reasonable after taking account of our consolidated financial statements include deferred income taxes, income tax payable, valuation of warrantscircumstances and stock-based payments, accrued expenses and valuation of marketable securities. Actual results could be materially different from thoseexpectations for the future based on available information. We evaluate these estimates upon which the carrying values were based.- 39 -Our critical accounting policies include:-30- ·Revenue recognition;·Patents;·Income Taxes·Impairment of long lived assets; and·Stock based compensation.Revenue Recognitionrecognize revenue received fromconsider an accounting estimate to be critical if: (i) the licensing of our intellectual property and other related intellectual property activities. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been performed pursuant to the terms of the license or other applicable agreement, (iii) amounts are fixed or determinable, and (iv) collectability of amounts is reasonably assured. We rely on royalty reports received from third party licensees to record our revenue. From time to time we may audit or otherwise dispute royalties reported from our licensees. Any adjusted royalty revenue as a result of such audits or dispute is recorded by us in the period in which such adjustment is agreed to by us and the licensee or otherwise determined.PatentsWe own patents that relate to various technologies. We capitalize the costs associated with acquisition, registration and maintenance of our acquired patents and amortize these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the patents would be capitalized and amortized over the balance of the useful life for the patents.Income TaxesWe account for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, "Income Taxes" (ASC 740), whichaccounting estimate requires us to usemake assumptions about matters that were highly uncertain at the assetstime the accounting estimate was made, and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income(ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.- 40 -Impairment of long-lived assetsIntangible assets with finite lives are tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Accordingly, we record impairment losses on long-lived assetsreasonably could have used in operations or expected to be disposed of when indicators of impairment exist and the undiscounted cash flows expected to be derived from those assets are less than carrying amounts of these assets. At December 31, 2016 and December 31, 2015, there was no impairment to our patents.Stock-based compensationWe account for our stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718, Compensation - Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock units, to be recognized in the consolidated statements of income and comprehensive income (loss) based on their grant date fair values. Compensation expense related to awards to employees is recognized on a straight-line basis based on the grant date fair value over the associated servicecurrent period, of the award, which is generally the vesting term. Share-based payments issued to non-employees are recorded at their fair values, and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period and are expensed using an accelerated attribution model. We use the Black-Scholes option pricing model to determine the grant date fair value of options granted. The fair value of restricted stock units is determined based on the number of shares granted and either the quoted market price of our common stock on the date of grant for time-based and performance-based awards, or the fair value on the date of grant using the Monte Carlo Simulation model for market-based awards.Effect of New Accounting PronouncementsIn August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows. This ASU provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. We do not believe that the adoption of the ASU willwould have a material impact on our consolidated financial statements.In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvementcondition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above. Employee Share-based Payment Accounting (ASU 2016-09) to simplify the accounting for share-based payment transactions, including the income tax consequences, to provide an option to recognize gross share-based compensation expense with actual forfeitures recognized as they occur, as well as to define certain classifications on the statement of cash flows. This guidance will be effective for us in the first quarter of 2017, and early adoption is permitted. We are in the process of estimating the impact of adopting this new standard on our consolidated financial statements and related disclosures. We do not believe that this guidance will have a material impact on our consolidated financial statements and related disclosures.included herein. -31- - 41 -In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and requires a lessee to recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. Early application is permitted. We do not believe the adoption of this accounting standard will have a material impact on our consolidated financial statements.In May 2014, FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 provides for a single comprehensive model for use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new revenue standard allows for either full retrospective or modified retrospective application. We are required to adopt the amendments in ASU No. 2014-09 using one of the two acceptable methods. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU No. 2014-09 to annual periods beginning after December 2017, along with an option to permit early adoption as of the original effective date. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends the guidance in 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. The ASU does not change the core principle of the guidance in Topic 606. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. The effective date and transition requirements for the ASUs are the same as the effective date and transition requirements in Topic 606. Public entities should apply the ASUs for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We expect to complete our assessment process, including identifying our performance obligations and selecting a transition method for adoption, by the end of the second quarter of 2017 along with our implementation process prior to the adoption of this ASU on January 1, 2018.Accounting Standards Adopted in 2016In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740); Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The updated standard is effective beginning on January 1, 2017 with early application permitted as of the beginning of any interim or annual reporting period. Effective January 1, 2016, the Company elected to adopt early the standard and classify the deferred tax assets as non-current assets on our consolidated balance sheets.- 42 -F-25F-24 which follow Part III.Procedures.Management'sManagement’s Annual Report on Internal Control over Financial Reporting."internal“internal control over financial reporting"reporting” of the company,Company, as defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer'sissuer’s principal executive and principal financial officer and effected by ourthe board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally-32- company'scompany’s assets that could have a material effect on the financial statements.- 43 -Management, our20162023 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting were effective as of the end of the period covered by this report."smaller“smaller reporting company"company” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended, and as such, are not required to provide the information contained in this sub-section pursuant to Item 308(b) of Regulation S-K. Accordingly, this Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.2016,2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.-33- None.- 44 -director'sdirector’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen, exercise sound judgment, and a commitment of service to Network-1 and our Board."Security“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."Matters” beginning on page 44 hereof. There are no family relationships among any of our directors and executive officers.NAME AGE AGEPOSITION Corey M. Horowitz 69 62Chairman, Chief Executive Officer and Chairman of the Board of Directors David C. KahnJonathan E. Greene62 65Chief Financial Officer,Executive Vice President, Secretary and a DirectorJonathan GreeneRobert M. Mahan57 55Executive Vice PresidentChief Financial OfficerEmanuel R. Pearlman 63 56Director Niv Harizman 59 52Director Allison Hoffman 53 Director -34- 46Directorbecamehas been our Chairman and Chief Executive Officer insince December 2003. Mr. Horowitz has also served as Chairman of our Board of Directors since January 1996 and has been a member of our Board of Directors since April 1994. During the period June 2001 throughIn December 2003, CMH Capital Management Corp., an entity solely owned by2018, Mr. Horowitz rendered financial advisory services to us.became a member of the Board of Managers of ILiAD Biotechnologies, LLC, a privately held biotechnology company, in connection with our investment in the company (see “Business-Investment in ILiAD Biotechnologies” at page 9 of this Annual Report). Mr. Horowitz is also a member of the Life Sciences Institute Leadership Council at the University of Michigan. We believe Mr. Horowitz'sHorowitz’s qualifications to serve on our Board of Directors include his significant experience and expertise as an executive in the intellectual property field, his understanding of our intellectual property and the patent acquisition, licensing and enforcement business combined with his private equity and corporate transactional experience.David C. Kahn, CPA, became our Chief Financial Officer in January 2004 and our Secretary in August 2012. Mr. Kahn was elected to our Board in April 2012. Since December 1989, Mr. Kahn has provided accounting and tax services on a consulting basis to private and public companies. From August 2000 until August 2012, Mr. Kahn served as a full-time faculty member of Yeshiva University in New York. We believe Mr. Kahn's qualifications to serve on our Board include his background and expertise in accounting and tax matters.- 45 -2013.2013 and our Secretary and a member of our Board of Directors in September 2022. He served as a consultant to the Company from December 2004 until March 2013, providing technical and marketing analysis for our intellectual property portfolio. Mr. Greene became an employee of the CompanyNetwork-1 in March 2013. From April 2006 to February 2009, Mr. Greene served as a marketing consultant for Avatier Corporation, a developer of identity management software. From August 2003 until December 2004, he served as a consultant to Neartek, Inc., a storage management software company (August 2003 until October 2003) and Kavado Inc., a security software company (November 2003 until December 2004). We believe Mr. Greene’s qualifications to serve on our Board include his engineering and technical expertise to assist us in our patent acquisition, licensing and enforcement business.January 2003 until July 2003,May 2021 to February 2022, Mr. GreeneMahan served as DirectorInterim Chief Financial Officer of Product Management for FalconStor Software,Loft Orbital Solutions, Inc. (NASDAQ:FALC), a storage management software company.space infrastructure company that designs, launches and operates low earth orbit satellites. From December 2001 through December 2002, Mr. GreeneApril 2019 to May 2021, he served as Senior Vice Presidentthe Interim Chief Financial Officer of MarketingXWELL, Inc., formerly XpresSpa Group, Inc., (NASDAQ: XWEL),a global health and Business Developmentwellness holding company operating XpresCheck®, XpresSpa®, and Treat™ locations in airports. From November 2016 through April 2019, Mr. Mahan served as the Chief Financial Officer of Network-1, atSkyBell Technologies, Inc., a time when Network-1 wascompany engaged in the development, marketingvideo doorbell and licensingsmart home industry. Mr. Mahan began his career in the audit practice of security software. From December 1999 until September 2001, he servedPricewaterhouseCoopers from 1989 through 1992 and as Senior Vice Presidenta Controller/Division Chief Financial Officer of Marketing for PanacyaTommy Hilfiger USA, Inc., from 1992 – 2001.-35- vendor of service management software.Emanuel Pearlman became a directormember of our company inBoard of Directors since January 2012.2012, and also serves as Chairman of our Audit Committee and a member of our Nominating and Corporate Governance Committee. Mr. Pearlman currently serves as the Chairman and CEOChief Executive Officer of Liberation Investment Group, LLC, a New York based investment management and financial consulting firm, a positionwhich he has held sincefounded in January 2003. From March 2023 to July 2023, Mr. Pearlman was a member of the Board of Directors of QualTek Services Inc. (NASDAQ:QTEK), a turnkey provider of infrastructure services to North American 5G wireless, telecom, power grid modernization and renewable energy sectors, which became a private company in July 2023. Mr. Pearlman also served as a member of the Special Committee of the Board to review and approve strategic and financial alternatives. In March 2023, Mr. Pearlman also became a member of the Board of Directors of MidCap Financial Investment Corporation (NASDAQ:MFIC), a closed-end externally managed, non-diversified management investment company that has elected to be treated as a business development company. Mr. Pearlman also serves on the Audit, Nominating and Corporate Governance, and Compensation Committee of MidCap Financial Investment Corp. In February 2023, Mr. Pearlman became a member of the Board of Directors of Diebold Nixdorf, Inc.(NYSE: DBD), a multinational financial and retail technology company, and serves as Executivea member of its Finance Committee and the People and Compensation Committee. From March 2022 to April 2022, he was a member of the Board of Directors and Chair of the Strategic Review Committee of Red Box Entertainment, Inc. (NASDAQ:RDBX), an entertainment company that provides consumers access to a large variety of content across digital and physical media. From October 2020 to September 2021, Mr. Pearlman was a member of the Board of Directors of Atlas Crest Investment Corp. (NYSE:ACIC) and during the period February 2021 until June 2022, he served on the Board of Directors of Atlas Crest Investment Corp. II (NYSE:ACII), each entity was a special purpose acquisition company (SPAC). Mr. Pearlman served as Chairman of the BoardAudit Committee and a member of the Compensation Committee and Nomination & Governance Committee of Atlas Crest Investment Corp. until September 2021 and held the same committee positions for Atlas Crest Investment Corp. II until June 2022. Mr. Pearlman served as Executive Chairman of Empire Resorts, Inc. (NASDAQ:NYNY), a position he has held since from June 1, 2016. From September 2010 to May 2016 heuntil November 2019, served as Non-Executive Chairman of the Board of Empire Resorts, Inc.from September 2010 through May 2016, and as a director since May 2010. He currently serves as Chairman of the Strategic Development Committee of Empire Resorts, Inc. Mr. Pearlman also previously served on the Audit, Compensation, Corporate Governance and Regulatory Compliance CommitteesBoard of Empire Resorts, Inc. From January 2012Directors from May 2010 to January 2013, Mr. Pearlman served on the board of directors of Dune Energy, Inc. (OTCBB: DUNR.OB) as Chairman of the Nominating and Governance Committee. From October 2006 to March 2010, Mr. Pearlman served on the board of directors of Multimedia Games, Inc. (NASDAQ: MGAM).November 2019. Mr. Pearlman was previously a directormember of Network-1the Board of Directors of CEVA Logistics, AG (SIX:CEVA) from December 1999 to December 2002.May 2018 until October 2019 and served on its Audit Committee from May 2018 through October 2019 and its Nomination and Governance Committee from May 2018 through May 2019. We believe Mr. Pearlman'sPearlman’s qualifications to serve on our Board include his significant investment and financial experience and expertise combined with his Board experience. became has been a directormember of our company inBoard of Directors since December 2012.2012 and serves as Chair of our Nominating and Corporate Governance Committee and a member of our Compensation Committee. Mr. Harizman is a Managing Member of Tyto Capital Partners LLC, a private investment firm specializing in debt and equity investments in middle market companies and special situations, a position he has held since August 2010. Since March 2010, Mr. Harizman has also been the Managing Member of NHK Partners LLC, an entity that makes private investments and provides consulting services. Since November 2013, Mr. Harizman has been affiliated with Riverside Management Group, a merchant banking firm, and BCW Securities LLC, its affiliated broker-dealer. From May 2005 to March 2010, Mr. Harizman was a Founding Partner and Head of Corporate Financepreviously held senior investment banking positions at Plainfield Asset Management LLC, which was a privately held registered investment adviser focused on alternative investments. From May 2000 until May 2005, Mr. Harizman was a member of the Mergers & Acquisitions Group of Credit Suisse First Boston LLC, where he was a Managing Director from 2001-2005 and a Director from 2000 to 2001. From 1995 until 2000, Mr. Harizman was employed by Bankers Trust and its successors including BT Alex. Brown Incorporated and Deutsche Bank in various investment banking positions in the Mergers & Acquisitions Group and Leveraged Finance Group.BT AlexBrown Incorporated. We believe Mr. Harizman'sHarizman’s qualifications to serve on our Board include his significant investment and financial transactional experience and expertise.-36- became has been a directormember of our company inBoard of Directors since December 2012.2012 and serves as Chair of our Compensation Committee and a member of our Audit Committee. Since August 2020, Ms. Hoffman has served as General Counsel of Phreesia, Inc. (NYSE:PHR), a leading provider of software solutions that healthcare organizations use to manage the patient intake process. From January 2016 until August 2020, Ms. Hoffman has served as Chief Legal Officer and Chief TalentAdministrative Officer at Intersection Parent, Inc., an urban experience company that utilizes technology to make cities better, including bringing free Wi-Fi throughout New York City. From September 2013We believe that Ms. Hoffman’s qualifications to December 2015, Ms. Hoffman served as Executive Vice President, General Counselserve on our Board include her extensive legal background and Corporate Secretary of Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), a media and merchandising company providing consumers with high quality life style content and products. From December 2012 until September 2013, she provided legal services to Martha Stewart Living Omnimedia, Inc. From January 2007 until September 2012, Ms. Hoffman served as Senior Vice President, Chief Legal Officer and Secretary of ALM Media, LLC, a leading provider of specialized news and information for the legal and commercial real estate sectors.- 46 -Thewww.Network-1.com/sec/sec.htmir.Network-1.com/governance-docs. Each member of each committee is an "independent"“independent” director under the standards of the NYSE MKT LLC.American LLC Company Guide. Three of our current five directors, Emanuel Pearlman, Allison Hoffman and Niv Harizman, are considered independent directors under Rule 803A(2) of the NYSE MKTAmerican LLC Company Guide.10A-33(a)(58)(A) of the Securities Exchange Act of 1934, as amended, and Section 803B of the NYSE MKTAmerican Company LLC Company Guide consisting of Emanuel Pearlman (Chairman) and Allison Hoffman. Our Board of Directors has determined that Emanuel Pearlman and Allison Hoffman each qualifyqualifies as an audit committee financial expert under applicable SEC rules. Mr. Pearlman and Ms. Hoffman also qualify as "independent"“independent” as independence for audit committee members is defined under Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section 803B(2) of the NYSE MKTAmerican LLC Company Guide.-37- (Chairperson)(Chair) and Niv Harizman. The Compensation Committee is appointed by our Board of Directors to assist the Board in carrying out the Board'sits responsibilities relating to the compensation of our executive officers and directors. The Committee has overall responsibility for evaluating and approving the officer and director compensation plans, policies and our programs.- 47 -(Chairman)(Chair) and Emanuel Pearlman. The Nominating and Corporate Governance Committee is responsible for, among other things, developing and recommending to the Board a set of corporate governance policies for the Company, establishing criteria for selecting new directors, and identifying, screening and recruiting new directors. The Committee also recommends to the Board nominees for directors and recommends directors for committee membership to the Board.acquisitionstrategic opportunities. The Committee also assists in capital markets related activities. Niv Harizman is the sole member of the Strategic Development Committee.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a)the Securities Exchange ActEthics1934, as amended, requiresEthics that applies to our officers and directors, and persons who own more than ten percent (10%) of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent (10%) stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us or amendments thereto, we believe that all Section 16(a) filing requirements applicable to ourexecutive officers, directors and greater than ten percent (10%) stockholders were compliedemployees. Copies of the Code of Ethics may be obtained, without charge, upon written request addressed to: Network-1 Technologies, Inc., 65 Locust Avenue, Third Floor, New Canaan, Connecticut 06840, Attn: Chief Executive Officer.during 2016insider trading laws, rules and regulations, and listing standards applicable to us. Under this policy, all of our officers, employees, non-employee directors and consultants who are in possession of material non- public information are prohibited from trading in the Company’s securities, except for a Form 4 for Jonathan Greene,trades made pursuant to plans approved by our Executive Vice President, filed one day late on March 10, 2016.compliance officer and counsel in accordance the insider trading policy that are intended to comply with Rule 10b5-1 under the Exchange Act.-38- - 48 -20162023 and December 31, 2015,2022, awarded to, earned by or paid to our Chief Executive Officer ("CEO"(“CEO”) and to each of our executive officers who received total compensation in excess of $100,000 for the year ended December 31, 20162023 for services rendered in all capacities to us (collectively, the "Named“Named Executive Officers"Officers”).
Principal Position Year Salary ($) Bonus ($)
Awards($)(3)
Awards (4)
Compensation Total($) Corey M. Horowitz 2016 $ 440,000 $ $ 1,696,000 $ — $ 35,000 $ 7,073,000 Chairman and Chief 2015 $ 415,000 $ 1,086,000 $ — $ 108,000 $ 35,000 $ 1,644,000 Executive Officer 2016 $ 166,000 $ 75,000 $ 124,000 $ — $ 33,375 $ 398,315 Chief Financial Officer 2015 $ 157,500 $ 30,000 $ — $ 13,000 $ 22,890 $ 223,390 2016 $ 200,000 $ 125,000 $ 124,000 $ — $ 33,375 $ 482,375 Executive Vice President 2015 $ 200,000 $ 40,000 $ — $ 13,000 $ 33,375 $ 286,375 Name and
Principal Position Year Salary ($) Bonus ($) Stock
Awards($)(3) All Other
Compensation($)(1) Total($) Corey M. Horowitz 2023 $ 545,572 $ 305,000 (2) $ — $ 53,500 (4) $ 904,072 Chairman and Chief Executive Officer 2022 $ 535,000 $ 175,000 (2) $ 1,102,940 $ 109,675 (4) $ 1,922,615 Robert Mahan 2023 $ 175,000 $ — $ 115,000 (5) $ — $ 290,000 Chief Financial Officer Jonathan Greene 2023 $ 200,000 $ 25,000 $ 33,900 $ 30,409 (6) $ 289,309 Executive Vice President 2022 $ 200,000 $ 25,000 $ 41,100 $ 20,419 (6) $ 286,519 (1)We have concluded that the aggregate amount of perquisites and other personal benefits paid in 2016 and 2015 to either Mr. Horowitz, Mr. Kahn or Mr. Greene did not exceed $10,000.(2)Mr. Horowitz received the following cash incentive bonus payments for 2016: (i) an annual discretionary bonus of $650,000 and (ii) incentive bonus compensation of $4,252,000 pursuant to his employment agreement (see "Employment Agreements-Termination of Employment and Change In-Control Arrangements" below). Mr. Horowitz received the following cash incentive bonus payments for 2015: (i) an annual discretionary bonus of $200,000 and (ii) incentive bonus compensation of $886,000 pursuant to his employment agreement.(3)The amounts in this column represent the aggregate grant date fair value of restricted stock units awards granted to the Named Executive Officers computed in accordance with FASB ASC Topic 718. In accordance with SEC rules, the grant date fair value of an award that is subject to a performance condition is based on the probable outcome of the performance condition. See Note G[1] to our consolidated financial statements included in this Annual Report for a discussion of the assumptions made by the Company in determining the grant date fair value.(4)The amounts in this column represent the aggregate grant date fair value of option awards granted to the Named Executive Officers in accordance with FASB ASC Topic 718. See Note G[2] to our consolidated financial statements included in this Annual Report for a discussion of the assumptions in determining the grant date fair value made by the Company.(5)Includes 401K matching funds contributions by the Company and profit sharing under the Company's 401k Plan for the benefit of Mr. Horowitz of $35,000 and $35,400 for 2016 and 2015, respectively.(6)Includes 401K matching funds contributions by the Company and profit sharing under the Company's 401k Plan for the benefit of Mr. Kahn of $33,375 for 2016 and $22,800 for 2015.(7)Represents 401K matching funds contributions by the Company and profit sharing under the Company's 401k Plan for the benefit of Mr. Greene of $33,375 for 2016 and $33,375 for 2015.- 49 -July 14, 2016,March 22, 2022, we entered into a new employment agreement ("Agreement"(“Agreement”) with Corey M. Horowitz, our Chairman and Chief Executive Officer, pursuant to which he continues to serve as our Chairman and Chief Executive Officer for a fivefour year term (“Term”), at an annual base salary of $475,000 which shall be increased by$535,000 subject to increases of 3% per annum during the term of the Agreement.Term. The Agreement established an annual target bonus of $175,000 for theour Chairman and Chief Executive Officer based upon performance. For the year ended December 31, 2023 and 2022, our Chairman and Chief Executive Officer received an annual discretionary bonus of $175,000.theour Chairman and Chief Executive Officer, under our 2013 Plan, 750,000600,000 restricted stock units (the "RSUs"“RSUs”, each RSU awarded by us to our officers, directors and consultants represents a contingent right to receive one share of our common stock) which vestterms provided for vesting in threefour tranches, as follows: (i) 250,000(1) 175,000 RSUs shallvested 100,000 RSUs on March 22, 2023 and 75,000 RSUs will vest on July 14, 2018, March 22,2024,subject to Mr. Horowitz'sHorowitz’s continued employment by us through theeach such vesting date (the "Employment Condition"“Employment Condition”) (“Tranche 1”); (ii) 250,000(2) 150,000 RSUs shall vest if at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments forduring the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2)Term our common stock achievingachieves a closing price (for 20for twenty (20) consecutive trading days)days (“Closing Price”) of a minimum of $3.25$3.50 per share (subject to adjustment for stock splits) and the Employment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 2”); (3) 150,000 RSUs shall vest if at any time during the term of employment; and (iii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2)Term our common stock achievingachieves a closing price (for 20 consecutive trading days)Closing Price of a minimum of $4.25$4.00 per share (subject to adjustment for stock splits) and the Employment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 3”); and (4) 125,000 RSUs shall vest if at any time during the termTerm, our common stock achieves a Closing Price of employment. Notwithstandinga minimum of $4.50 per share (subject to adjustment for stock splits) and the aforementioned, inEmployment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 4”). In the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employmentby Mr. Horowitz for Good Reason (as defined), all in each case prior to the last day of the 750,000Term, the vesting of all RSUs (Tranches 1, 2, 3 and 4) shall accelerate (and not be subject to any conditions) and all RSUs shall become immediately fully vested. All RSUs granted by us to our officers, directors or consultants have dividend equivalent rights.the Company'sour gross royalties or other payments from Licensing Activities (as defined) (without deduction of legal fees or any other expenses) with respect to our Remote Power Patent and a 10% net interest (gross royalties and other payments after deduction of all legal fees and litigation expenses related to licensing, enforcement and sale activities, but in no event shall he receive less than 6.25% of the gross recovery) of our royalties and other payments relating to Licensing Activities with respect to patents other than theour Remote Power Patent (including all of our Mirror Worlds Patent Portfolioexisting patent portfolios and Cox Patent Portfolio)our investment in ILiAD) (collectively, the "Incentive Compensation"“Incentive Compensation”). During the year ended December 31, 20162023 and December 31, 2015,2022, Mr. Horowitz earned Incentive Compensation of $4,252,000$130,000 and $886,000,$-0-, respectively.-40- term of his employmentTerm or at anytimeany time thereafter, whether he is employed by us or not; provided,, that,, the employment of Mr. Horowitz has not been terminated by us "For Cause"“For Cause” (as defined) or terminated by him without "Good Reason"“Good Reason” (as defined). In the event of a merger or sale of- 50 -Horowitz'sHorowitz’s employment is terminated by us "Other“Other Than For Cause"Cause” (as defined) or by him for "Good Reason"“Good Reason” (as defined), Mr. Horowitz shall also be entitled to (i) a lump sum severance payment of 12 months base salary, (ii) a pro-rated portion of the $175,000 target bonus provided bonus criteria have been satisfied on a pro-rated basis through the calendar quarter in which the termination occurs and (iii) accelerated vesting of all unvested options, RSUs or other awards.term of the AgreementTerm and for a period of 12 months thereafter if his employment is terminated "Other“Other Than For Cause"Cause” (as defined) provided he is paid his 12 month base salary severance amount and (ii) for a period of two years from the termination date, if terminated "For Cause"“For Cause” by us or "Without“Without Good Reason"Reason” by Mr. Horowitz.David Kahn serves as our Chief Financial Officer on an at-will basis pursuant to an offer letter, dated April 9, 2014, at an annual base salary of $175,000 (increased in June 2016 from $157,000). Mr. Kahn received an annual bonus of $75,000 for the year ended December 31, 2016 and $30,000 for December 31, 2015. In connection with the offer letter, Mr. Kahn was issued, under our 2013 Plan, a 5-year stock option to purchase 50,000 shares of the common stock, at an exercise price of $1.65 per share, which option vested in two equal amounts (25,000 shares each) on each of December 31, 2014 and December 31, 2015. On June 9, 2016, Mr. Kahn was granted 50,000 restricted stock units (RSUs) under our 2013 Plan (each RSU represents a contingent right to receive one share of our common stock). Each such RSU vests 50% on the one year anniversary of the grant (June of 2017) and 50% on the two year anniversary of grant (June 9, 2018). In addition, in the event Mr. Kahn's employment is terminated without "Good Cause" (as defined), he shall receive (i) (a) 6 months base salary or (b) 12 months base salary in the event of a termination without "Good Cause" within 6 months following a "Change of Control" of the Company (as defined) and (ii) accelerated vesting of all remaining unvested shares underlying his options or any other awards he may receive in the future.ana discretionary annual bonus of $125,000$25,000 for the year ended December 31, 2016each of 2023 and $40,000 for the year ended December 31, 2015.2022. On June 9, 2016,January 8, 2024, Mr. Greene was granted 50,000 restricted stock units (RSUs)15,000 RSUs under our 2013the 2022 Plan, (each RSU represents a contingent right to receive one share50% of our common stock). Thesuch RSUs vest 50%vested on the one year anniversary of the date of grant (June 9, 2017)(January 8, 2025) and 50% of such RSUs vested on the two year anniversary of the grant (June 9, 2018)(January 8, 2026).During On January 24, 2023, Mr. Greene was granted 15,000 RSUs under the 2022 Plan, 50% of such RSUs vested on the one year ended December 31, 2016, David Kahn,anniversary of the date of grant (January 24, 2023) and 50% of such RSUs vested on the two year anniversary of the grant (January 24, 2024).exercisedsince December 21, 2022 on a stock option to purchase 100,000 shares of common stockconsulting basis at an exercise priceannual compensation of $1.59 per share. Such option$175,000. On September 8, 2023, Mr. Mahan was exercisedgranted 50,000 RSUs under the 2022 Plan, 50% of such RSUs vest on a partial net exercise (cashless) basis by Mr. Kahn's delivery to us of cash of $61,295, 50,857 shares to satisfy the balanceone year anniversary of the aggregate exercise pricegrant (September 8, 2024) and 5,563 shares delivered to satisfy the balance of withholding taxes. As a result50% of the option exercise, Mr. Kahn received 43,580 net shares.RSUs vest on the two year anniversary date of grant (September 8, 2025).-41- - 51 -During the year ended December 31, 2016, Jonathan Greene, our Executive Vice President, exercised a stock option to purchase 240,000 shares at an exercise price of $1.60 per share. Such option was exercised on a net exercise (cashless) basis by delivery of 198,864 shares of common stock by Mr. Greene to the Company for the exercise price and 17,092 shares to satisfy withholding taxes. As a result of the option exercise, Mr. Greene received 24,044 net shares.. 401(k) plans provide which provides a tax-advantaged method of saving for retirement. We expensed matching contributions and profit sharing of $101,750$73,159 and $91,261$78,194 under the 401(k) plan for the years ended December 31, 20162023 and December 31, 2015,2022, respectively.2016,2023, we compensated each non-management director of our companyCompany by granting to each such outside director 15,000 restricted stock units (each RSU represents a contingent right to receive one share of our common stock).15,000 RSUs. The RSUs vested as follows: 7,500 on the datein equal amounts of grant (June 9, 2016) and 3,750 RSUs on each of March 15, 2023, June 15, 2023, September 9, 201615, 2023 and December 9, 2016.15, 2023. In addition, we pay our non-management directors cash director fees of $40,000 per annum ($10,00010,000 per quarter). Non-management directors also receive additional cash compensation on an annual basis for serving on the following Board committees: The Audit Committee -Chairperson ($7,500)receives $7,500 and member ($5,000) andmembers receive $5,000; the Chairperson and membermembers of each of the Compensation Committee and Nominating and Corporate Governance Committee receive annual fees of $3,750 and $2,500,$2,500, respectively.In consideration for serving as the sole member of our Strategic Development Committee, in June 2013 we issued to Niv Harizman a 5-year option to purchase 300,000 shares of our common stock, at an exercise price of $1.88 per share, which option vested 100,000 shares on the date of grant, 100,000 shares on the first anniversary of the date of grant and vested 100,000 shares on the second anniversary from the grant date.boardBoard of directorsDirectors (other than our Named Executive Officers) during the year ended December 31, 2016.2023. No director who is also a Named Executive Officer received any compensation for services as a director in 2016.Name Emanuel Pearlman $50,000 $37,000 — $87,000 Niv Harizman $46,250 $37,000 — $83,250 Allison Hoffman $48,875 $37,000 — $85,875
($)(2) (3)
($)Emanuel Pearlman $50,000 $33,750 $ 1,125 $ 84,875 Niv Harizman $46,250 $33,750 $ 1,125 $ 81,125 Allison Hoffman $48,750 $33,750 $ 1,125 $ 83,625 (1) Represents director'sdirectors’ fees payable in cash to each non-management director of $10,000 per quarter (or $40,000($40,000 per annum) for 20162023 plus additional cash fees for serving on Board committees as disclosed above.- 52 -(2) The amounts included in this column represent the grant date fair value of restricted stock unit awards (RSUs) granted to directors, computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions see Note G[2]B[10] to our consolidated financial statements included in this Annual Report. The 15,000 restricted stock units (RSUs)RSUs granted to each non-management director vested 7,500 RSUs on June 9, 2016 (date of grant) and 3,750 RSUs on each of September 9, 2016 and December 9, 2016.a quarterly basis beginning March 15, 2023. Each restricted stock unitRSU represents thea contingent right to receive one share of common stock.(3) As of December 31, 2016,2023, no stock options were owned by any of the above listed directors also held outstanding stock options to purchase sharesdirectors.(4) Includes dividends (dividend equivalent rights) earned upon vesting of our common stock as follows: Mr. Pearlman – options to purchase 95,000 shares; Mr. Harizman – options to purchase 445,000 shares; and Ms. Hoffman - options to purchase 145,000 shares.RSUs in 2023.-42- 2016unexercised options andoutstanding equity awards consisting of unvested restricted stock units for each Named Executive Officer as of December 31, 2016: Option Awards Stock Awards Name
Underlying Unexercised
Options Option Exercise Price ($) Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested ($)
(1) ($) Exercisable Unexercisable — 750,000(2) $2,550,000 — 50,000(3) $ 170,000 — $ 1.65 50,000(4) $ 170,000 (1)
Number of Securities
Underlying Unexercised
Options
Price ($)
Date
Exercisable500,000(2) $1,090,000 Robert M. Mahan
Chief Financial Officer— 50,000(3) $ 109,000
Executive Vice President— — — — 22,500(4) $ 49,050 (1) In accordance with SEC rules, market value is based on $3.40$2.18 per share representing the closing price of our common stock on the last trading day of the year.(2) Represents (i) 250,000 based500,000 unvested restricted stock units, that vest on July 14, 2018, subject to Mr. Horowitz's continued employment by us; and (2) an aggregatethe terms of 500,000 performance basedthe vesting of such restricted stock units that vest at anytime beginning July 14, 2018 through July 14, 2021, subject to Mr. Horowitz's continued employment by usare disclosed on page 40 under “Employment Agreements - Termination of Employment and our stock price achieving closing prices of $3.25 (250,000Change-In-Control Arrangements.”(3) Represents 50,000 unvested restricted stock units, shall vest) and $4.25 (250,000 additional restricted stock units shall vest), all of which is described in detail under Executive Compensation – Narrative Disclosure to Summary Compensation Table on page 50 of this Annual Report.(3)Represents (i) 25,000 restricted stock units which vest on June 9, 2017,September 8, 2024 and (ii) 25,000 restricted stock units which vest on June 9, 2018,September 8, 2025, subject to Mr. Kahn'sMahan’s continued employment by us. All suchengagement.(4) Represents 22,500 unvested restricted stock units, were granted to Mr. Kahn on June 9, 2016.(4)Representsof which (i) 25,0007,500 restricted stock units which vestvested on June 9, 2017, andJanuary 18, 2024, (ii) 25,0007,500 restricted stock units whichvested on January 24, 2024, and (iii) 7,500 restricted stock units will vest on June 9, 2018,January 24, 2025, subject to Mr. Greene'sGreene’s continued employment by us. All such restricted stock units were granted to Mr. Greene on June 9, 2016.employment.-43- - 53 -ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS MarchFebruary 15, 20172024 for (i) each of our directors, (ii) each of our executive officers, (iii) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our executive officers and directors as a group. 7,118,769 28.1% 2,165,472 9.0% 3,450,878 14.3% 2,865,645 11.9% 1,200,130 5.0% 475,418 1.9% 163,375 * 136,158 * 98,250 * 78,125 *
(6 Persons) 8,055,095 30.8%
OF BENEFICIAL OWNER
OF BENEFICIAL
OWNERSHIP (1)(2) PERCENTAGE
OF COMMON STOCK BENEFICIALLY OWNED(2) CMH Capital Management Corp.(4) 2,291,372 9.7% Niv Harizman(5) 305,985 1.3% Emanuel Pearlman(6) 132,059 * Jonathan E. Greene(7) 103,597 * Allison Hoffman(8) 94,311 * Robert Mahan(9) — — All officers and directors as a group
(6 Persons) 7,531,894 5% Stockholders: Steven D. Heinemann(10) 1,941,696 8.2% Goose Hill Capital LLC(11) 1,356,563 5.8% Clayton Partners LLC(12) 1,435,200 6.1% (1) Unless otherwise indicated, we believe that all persons named in the above table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them. Unless otherwise indicated the address for each listed beneficial owner is c/o Network-1 Technologies, Inc., 445 Park65 Locust Avenue, Suite 912,Third Floor, New York, New York 10022.Canaan, Connecticut 06840.-44- (2) A person is deemed to be the beneficial owner of shares of common stock that can be acquired by such person within 60 days from MarchFebruary 15 2016, 2024 upon the exercise of stock options, orvesting of restricted stock units that vestor the conversion of other convertible securities within such 60 day period. Each beneficial owner's percentage ownership is determined by assuming that all stock options and restricted stock units held by such person (but not those held by any other person) and which are exercisable or vestedvest within 60 days from MarchFebruary 15, 20172024 have been exercised andor vested. Assumes a base of 24,204,95423,552,564 shares of our common stock outstanding.outstanding as of February 15, 2024.- 54 -(3) Includes (i) 3,124,3854,007,559 shares of common stock heldowned by Mr. Horowitz, (ii) 1,250,00075,000 shares of common stock subject to currently exercisablerestricted stock options held by Mr. Horowitz,units that vest within 60 days of February 15, 2024 (iii) 2,165,4722,157,097 shares of common stock held by CMH Capital Management Corp., an entity solely owned by Mr. Horowitz, (iv) 125,900134,275 shares of common stock owned by the CMH Capital Management Corp. Profit Sharing Plan, of which Mr. Horowitz is the trustee, (v) 67,47167,470 shares of common stock owned by Donna Slavitt, the wife of Mr. Horowitz, (vi) an aggregate of 383,250452,250 shares of common stock held by two trusts and a custodian account for the benefit of Mr. Horowitz'sHorowitz’s three children, and (vii) 2,291 shares of common stock held by Horowitz Partners, a general partnership of which Mr. Horowitz is a partner. Does not include 750,000 shares of common stock from425,000 restricted stock units owned by Mr. Horowitz that willdo not vest within 60 days of March 15, 2017.February 15,2024.(4) Includes 2,165,4722,157,097 shares of common stock owned by CMH Capital Management Corp. and 125,900134,275 shares of common stock owned by CMH Capital Management Corp. Profit Sharing Plan. Corey M. Horowitz, by virtue of being the sole officer, director and shareholder of CMH Capital Management Corp. and the trustee of the CMH Capital Management Corp. Profit Sharing Plan, has the sole power to vote and dispose of the shares of common stock owned by CMH Capital Management Corp. and the CMH Capital Management Corp. Profit Sharing Plan.(5) Includes (i) 302,235 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of February 15, 2024. Does not include 11,250 shares of common stock subject to restricted stock units owned by Mr. Harizman that do not vest within 60 days from February 15, 2024. (6) Includes (i) 128,309 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of February 15,2024. Does not include 11,250 shares of common stock subject to restricted stock units owned by Mr. Pearlman that do not vest within 60 days from February 15, 2024. (7) Includes 103,597 shares of common stock. Does not include 22,500 shares of common stock subject to restricted stock units owned by Mr. Greene that do not vest within 60 days from February 15, 2024. (8) Includes (i) 90,561 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of February 15, 2024. Does not include 11,250 shares of common stock subject to restricted stock units owned by Ms. Hoffman that do not vest within 60 days from February 15, 2024. -45- (5)(9) (10) Includes 585,233585,133 shares of common stock owned by Mr. Heinemann and 2,865,6451,356,563 shares of common stock owned by Goose Hill Capital LLC. Goose Hill Capital LLC is an entity ina limited liability company of which Mr. Heinemann is the sole member. Mr. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon a Form 4Amendment No. 11 to Schedule 13G filed by Mr. Heinemann with the SEC on June 19, 2015 and Amendment No. 5 to Schedule 13G filed by Mr. Heinemann and Goose Hill Capital LLC with the SEC on February 13, 2017.January 29, 2024. The address for Mr. Heinemann is 24 West 40th Street, 15th Floor, New York, New York 10018.c/o Goose Hill Capital, LLC, 12378 Indian Road, North Palm Beach, Florida 33408.(6)(11) 2,865,6451,356,563 shares of common stock. Steven D. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon a Form 4Amendment No. 11 to Schedule 13G filed by Mr. Heinemann with the SEC on June 19, 2015 and Amendment No. 5 to Schedule 13G filed by Mr. Heinemann and Goose Hill Capital LLC with the SEC on February 13, 2017.January 29, 2024. The address for Goose Hill Capital LLC is 24 West 40th Street, 15th Floor, New York, New York 10018.(7)(12) Includes 1,200,130 shares of common stock. The aforementioned beneficial ownership is based upon a Schedule 13G filed by Mr. Herzog with the SEC on February 10, 2016. The address of Mr. Herzog is 824 Harbor Road, Southport, Connecticut 06890-1410.(8)Includes (i) 30,418 shares of common stock, and (ii) 445,000 shares of common stock subject to currently exercisable options. Does not include 10,125 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2017.(9)Includes (i) 18,375 shares of common stock, and (ii) 145,000 shares of common stock subject to currently exercisable options. Does not include 10,125 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2017.(10)Includes (i) 41,158 shares of common stock, and (ii) 95,000 shares of common stock subject to currently exercisable stock options. Does not include restricted stock units for 10,125 shares of common stock that do not vest within 60 days from March 15, 2017.(11)Includes (i) 33,2501,435,200 shares of common stock owned by Mr. Kahn and (ii) 65,000 shares of common stock subject to currently exercisable stock options ownedClayton Partners LLC based upon Amendment No.1 Schedule 13G filed by Mr. Kahn. Does not include 50,000 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2017.Clayton Partners LLC with the SEC on February 13, 2024. The address for Clayton Partners is 3160 College Avenue, Suite 203, Berkeley, California 94705.(12)ITEM 13.Includes (i) 28,125 shares of common stock and (ii) 50,000 shares of common stock subject to currently exercisable options. Does not include 50,000 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2017.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE - 55 -ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCESince the last two fiscal years there were no transactions with related persons requiring disclosure under Item 404 of Regulation S-K under the Securities Act.CodesCode of Ethics, all of our officers, directors and employees are to avoid conflicts of interest and to refrain from taking part or exercising influence in any transaction in which such party'sparty’s personal interest may conflict with the best interest of the Company. Except for provisions of the Audit Committee Charter, there are no written procedures governing review of related-persons transactions.MKTAmerican LLC Company Guide.-46- ACCOUNTINGACCOUNTANT FEES AND SERVICESFriedman$100,000 and $95,000, respectively,$156,000 for the yearsyear ended December 31, 2016 and December 31, 20152023, for the audit of our annual financial statements, review of our financial statements included in our Form 10-Qs and for other services in connection with statutory or regulatory filings.Audit Related Fees, Marcum LLP billed us aggregate fees of $103,200 for the year ended December 31, 2022 for the audit of our financial statements for 2022, review of our financial statements included in our Form 10-Q for the three months ended September 30, 2022 and for other services in connection with statutory and regulatory filings. Certain assets of our prior independent registered public accounting firm, Friedman LLP (“Friedman”), were acquired by Marcum LLP effective September 1, 2022. Friedman, our independent registered public accounting firm until October 11, 2022, billed us aggregate fees of $48,832 for the year ended December 31, 2022 for review of our financial statements included in our Form 10-Qs for the three months ended March 31, 2022 and June 30,2022 and for other services in connection with statutory and regulatory filings.All Other FeesFriedman$10,900 during$2,500 and $30,320 for the years ended December 31, 2023 and 2022. Friedman LLP provided various tax and compliance services for which it billed us $3,271 for the year ended December 31, 2016.2022 which included preparation of our tax returns. Marcum LLP and Friedman LLP did not render any other professional services other than those discussed above for the year ended December 31, 2015.-47- - 56 -Page Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 688) F-1 Report of independent registered public accounting firmF-1Consolidated Balance Sheets as of December 31, 20162023 and 20152022F-2F-3Consolidated Statements of IncomeOperations and Comprehensive IncomeLoss for the years ended December 31, 20162023 and 20152022F-3F-4Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 20162023 and 20152022F-4F-5Consolidated Statements of Cash Flows for the years ended December 31, 20162023 and 20152022F-5F-6Notes to Consolidated Financial Statements F-6F-7-48- and Stockholders
Network-1 Technologies, Inc.20162023 and 2015, and2022, the related consolidated statements of incomeoperations and comprehensive income, changes in stockholders'loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 20162023, and 2015. Network-1 Technologies, Inc.'s management is responsiblethe related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for these consolidatedeach of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. statements.statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidatedthe Company's financial statements based on our audits.Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The companyCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. OurAs part of our audits included consideration, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company'sCompany's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includessupportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidatedpresentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.In our opinion,consolidatedcurrent period audit of the financial statements referredthat were communicated or required to above present fairly, in allbe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material respects,to the financial position of Network-1 Technologies, Inc.statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years ended December 31, 2016 and 2015 and in conformity with accounting principles generally accepted in the United States of America./s/ Friedman LLP
March 8, 2024March 20, 2017F-1 December 31, 2016 2015 CURRENT ASSETS: Cash and cash equivalents $ 50,918,000 $ 20,608,000 Marketable securities, available for sale 1,065,000 1,061,000 Royalty receivables, net 2,879,000 1,537,000 Prepaid Taxes 1,195,000 — Other current assets 83,000 196,000 Total Current Assets 56,140,000 23,402,000 OTHER ASSETS: Deferred tax assets 207,000 4,958,000 Patents, net of accumulated amortization 1,231,000 2,002,000 Security deposits 19,000 19,000 $ 57,597,000 $ 30,381,000 LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 171,000 $ 139,000 Accrued contingency fees and related costs 2,681,000 724,000 Accrued payroll 1,748,000 764,000 Other accrued expenses 125,000 64,000 TOTAL LIABILITIES 4,725,000 1,691,000 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY
23,744,829 and 23,211,149 issued and outstanding at December 31, 2016 Additional paid-in capital 62,367,000 61,249,000 Accumulated deficit (9,702,000 ) (32,756,000 ) Accumulated other comprehensive loss (31,000 ) (35,000 ) TOTAL STOCKHOLDERS' EQUITY 52,872,000 28,690,000 $ 57,597,000 $ 30,381,000 December 31, 2023 2022 ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 16,896,000 $ 13,448,000 Marketable securities, at fair value 28,571,000 34,991,000 Prepaid taxes — 177,000 Other current assets 206,000 348,000 Total Current Assets 45,673,000 48,964,000 OTHER ASSETS: Patents, net of accumulated amortization 1,326,000 1,592,000 Equity investment 5,249,000 7,252,000 Operating leases right of use asset 16,000 161,000 Security deposits 13,000 — Total Other Assets 6,604,000 9,005,000 TOTAL ASSETS $ 52,277,000 $ 57,969,000 LIABILITIES AND STOCKHOLDERS’ EQUITY: CURRENT LIABILITIES: Accounts payable $ 125,000 $ 507,000 Income taxes payable — 115,000 Accrued payroll 378,000 317,000 Other accrued expenses 297,000 587,000 Operating lease obligations, current 23,000 79,000 Total Current Liabilities 823,000 1,605,000 LONG TERM LIABILITIES: Deferred tax liability 762,000 1,161,000 Operating lease obligation, non-current — 94,000 TOTAL LIABILITIES $ 1,585,000 $ 2,860,000 COMMITMENTS AND CONTINGENCIES (See Note I) STOCKHOLDERS' EQUITY Preferred stock, $ par value; authorized shares;
issued and outstanding at December 31, 2023 and December 31, 2022 $ — $ — Common stock, $ par value; authorized shares;
and shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively 235,000 239,000 Additional paid-in capital 67,446,000 66,939,000 Accumulated deficit (16,989,000 ) (12,055,000 ) Accumulated other comprehensive loss — (14,000 ) TOTAL STOCKHOLDERS’ EQUITY 50,692,000 55,109,000 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 52,277,000 $ 57,969,000 F-2INCOMEOPERATIONS AND COMPREHENSIVE INCOME
December 31, 2016 2015 $ 65,088,000 $ 16,565,000 OPERATING EXPENSES: Costs of revenue 25,794,000 5,506,000 Professional fees and related costs 2,590,000 2,331,000 General and administrative 2,782,000 2,874,000 Amortization of patents 813,000 1,655,000 Stock-based compensation 509,000 272,000 Contingent patent cost 500,000 — OPERATING INCOME 32,100,000 3,927,000 Interest income, net 61,000 58,000 32,161,000 3,985,000 INCOME TAXES (BENEFIT): Current 4,187,000 93,000 Deferred taxes, net 4,751,000 (215,000 ) Total income taxes (benefit) 8,938,000 (122,000 ) $ 23,223,000 $ 4,107,000 Net Income Per Share Basic $ 1.00 $ 0.17 Diluted $ 0.93 $ 0.17 Weighted average common shares outstanding: Basic 23,320,065 Diluted 24,885,282 24,482,557 NET INCOME $ 23,223,000 $ 4,107,000 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
during the year (18,000 ) Total other comprehensive income (loss) 4,000 (18,000 ) COMPREHENSIVE INCOME $ 23,227,000 $ 4,089,000 Years Ended
December 31, 2023 2022 REVENUE $ 2,601,000 $ — OPERATING EXPENSES: Costs of revenue 874,000 — Professional fees and related costs 807,000 809,000 General and administrative 2,889,000 2,778,000 Amortization of patents 266,000 316,000 TOTAL OPERATING EXPENSES 4,836,000 3,903,000 OPERATING LOSS (2,235,000 ) (3,903,000 ) OTHER INCOME Interest and dividend income, net 1,868,000 1,020,000 Gain on conversion of note — 271,000 Gain on equity method investment — 3,883,000 Net realized and unrealized gain (loss) on marketable securities 525,000 (1,351,000 ) Total other income, net 2,393,000 3,823,000 INCOME (LOSS) BEFORE INCOME TAXES AND SHARE OF
NET LOSSES OF EQUITY METHOD INVESTEE 158,000 (80,000 ) INCOME TAXES PROVISION: Current 11,000 — Deferred taxes, net (399,000 ) 607,000 Total income taxes (benefit) expense (388,000 ) 607,000 546,000 (687,000 ) SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE (2,003,000 ) (1,639,000 ) NET LOSS $ (1,457,000 ) $ (2,326,000 ) Net Loss Per Share: Basic $ (0.06 ) $ (0.10 ) Diluted $ (0.06 ) $ (0.10 ) Weighted average common shares outstanding: Basic 23,791,287 23,825,917 Diluted 23,791,287 23,825,917 Cash dividends declared per share $ 0.10 $ 0.10 NET LOSS $ (1,457,000 ) $ (2,326,000 ) OTHER COMPREHENSIVE INCOME (LOSS) Net unrealized holding gain (loss) on corporate bonds and notes arising during the year, net of tax 14,000 (2,000 ) COMPREHENSIVE LOSS $ (1,443,000 ) $ (2,328,000 ) F-3STOCKHOLDERS'STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 20162023 AND 2015 Common Stock
Paid-in
Capital Accumulated Deficit
(loss) Shares Amount Balance – January 1, 2015 24,274,336 $ 243,000 $ 60,977,000 $ (34,262,000 ) $ (17,000 ) $ 26,941,000 — — 272,000 — — 272,000 200,000 2,000 — — — 2,000 (79,651 ) (1,000 ) — (1,000 ) — (2,000 ) (1,183,536 ) (12,000 ) — (2,600,000 ) — (2,612,000 ) — — — — (18,000 ) (18,000 ) — — — 4,107,000 — 4,107,000 23,211,149 $ 232,000 $ 61,249,000 $ (32,756,000 ) $ (35,000 ) $ 28,690,000 — — 509,000 — — 509,000 45,000 * — — — — 59,749 1,000 88,000 — — 89,000 470,251 5,000 — — — 5,000 (351,541 ) (4,000 ) — — — (4,000 ) (21,379 ) * — ) — (49,000 ) 375,000 4,000 521,000 — — 525,000 (43,400 ) * — (120,000 ) — (120,000 ) — — — — 4,000 4,000 — — — 23,223,000 — 23,223,000 23,744,829 $ 238,000 $ 62,367,000 $ (9,702,000 ) $ (31,000 ) $ 52,872,000 __________________________*Less than $1,000 Total Stockholders’ Equity Common Stock Additional Paid-in Capital Shares Amount Additional Paid-in
Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Balance – January 1, 2022 23,792,212 $ 238,000 $ 66,361,000 $ (6,428,000 ) $ (12,000 ) $ 60,159,000 Dividends and dividend equivalents declared — — — (2,418,000 ) — (2,418,000 ) Stock-based compensation — — 585,000 — — 585,000 Vesting of restricted stock units 182,500 2,000 (2,000 ) — — — Cashless exercise of stock options 500,000 5,000 (5,000 ) — — — Value of shares delivered to pay exercise price and withholding taxes (382,543 ) (3,000 ) — (352,000 ) — (355,000 ) Treasury stock purchased and retired (228,530 ) (3,000 ) — (531,000 ) — (534,000 ) Net unrealized loss on corporate bonds and notes — — — — (2,000 ) (2,000 ) Net loss — — — (2,326,000 ) — (2,326,000 ) Balance – December 31, 2022 23,863,639 $ 239,000 $ 66,939,000 $ (12,055,000 ) $ (14,000 ) $ 55,109,000 Dividends and dividend equivalents declared — — — (2,433,000 ) — (2,433,000 ) Stock-based compensation — — 508,000 — — 508,000 Vesting of restricted stock units 157,500 1,000 (1,000 ) — — — Value of shares delivered to pay withholding taxes (39,099 ) — — (83,000 ) — (83,000 ) Treasury stock purchased and retired (428,132 ) (5,000 ) — (961,000 ) — (966,000 ) Realized gain on corporate bonds — — — — 14,000 14,000 Net loss — — — (1,457,000 ) — (1,457,000 ) Balance – December 31, 2023 23,553,908 $ 235,000 $ 67,446,000 $ (16,989,000 ) — $ 50,692,000 F-4
December 31, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 23,223,000 $ 4,107,000 Amortization of patents 813,000 1,655,000 Stock-based compensation 509,000 272,000 Deferred tax provision 4,751,000 (215,000 ) Impairment of other investments — 576,000 Source (use) of cash from changes in operating assets and liabilities: Royalty receivables (1,342,000 ) (288,000 ) Prepaid taxes (1,195,000 ) — Other current assets 113,000 46,000 Accounts payable 32,000 (199,000 ) Accrued expenses 3,002,000 (321,000 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 29,906,000 5,633,000 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of patents (42,000 ) (75,000 ) CASH FLOWS FROM FINANCING ACTIVITIES: Value of shares delivered to fund withholding taxes on exercise of options (49,000 ) Repurchase of common stock (120,000 ) (2,612,000 ) Proceeds from exercises of options and warrants 615,000 — NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 446,000 (2,612,000 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 30,310,000 2,946,000 CASH AND CASH EQUIVALENTS, beginning of year 20,608,000 17,662,000 CASH AND CASH EQUIVALENTS, end of year $ 50,918,000 $ 20,608,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the years for: Interest $ — $ — Income taxes $ 5,265,000 $ 107,000 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (1,457,000 ) $ (2,326,000 ) Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: Amortization of patents 266,000 316,000 Stock-based compensation 508,000 585,000 Loss allocated from equity investment 2,003,000 1,639,000 Deferred tax (benefit) expense (399,000 ) 607,000 Amortization of right of use asset, net 65,000 43,000 Gain on equity method investment — (3,883,000 ) Accrued interest on convertible note — (86,000 ) Gain on conversion of note — (271,000 ) Unrealized (gain) loss on marketable securities (103,000 ) 880,000 Changes in operating assets and liabilities: Other current assets 142,000 (208,000 ) Prepaid taxes 177,000 (167,000 ) Accounts payable (382,000 ) 48,000 Income taxes payable (115,000 ) (2,837,000 ) Security deposit (13,000 ) 13,000 Operating lease obligations (70,000 ) (31,000 ) Accrued expenses (291,000 ) 242,000 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 331,000 (5,436,000 ) CASH FLOWS FROM INVESTING ACTIVITIES: Sales of marketable securities 53,521,000 13,156,000 Purchases of marketable securities (46,984,000 ) (33,903,000 ) Development of patents — (524,000 ) Equity Investment — (1,000,000 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,537,000 (22,271,000 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid (2,371,000 ) (2,453,000 ) Value of shares delivered to fund withholding taxes (83,000 ) (355,000 ) Repurchases of common stock, inclusive of commissions (966,000 ) (534,000 ) NET CASH USED IN FINANCING ACTIVITIES (3,420,000 ) (3,342,000 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 3,448,000 (31,049,000 ) CASH AND CASH EQUIVALENTS, beginning of year 13,448,000 44,497,000 CASH AND CASH EQUIVALENTS, end of year $ 16,896,000 $ 13,448,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the years for: Interest $ — $ — Income taxes $ 65,000 $ 3,004,000 NON-CASH FINANCING ACTIVITY Accrued dividend rights on restricted stock units $ 65,000 $ 37,000 Modification of right-of-use asset $ 80,000 $ 204,000 Conversion of note receivable $ — $ 1,086,000 F-5Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015"Company"“Company”) is engaged in the development, licensing and protection of its intellectual property assets. The Company presently owns thirty-three (33)one hundred (100) U.S. patents, fifty-four (54) of such patents have expired, and fifteen (15) foreign patents related to (i) the Cox patent portfolio (the “Cox Patent Portfolio) relating to enabling technology for identifying media content on the Internet and taking further actions to be performed after such identification; (ii) the M2M/IoT patent portfolio (the “M2M/IoT Patent Portfolio”) relating to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine, and other mobile devices, including (i)smartphones, tablets and computers, and automobiles; (iii) the HFT patent portfolio (the “HFT Patent Portfolio”) covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) the Mirror Worlds patent portfolio (the “Mirror Worlds Patent Portfolio”) relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) the remote power patent (the "Remote“Remote Power Patent"Patent”) covering delivery of powerPower over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras; (ii) the Mirror Worlds patent portfolio (the "Mirror Worlds Patent Portfolio") relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; (iii) the Cox patent portfolio (the "Cox Patent Portfolio) relating to enabling technology for identifying media content on the Internet and taking further action to be performed based on such identification; and (iv) QoS patents (the "QoS Patents") relating to systems and methods for the transmission of audio, video and data over computer and telephony networks in order to achieve high quality of service (QoS).cameras.Company has been actively engaged in licensing its Remote Power Patent (U.S. Patent No. 6,218,930) covering the control of power delivery over Ethernet cables. The Company has entered into twenty-four license agreements with respect to its Remote Power Patent. The Company has also entered into two license agreements with respect to its Mirror Worlds Patent Portfolio. The Company'sCompany’s current strategy includes continuing to pursue licensing opportunities for its intellectual property assets.assets. In addition, the Company continually reviews opportunities to acquire or license additional intellectual property. property as well as other strategic alternatives. The Company'sCompany’s patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as the Company has achieved with respect to its Remote Power Patent and Mirror Worlds Patent Portfolio. In addition, the Company may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.Principlesconsolidation[1] Principles of Consolidation Company'sCompany’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("(“U.S. GAAP"GAAP”). The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiary,subsidiaries, Mirror Worlds Technologies, LLC and HFT Solutions, LLC. All intercompany transactions and balances are eliminated in consolidation.Note B – Summary of Significant Accounting Policies[ 1]2]Use of Estimates and Assumptions significant estimates and assumptions made in the preparation of the Company'sCompany’s consolidated financial statements primarily include revenue recognition,costs related to the Company’s assertion of litigation, the valuation of warrantsthe Company’s patent portfolios, stock-based compensation, the recoverability of deferred tax assets and stock-based payments, current income taxes, deferred income taxes, valuationthe carrying value of other investments, valuation of patents, accrued expenses and valuation of marketable securities.the Company’s equity method investments. Actual results could be materially different from those estimates, upon which the carrying values were based.[ 2]3]Cash and Cash Equivalents placesmaintains cash investmentsdeposits in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC"). Accounts at each institution are insured by the FDIC up to $250,000. At December 31, 2016,2023 and 2022, the Company maintained a cash balance of $50,418,000had $2,403,000 and $1,715,000, respectively, in excess of the FDIC limits.F-6NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial Statements20162023 and 2015Note B – Summary2022, the Company had cash equivalents of Significant Accounting Policies (continued)Cash[4] Marketable Securities cash equivalents as offixed income mutual funds. (see Note G hereof). At December 31, 20162023 and December 31, 2015 are composed of: December 31, 2016 December 31, 2015 Cash $ 9,452,000 $ 6,283,000 Money market funds 41,466,000 14,325,000 Total $ 50,918,000 $ 20,608,000 [3]Marketable SecuritiesMarketable2022, included in marketable securities, the Company had aggregate certificates of deposit of $6,077,000 and $2,976,000, respectively. The Company’s marketable securities are classified as available-for-salemeasured at fair value and are recorded at fair market value.accounted for in accordance with ASU 2016-01. Unrealized holding gains and losses on certificates of deposit, government securities, and fixed income mutual funds are recorded in net realized and unrealized gain (loss) from investments on the consolidated statements of operations and comprehensive (loss). Unrealized holding gains and losses, net of the related tax effect, on corporate bonds and notes are excluded from earnings and are reported as other comprehensivea separate component of stockholders’ equity until realized. Dividend and interest income or loss.are recognized when earned. Realized gains and losses are reclassifiedincluded in earnings and are derived using the specific identification method for determining the cost of the marketable securities.[5] Revenue Recognition • identification of the license agreement or litigation settlement agreement; • identification of the performance obligations in the license agreement or litigation settlement agreement; • determination of the consideration for the license or settlement; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when the Company satisfies its performance obligations. Schedule of disaggregation of revenue Years Ended December 31, 2023 2022 Litigation Settlements $ 2,601,000 $ — Total Revenue $ 2,601,000 $ — other comprehensivethe Company’s patent licensing and enforcement business is typically generated from negotiated license agreements or settlement agreements with respect to any of the Company’s expired patents. The timing and amount of revenue recognized from each licensee or such settlement agreement depends upon a variety of factors, including the terms of each agreement and the nature of the obligations of the parties. These agreements may include, but not be limited to, elements related to past infringement liabilities, non-refundable upfront license fees, and ongoing royalties on licensed products sold by the licensee. Generally, in the event of settlement of litigation related to the Company’s assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license, (ii) a non-refundable lump sum payment (license initiation fee) together with an ongoing obligation to pay quarterly or monthly royalties to the Company for the life of the licensed patent, or (iii) a lump sum settlement payment with respect to litigation involving the Company’s expired patents.[6] Equity Method Investments netzero, no further losses are recorded in the Company’s financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.lossexpense in the period they are realized. At December 31, 2016Company’s consolidated statements of operations and December 31, 2015, the Company's marketable securities consisted of two corporate bonds (face value $1,000,000) with a 3.9% and 4.5% coupon and maturities greater than three months when purchased. comprehensive loss.Company's marketable securities mature in 2021 and it is not the intentionCompany performed an assessment to determine significance of the equity method investee under the investment, asset and income tests utilizing the 20% threshold. The Company to hold such securities until maturity.[ 4]7]Patents [ 5]8]Impairment of long-lived assetsIntangible assets with finite lives are tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Accordingly, the Company records impairment losses on long-lived assets used in operations or expected to be disposed of when indicators of impairment exist and the undiscounted cash flows expected to be derived from those assets are less than carrying amounts of these assets. At December 31, 2016 and December 31 2015, there was no impairment to the Company's patents. For the year ended December 31, 2015, the Company wrote-off in full its investment of $576,000 in Lifestreams Technologies Corporation (see Note D hereof).[6]Allowance for Doubtful AccountsThe Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to their expected net realizable value. There was no allowance for doubtful accounts at December 31, 2016 and 2015.[7]Revenue RecognitionThe Company recognizes revenue received from the licensing of its intellectual property and other related intellectual property activities. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been performed pursuant to the terms of the applicable license agreement, (iii) amounts are fixed or determinable, and (iv) collectability of amounts is reasonably assured. The Company relies on royalty reports received from third party licensees to record its revenue. From time to time the Company may audit or otherwise dispute royalties reported from licensees. Any adjusted royalty revenue as a result of such audits or dispute is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined.[8]Costs of Revenue and Related Costs 20162023 and 20152022 contingent legal fees payable to patent litigation counsel, (see Note H[1] hereof),any other contractual payments to third parties related to net proceeds from settlementsmonetization of patents (see Note H[2]I[1] hereof) and incentive bonus compensation payable to its Chairman and Chief Executive Officer (see Note I[J[1] hereof).F-7NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note B – Summary of Significant Accounting Policies (continued)[9] Income Taxes Accounting Standards Codification (ASC)ASC Topic 740, "Income Taxes"Income Taxes (ASC 740), which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary (timing) differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized."AccountingAccounting for Uncertainty in Income Taxes", defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company had no uncertain tax positions as of December 31, 20162023 and December 31, 2015.United States2022.20132020 are not subject to examination by any applicable tax authorities.Effective January 1, 2016,authorities, except that tax authorities could challenge returns (only under certain circumstances) for earlier years to the Company elected to adopt Accounting Standards Update No. 2015-17, Income Taxes (Topic 740); Balance Sheet Classification of Deferred Taxes (ASU 2015-17) and classify the deferred tax assets as non-current assets on the consolidated balance sheets. See "Accounting Standards Adopted in 2016" section of this Note Bextent they generated loss carry-forwards that are available for further details.[10] Stock-Based Compensation -―Stock Compensation ("“ASC 718"718”). ASC 718 requires all stock-based compensation to employees, including grants of employee stock options and restricted stock units, to be recognized in the consolidated statements of incomeoperations and comprehensive income (loss) based on their grant date fair values.Share based payments issued to non-employees are recorded at their fair values, and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period and are expensed using an accelerated attribution model. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of options granted. The fair value of restricted stock units is determined based on the number of shares grantedunderlying the grant and either the quoted market price of the Company'sCompany’s common stock on the date of grant for time-based and performance-based awards, or the fair value on the date of grant using the Monte Carlo Simulation model for market-based awards (see Note G for further discussion of the Company's stock – based compensation).[11] Earnings Per Share F-8NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note B – Summary of Significant Accounting Policies (continued)share (see share.E).[12] ReclassificationFair Value MeasurementsThe Company has reclassified certain amounts in its prior period consolidated financial statements to conform to the current period presentation.[13]Financial InstrumentsU.S. GAAP regardingof financial instruments and relatedas the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value measurements define fair value, establish a three-level valuation hierarchy thatwhich requires an entity to maximize the use ofclassification based on observable inputs and minimize the use of unobservable inputs when measuring fair value.Theare definedthat may be used to measure fair value: follows:Level 1 inputs to the valuation methodology are quoted prices (unadjusted) in an active market for identical assets or liabilities in active markets.2 inputs to the valuation methodology2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets andor liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.observable forsupported by little or no market activity; therefore, the assetinputs are developed by the Company using estimates and assumptions that the Company expects a market participant would use, including pricing models, discounted cash flow methodologies, or liability, either directly or indirectly, for substantially the full term of the financial instrument.Level 3 inputs to the valuation methodology are unobservable.The Company's financial assets subject to fair value measurements and the necessary disclosures are as follows: Fair Value Measurements at December 31, 2016 Using Fair Value Hierarchy Level 1 Level 2 Level 3 Cash and cash equivalents $ 50,918,000 $ 50,918,000 $ — $ — Corporate bonds 1,065,000 1,065,000 — — Total $ 51,983,000 $ 51,983,000 $ — $ — Fair Value Measurements at December 31, 2015 Using Fair Value Hierarchy Level 1 Level 2 Level 3 Cash and cash equivalents $ 20,608,000 $ 20,608,000 $ — $ — Corporate bonds 1,061,000 1,061,000 — — Total $ 21,669,000 $ 21,669,000 $ — $ — marketable securities, royalty receivable, other assets,and cash equivalents and accounts payable, and accrued expenses approximates fair value because of the short periodshort-term nature of time betweenthese financial instruments.[13] Carrying Value, Recoverability and Impairment of Long-Lived Assets originationcarrying amount of such instrumentsa long-lived asset (asset group) is not recoverable and theirexceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected realizationto result from the use and their current market rateseventual disposition of interest. Marketable securities available for sale are measured at fair value on recurring basisthe asset (asset group). That assessment shall be based on Level 1 inputs (see Note B[3]).the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited. At December 31, 2023 and 2022, there was no impairment to the Company’s patents and equity investment.F-9Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015The[14] Leases also measuresdetermines if an arrangement is a lease at inception. Right-of-Use (“ROU”) assets and related lease obligations are recognized at commencement date based on the fairpresent value of certain assetsremaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As the Company's lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company's determined incremental borrowing rate is a non-recurring basis, when events or circumstances indicatehypothetical rate based on its understanding of what the carrying amountCompany's credit rating would be. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received and net of the deferred rent balance on the date of implementation. The Company's lease terms may include options to extend or terminate the lease and the initial term will be adjusted when it is reasonably certain that the Company will exercise such options. As permitted under ASC 842, the Company has elected to not recognize ROU assets may be impaired. These assets consistedand related lease obligations for leases with initial terms of twelve months or less.[15] Dividend Policy Company's prior investments in Lifestreams Technologies CorporationCompany’s Board of Directors. Common stock dividends are charged against retained earnings when declared or paid (see Note D)O hereof). These assets were written-off in full as of December 31, 2015.[ 14]16]Recently IssuedNew Accounting StandardsAugustJune 2016, the FASB issued ASU No. 2016-15, Classification2016-13 “Financial Instruments-Credit Losses-Measurement of Certain Cash ReceiptsCredit Losses on Financial Instruments”. This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and Cash Payments, which amends ASC 230, Statementrequires consideration of Cash Flows. This ASU providesa broader range of reasonable and supportable information to inform credit loss estimates. The guidance applies to loans, accounts receivable, trade receivables and other financial assets measured at amortized cost, loan commitments, held-to-maturity debt securities and beneficial interests in securitized financial assets, but the effect on the statement of cash flows presentation of certain transactions where diversity in practice exists.Company is projected to be limited to held-to-maturity debt securities. The guidance iswas effective for the year beginning on January 1, 2023, including interim and annual periods beginning after December 15, 2017, and early adoption is permitted.within the year. The Company does not believe that the adoption of this ASU willstandard did not have a material impact on itsthe Company’s consolidated financial statements.March 2016,November 2023, the FASBFASB issued Accounting Standards Update ("ASU") No. 2016-09, Compensation-Stock CompensationASU 2023-07, Segment Reporting (Topic 718)280): ImprovementImprovements to Employee Share-based Payment Accounting (ASU 2016-09) to simplify the accounting for share-based payment transactions, including the income tax consequences, an option to recognize gross share-based compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance will beReportable Segment Disclosures. ASU 2023-07 updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for us in the first quarter of 2017,all entities for fiscal years beginning after December 15, 2023, and earlyfor interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is incurrently evaluating ASU 2023-07 to determine its impact on the process of estimatingCompany's disclosures, however, the impact of adopting the new standard on its consolidated financial statements and related disclosures. The Company does not believe that this guidance willexpect ASU 2023-07 to have a material impact on its consolidated financial statements and related disclosures.impact.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and requires a lessee to recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. Early application is permitted. The Company does not believe that the adoption of this accounting standard will have a material impact on its consolidated financial statements.In May 2014, FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 provides for a single comprehensive model for use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new revenue standard allows for either full retrospective or modified retrospective application. The Company is required to adopt the amendments in ASU No. 2014-09 using one of the two acceptable methods. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU No. 2014-09 to annual periods beginning after December 2017, along with an option to permit early adoption as of the original effective date. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends the guidance in 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. The ASU does not change the core principle of the guidance in Topic 606. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. The effective date and transition requirements for the ASUs are the same as the effective date and transition requirements in Topic 606. Public entities should apply the ASUs for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company expects to complete its assessment process, including identifying its performance obligations and selecting a transition method for adoption, by the end of the second quarter of 2017 along with its implementation process prior to the adoption of this ASU on January 1, 2018.F-10Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Accounting Standards Adopted in 2016In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740); Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. updated standard is effective beginning on January 1, 2017 with early application permitted as of the beginning of any interim or annual reporting period. Effective January 1, 2016, the Company elected to early adopt the standard and classify the deferred tax assets as non-current assets on its consolidated balance sheets.NOTE C - PATENTSThe Company'sCompany’s intangible assets at December 31, 20162023 include patents with estimated remaining economic useful lives ranging from 3.510 to 4.7516 years. For all periods presented, all of the Company'sCompany’s patents were subject to amortization. The gross carrying amounts and accumulated amortization related to acquired intangible assets as of December 31, 20162023 and 2015 are2022 were as follows: 2016 2015 Gross carrying amount – patents $ 6,427,000 $ 6,385,000 Accumulated amortization – patents (5,196,000 ) (4,383,000 ) Patents, net $ 1,231,000 $ 2,002,000 Schedule of patent 2023 2022 Gross carrying amount $ 8,473,000 $ 8,473,000 Accumulated amortization (7,147,000 ) (6,881,000 ) Patents, net $ 1,326,000 $ 1,592,000 20162023 and 20152022 was $813,000$266,000 and $1,655,000,$316,000, respectively. Future amortization of current intangible assets, net is as follows:2017 $ 200,000 2018 $ 200,000 2019 $ 193,000 2020 $ 193,000 2021 and thereafter $ 445,000 Total $ 1,231,000 The Company's Remote Power Patent expires in March 2020. Schedule of future amortization of current intangible For the years ended December 31, 2024 $ 120,000 2025 120,000 2026 120,000 2027 119,000 2028 116,000 Thereafter 731,000 Total $ 1,326,000 Company'sCompany’s Mirror Worlds Patent Portfolio, range from August 2017 to February 2020 (six of the patents in our Mirror Worlds PatentCox Portfolio expired as of December 31, 2016). The expiration dates of the patents within the Cox Patent Portfolio range from September 2021 to November 2023 and the expiration date of patents within the Company's QoS patents is June 2019.F-11NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015NOTERemote Power Patent have expired.During 2013 and 2014 the Company made aggregate investments of $576,000 in Lifestreams Technologies Corporation (the original investment was part of the Company's acquisition of the Mirror Worlds Patent Portfolio – see Note H[2] hereof). Since the Company owned less than 20% of the outstanding equity of Lifestreams and did not have significant influence or control, the Company's investment in Lifestreams was recorded at cost. A portion of the Company's investment in Lifestreams consisted of secured promissory notes (the "Notes"). The Notes all matured on March 31, 2015. At December 31, 2015, Lifestreams remained in default of the Notes and had not completed any additional material financing. As a result, the Company had an impairment of $576,000 with respect to the investment at December 31, 2015 and the full carrying value of the investment of $576,000 was written-off. The impairment of $576,000 was included in general and administrative expenses in the Company's Consolidated Statements of Income for the year ended December 31, 2015.NOTE E - EARNINGS PER SHAREEarningsIncome (Loss) per share is calculated by dividing the net income (loss) by the weighted average number of outstanding common shares during the period. Diluted per share data included the dilutive effects of options, warrants and restricted stock units. PotentialPotentially dilutive shares of 3,575,000 and 3,605,000 at December 31, 20162023 and 2015,2022, respectively, consistedconsist of options, warrants and restricted stock units. However, as the Company generated a net loss in 2023 and 2022, all potentially dilutive shares were not reflected in diluted net loss per share because the impact of such instruments was anti-dilutive. Computations of basic and diluted weighted average common shares outstanding are as follows: Schedule of earnings per share 2023 2022 Weighted-average common shares outstanding – basic 23,791,287 23,825,917 Dilutive effect of restricted stock units — — Weighted-average common shares outstanding – diluted 23,791,287 23,825,917 Restricted stock units excluded from the computation of diluted income per share because the effect of inclusion would have been anti-dilutive 587,500 625,000 2016 2015 Weighted-average common shares outstanding - basic Dilutive effect of options, warrants and restricted stock units Weighted-average common shares outstanding - diluted Options, warrants and restricted stock units excluded from the computation of diluted income per share because the effect of inclusion would have been anti-dilutive F-12Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015FE – INCOME TAXES (BENEFIT) (benefit) were as follows for the years ended December 31, 20162023 and December 31, 2015. 2016 2015 State $ 170,000 $ 22,000 Federal 4,017,000 71,000 Total Current Tax Expense 4,187,000 93,000 Deferred State 163,000 (48,000 ) Federal 4,588,000 (167,000 ) Total Deferred Tax Expense 4,751,000 (215,000 ) Total Income Taxes (Benefit) $ 8,938,000 $ (122,000 ) Schedule of components of the income taxes 2023 2022 Current State and local $ — $ — Federal 11,000 — Total Current Tax Expense (Benefit) $ 11,000 $ — Deferred State and local (39,000 ) 56,000 Federal (360,000 ) 551,000 Total Deferred Tax Expense (399,000 ) 607,000 Total Income Taxes $ (388,000 ) $ 607,000 20162023 and 2022 consisted of the following:Schedule of components of deferred tax assets and liability 2023 2022 Deferred tax assets (liability): Net operating loss carryforward $ 804,000 $ 477,000 Capital loss carryforward 47,000 331,000 Stock options and RSU 27,000 30,000 Tax credit carryforward 148,000 — Other 182,000 — Total deferred tax assets 1,208,000 838,000 Valuation allowance (1,208,000 ) (838,000 ) Deferred tax assets, net of valuation allowance $ — $ — 2023 2022 Deferred Tax Liability(1) (762,000 ) (1,161,000 ) Total deferred tax liability $ (762,000 ) $ (1,161,000 ) 2015 consist of2023, the following: 2016 2015 Deferred tax assets: Net operating carryforwards — $ 6,819,000 Options, warrants and restricted stock units 207,000 419,000 Valuation allowance — (2,280,000 ) Net deferred tax assets $ 207,000 $ 4,958,000 The Company utilized its remaining federal, state and localCompany’s estimated aggregate total net operating loss carry-forwardscarryforwards (NOLs) were $3,364,000 for U.S. federal tax purposes with an indefinite life. At December 31, 2023, the Company had deferred tax assets of approximately $20.7 million in 2016.$1,201,000, which were offset by a valuation allowance of $1,201,000 as it was determined that it is more likely than not that the deferred tax assets would not be realized. At December 31, 2023, the Company had a deferred tax liability position of $762,000. Year Ended December 31, 2016 2015 Income tax - statutory rate 34.0% 34.0% State and local, net 1.03% 1.16% Other – Net 0.3% 1.82% Change in Valuation allowance on deferred tax assets (7.3)% (40.06)% 28.03% (3.08)% While onlySchedule of reconciliation of income tax Years Ended December 31, 2023 2022 Income tax - statutory rate 21.00 % 21.00 % Permanent differences (0.19) % (8.4) % Change in valuation allowance (1.98) % (48.79) % State 2.46 % 1.28 % Other — (0.43) % Total 21.29 % (35.34) % returnson certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of Treasury has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The excise tax applies in cases where the total value of the stock repurchased during the taxable year exceeds $1,000,000. As the Company did not meet this threshold in 2023, the excise tax is not applicable for the four years ended prior to December 31, 2016 are open for examination for taxes payable for those years,2023 tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent that they generated loss carry forwards that are available for those future years.F-13NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015F – INCOME TAXES (BENEFIT) (continued)("PHC"(“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC'sPHC’s undistributed personal holding company income ("PHC Income"(“UPHCI”), which means, in general, taxable income subject to certain adjustments. For a corporation to be classified as a PHC, it must satisfy two tests: (i) that more than 50% in value of its outstanding shares must be owned directly or indirectly by 5five or fewer individuals at anytimeany time during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the "Ownership Test"“Ownership Test”) and (ii) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities and rents (the "Income Test"“Income Test”). InDuring the second half of 2016 (as well as prior years),2023, based on available information concerning the Company’s shareholder ownership, the Company did not meetsatisfy the Ownership Test. Due to the significant number of shares held by the Company's largest shareholders,In addition, the Company continually assesses its share ownershipdid not satisfy the Income Test in 2023. Thus, the Company was not a PHC for 2023. However, the Company may subsequently be determined to determine whetherbe a PHC in 2024 or in future years if it meetssatisfies both the Ownership Test and the Income Test. If the Ownership Test were met and the income generated by the Company were determined to constitute "royalties" within the meaning of the Income Test, the Company would constitutebecome a PHC and the Companyin 2024 or any future year, it would be subject to aan additional 20% tax on its UPHCI. In such an event, the amount of any PHC Income that it does not distributeCompany may issue a special cash dividend to its shareholders.Note Gshareholders in an amount equal to the UPHCI rather than incur the additional 20% tax.Stockholders'Stockholders’ Equity2013Company adopted a new 2022 Stock Incentive Plan, ("2013 Plan"(the “2022 Plan”), approved by its Board of Directors on July 25, 2022 and its stockholders on September 20, 2022. The 2022 Plan provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock, (c) deferred stock, (d) stock appreciation rights, and (e) other stock-based awards including restricted stock units. Awards under the 20132022 Plan may be granted singly, in combination, or in tandem. Subject to standard anti-dilution adjustments as provided, , the 20132022 Plan provides for an aggregate of 2,600,0002,300,000 shares of the Company'sCompany’s common stock to be available for distribution. The Company'sCompany’s Compensation Committee generally has the authority to administer the 20132022 Plan, determine participants who will be granted awards, the size and types of awards, the terms and conditions of awards and the form and content of the award agreements representing awards. Awards under the 20132022 Plan may be granted to employees, directors and consultants of the Company and its subsidiaries. As of December 31, 2016,2023, there are 1,325,000were shares of common stock available for issuance under the 20132022 Plan.[1]Restricted Stock UnitsDuring the year ended2016,2023, there were 75,000 shares of common stock subject to outstanding awards under the 2022 Plan and 512,500 shares of common stock subject to outstanding awards under the Company granted,2013 Stock Incentive Plan (“2013 Plan”). The Company discontinued issuing awards under theits 2013 Plan 750,000 restricted stock units (RSUs) to its Chairman and Chief Executive Officer in accordance with his new employment agreement (see Note I[1] hereof). The 750,000 RSUs vest in three tranches, as follows: (i) 250,000 RSUs vest on July 14, 2018, subject to the Chairman and Chief Executive Officer's continued employment by the Company through the vesting date (the "Employment Condition"); (ii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company's common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $3.25 per share (subject to adjustment for stock splits) at any time during the term of employment; and (iii) 250,000 RSUs shall vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company's common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $4.25 per share (subject to adjustment for stock splits) at any time during the term of employment. Notwithstanding the aforementioned, in the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employment by the Chairman and Chief Executive Officer for Good Reason (as defined), allresult of the 750,000 RSUs issued to the Company's Chairman and Chief Executive Officer shall accelerate and become immediately fully vested.The effect of a market condition is reflected in the estimateadoption of the grant-date fair value of the restricted stock units utilizing a Monte Carlo valuation technique. The service period for restricted stock units with a market-based vesting condition is inferred from the application of the Monte Carlo valuation technique. Assumptions utilized in connection with the Monte Carlo valuation technique included estimated risk-free interest rate ranging from 0.67% to 1.10%; expected volatility of 38.8% and the expected dividend yield was based on expectations regarding dividend payments at the time of grant.F-14NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note G – Stockholders' Equity (continued)During the year ended December 31, 2016, the Company granted 15,000 RSUs under the 2013 Plan to each of its three non-management directors. Such RSUs issued to the non-management directors vested 7,500 RSUs on June 9, 2016 (the date of grant), 3,750 RSUs on September 9, 2016 and 3,750 RSUs on December 9, 2016 (subject to continued service as a member of the Board of Directors). On June 9, 2016, the Company also granted 50,000 RSUs under the 2013 Plan to each of its Chief Financial Officer and Executive Vice President, and 40,000 RSUs to a consultant to the Company. Each such RSUs vests 50% on the one year anniversary of grant (June 9, 2017) and 50% on the two year anniversary of grant (June 9, 2018).All of the Company's issued and RSUs have dividend equivalent rights.20162023 and December 31, 2022 is as follows (each restricted stock unit represents the contingent right to receive one share of the Company'sCompany’s common stock):Schedule of stock option activity 2023 2022 Number of Shares Weighted-Average Grant
Date Fair Value Number of Shares Weighted-Average Grant
Date Fair Value Balance of restricted stock units outstanding at beginning of year 625,000 $ 1.87 12,500 $ 3.36 Grants of restricted stock units 120,000 2.27 670,000 1.92 Vested restricted stock units (157,500 ) (2.43 ) (57,500 ) (2.73 ) Balance of restricted stock units outstanding at end of year 587,500 $ 1.81 625,000 $ 1.87 Number of Shares Balance of restricted stock units outstanding at December 31, 2015 Grants of restricted stock units 935,000 $ 2.30 Vested restricted stock units (45,000 ) $ (2.47 ) Balance of unvested restricted stock units at December 31, 2016 $ 2.29 $497,000 for the year ended December 31, 2016. There was no restricted stock unit compensation expense2023 and for the year ended December 31, 2015.$1,656,000 of unrecognized restricted stock unit compensation expense as of December 31, 20162023 to be expensed over a weighted average period of 2.86approximately years.[2]Stock OptionsSchedule of marketable securities December 31, 2023 Cost
Basis Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Certificates of Deposit $ 6,112,000 $ — $ (35,000 ) $ 6,077,000 Government securities 14,701,000 127,000 (10,000 ) 14,818,000 Fixed income mutual funds 7,585,000 91,000 — 7,676,000 Total marketable securities $ 28,398,000 $ 218,000 $ (45,000 ) $ 28,571,000 December 31, 2022 Cost
Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Government securities $ 20,781,000 $ 67,000 $ — $ 20,848,000 Fixed income mutual funds 11,904,000 — 915,000 10,989,000 Certificates of Deposit 3,019,500 — (43,000 ) 2,976,000 Corporate bonds and notes 192,000 — (14,000 ) 178,000 Total marketable securities $ 35,896,000 $ 67,000 $ (972,000 ) $ 34,991,000 2016, stock options to purchase an aggregate of 385,000 shares of common stock were outstanding under2023, the 2013 Plan and options to purchase 1,925,000 shares of common stock were outstanding representing option grants outsideCompany owned approximately 6.7% of the 2013 Plan (issued prioroutstanding units of ILiAD on a non-fully diluted basis and 5.4% of the outstanding units on a fully diluted basis (after giving effect to the establishmentexercise of all outstanding options and warrants). In connection with its investment, the Company’s Chairman and Chief Executive Officer obtained a seat on ILiAD’s Board of Managers and receives the same compensation for service on the Board of Managers as other non-management Board members.2013 Plan). ThereFinancing, the Company invested $1,000,000.This private financing represented an observable price transaction in accordance with ASC 323 and resulted in dilution in the Company’s ownership in the ILiAD. In accordance with ASC 323-10-40-1, the Company accounted for the dilution as if it had sold a portion of its investment and therefore recorded an unrealized gain of $3,883,000 and a corresponding increase in the carrying value of its investment in ILiAD. The Company determined the new carrying value of its equity investment using an observable transaction price since the Company determined the securities owned by the Company were no grantsnot materially different than the securities sold by ILiAD in the Financing. The unrealized gain is reflected in the Company’s consolidated statements of stock options duringoperations and comprehensive loss for the year ended December 31, 2016.The fair value of options on the date of grant is estimated using the Black-Scholes option-pricing model utilizing the following weighted average assumptions:December 31, 2015Exercise Prices$2.34Risk-free interest rates1.39%Expected option life in years5 yearsExpected stock price volatility30.24%Expected dividend yield0.00%The weighted average fair value2022.optionsFinancing, the Company converted its convertible note in the principal amount of $1,000,000 plus accrued interest of $86,000, in accordance with its terms, into equity of ILiAD and has accounted for this investment under the equity method of accounting. The Company recognized a gain on the option grant date duringconversion of $271,000 which was recognized in its consolidated statements of operations and comprehensive income loss for the year ended December 31, 2015 was $0.68 per share.F-15NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note G - Stockholders' Equity (continued)The following table summarizes stock option activity for2022.31:31, 2023 and 2022, the Company recorded an allocated net loss from its equity method investment in ILiAD of $2,003,000 and $1,639,000, respectively. 2016 2015 Weighted Weighted Average Average Options Exercise Options Exercise Outstanding Price Outstanding Price 2,855,000 $ 1.33 2,950,000 $ 1.27 Granted — $ — 105,000 $ 2.34 Expired (15,000 ) $ 1.31 — — Exercised (530,000 ) $ 1.53 (200,000 ) $ 0.90 Options outstanding at end of year 2,310,000 $ 1.29 2,855,000 $ 1.33 Options exercisable at end of year 2,310,000 $ 1.29 2,828,750 $ 1.32 During2016,2023. The following table provides certain summarized financial information for the Company’s equity method investee for the periods presented and has been compiled from the equity investee’s financial statement, reported on one quarter lag. As a result of the Company did not grant any stock options. Duringreceiving audited financial statements from ILiAD for its year ended December 31, 2022 (See Note B[2] hereof), the table below includes an additional comprehensive loss of $621,000. For the year ended December 31, 2015, the Company granted stock options to purchase an aggregate of 105,000 shares of its common stock to its non-management directors. The fair value of these options based on the Black-Scholes option-pricing model amounted to $71,000 for 2015. During the year ended December 31, 2016, the Company recognized stock based compensation of $12,000 related to the vesting of prior issued stock options to employees and directors. During the year ended December 31, 2015, the Company recognized stock-based compensation of $272,000 related to the issuance of stock options and vesting of prior issued options (consisting of $235,0002023, with respect to stock options issued to employees and directors and $37,000 for a consultant). The Company at December 31, 2016 has no remaining unrecognized expenses related to unvested stock options. The aggregate intrinsic valuesuch additional comprehensive loss of all stock options exercisable at December 31, 2016 was $4,881,550.During the year ended December 31, 2016, an aggregate of 530,000 stock options were exercised (470,251 of which were exercised on a net exercise (cashless) basis), by the Company's Chief Financial Officer (100,000 shares), Executive Vice President (240,000 shares), a director (75,000 shares), a consultant (90,000 shares) and a former director (25,000 shares), at prices ranging from $1.21 to $1.60 per share. With respect to the aforementioned stock option exercises on a net exercise (cashless) basis, aggregate net shares of 132,080 were delivered to the Chief Financial Officer (43,580 shares), Executive Vice President (23,944 shares), director (47,283) and a consultant (17,273 shares).During the year ended December 31, 2015, stock options to purchase an aggregate of 200,000 shares were exercised on a net exercise (cashless) basis by the Company's Executive Vice President (150,000 shares) and a consultant (50,000 shares) at an exercise price of $0.90 per share. With respect to the aforementioned stock option exercises, aggregate net shares of 120,349 were delivered to the Executive Vice President (90,000 shares) and consultant (30,349 shares).F-16NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note G - Stockholders' Equity (continued)The following table presents information relating to all stock options outstanding and exercisable at December 31, 2016: Weighted Weighted Average Range of Average Remaining Exercise Options Exercise Life in Options Price Outstanding Price Years Exercisable $0.83 - $2.34 2,310,000 $1.29 2.76 2,310,000 [3]Warrants:As of December 31, 2016 and December 31, 2015, the following are the outstanding warrants to purchase shares of the Company's common stock: 250,000 $2.10 May 21, 2018 125,000 $2.10 July 26, 2018 375,000 250,000 $2.10 May 21, 2018 250,000 $1.40 May 21, 2018 125,000 $2.10 July 26, 2018 125,000 $1.40 July 26, 2018 750,000 The outstanding warrants to purchase 375,000 shares of common stock at December 31, 2016 pertain to 5-year warrants issued to Recognition Interface, LLC in connection with the Company's (through Mirror Worlds Technologies, LLC, its wholly-owned subsidiary) purchase of the Mirror Worlds Patent Portfolio in May 2013 (see Note H[2]).During the year ended December 31, 2016, Recognition Interface, LLC exercised warrants to purchase an aggregate of 375,000 shares at an exercise price of $1.40 per share resulting in gross proceeds toILiAD, the Company of $525,000. In January 2017, Recognition Interface, LLC exercised warrants to purchaserecorded an additional 375,000 sharesallocated net loss of the Company's common stock at an exercise price of $2.10 per share, resulting in additional gross proceeds to the Company of $787,500.F-17NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Schedule of equity method investments Twelve Months Ended
September 30, 2023 2022 Loss from continuing operations $ 24,272,000 $ 15,246,000 Comprehensive loss $ 29,532,000 $ 17,913,000 H - I – Commitments and Contingencies[1] Legal fees: litigationslitigation filed in April 2014 and December 2014May 2017 against GoogleMeta Platforms, Inc. and YouTube, LLC( formerly, Facebook, Inc.) in the United StatesU.S. District Court for the Southern District of New York relating to certainseveral patents within the CoxCompany’s Mirror Worlds Patent Portfolio acquired by the Company from Dr. Cox (see Note J[3]K[2] hereof). The terms of the Company'sCompany’s agreement with Russ, August & Kabat provide for legal feescash payments on a fullmonthly basis subject to a cap plus a contingency basisfee ranging from between 15% to 30% and 24% of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all of the expenses incurred with respect to this litigation.commenced in May 2013 against Apple, Inc., Microsoft, Inc. and other major vendors of document system software and computer systems inrelated to the United States District Court of Texas for the Eastern District of Texas, (Tyler Division) for infringement of U.S.Remote Power Patent No. 6,006,227 (see(See Note J[K[4]) hereof). The terms of the Company'sCompany’s agreement with Dovel & Luner LLP providedprovides ,among other things, for legal fees on a contingency basis ranging from 25%15% to 40% of the net recovery (after deduction of expenses)expenses where applicable) depending uponon the stage of the proceeding in which athe result (settlement or judgment)judgement) is achieved, subject to certain agreed upon contingency fee caps depending upon the amount of the net recovery.achieved. The Company wasis responsible for a certain portion of the expenses incurred with respect to thethis litigation. ForDuring the year ended December 31, 2016 and December 31, 2015,2023, the Company incurred $744,000 of such contingent legal fees and $88,000 of these fees are payable and reported in accrued expenses as of $10,649,000 and $2,301,000 to Dovel & Luner with respect to the litigation.Dovel & Luner, LLP provides legal services to the Company with respect to the Company's pending patent litigation filed in September 2011 against sixteen (16) data networking equipment manufacturers in the United States District Court for the Eastern District of Texas, (Tyler Division) (see Note J[1]). The terms of the Company's agreement with Dovel & Luner LLP essentially provide for legal fees on a full contingency basis ranging from 12.5% to 35% (with certain exceptions) of the net recovery (after deduction for expenses) depending on the stage of the preceding in which a result (settlement or judgment) is achieved. For the year ended December 31, 2016 and December 31, 2015, the Company incurred contingent legal fees and expenses to Dovel & Luner of $4,626,000 and $745,000, respectively, with respect to the litigation.2023.Dovel & Luner, LLP provided legal services to the Company with respect to the Company's patent litigation settled in July 2010 against several major data networking equipment manufacturers (see Note J[2]). The terms of the Company's agreement with Dovel & Luner, LLP provided for legal fees of a maximum aggregate cash payment of $1.5 million plus a contingency fee of up to 24% (based on the settlement being achieved at the trial stage) including legal fees of local counsel in Texas. With respect to royalty payments payable quarterly by Cisco to the Company in accordance with the Company's settlement and license agreement with Cisco, the Company has an obligation to pay Dovel & Luner 24% of such royalties received after expenses. During the years ended December 31, 2016 and December 31, 2015, total contingency fees incurred to Dovel & Luner, LLP were $2,117,000 and $2,157,000, respectively.F-18Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015H -I – Commitments and Contingencies (continued)[2] Patent Acquisitions: February 28, 2013,March 25, 2022, the Company completed the acquisition of a new patent portfolio (HFT Patent Portfolio) currently consisting of nine U.S. patents and two pending U.S. patents covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds. The Company paid the seller $500,000 at the closing and has an obligation to pay the seller an additional $500,000 in cash and $375,000 of the Company’s common stock (up to a maximum of 375,000 shares) upon achieving certain milestones with respect to the HFT Patent Portfolio. The Company also has an additional obligation to pay the seller 15% of the first $50 million of net proceeds (after deduction of expenses) generated by the patent portfolio and 17.5% of net proceeds greater than $50 million. consisting of four patents (as well as a pending patent application) from Dr. Ingemar Cox, a technology leader in digital watermarking content identification, digital rights management and related technologies, for a purchase price of $1,000,000 in cash and 403,226 shares of the Company's common stock. In addition, the Company is obligated to pay Dr. Cox 12.5% of the net proceeds (after deduction of expenses) generated by the Company from licensing, sale or enforcement of the patents. Since the acquisitionpatent portfolio. As of the patent portfolio from Dr. Cox, the Company has been issued thirteen (13) additional related patents by the USPTO resulting in an aggregate of seventeen (17) patents withinyears ended December 31, 2023, and 2022, no expense was incurred with respect to the Cox Patent Portfolio. Professional feesAs of December 31, 2023 and filing fees of $169,0002022, no amounts were capitalized as patent cost.On May 21, 2013,accrued with respect to the Company's wholly-owned subsidiary, Mirror Worlds Technologies, LLC, acquired the Mirror Worlds Patents consisting of all of the patents previously owned by Mirror Worlds, LLC (which subsequently changed its name to Looking Glass LLC), including nine issued United States patents and five pending applications (one of which was issued in November 2013) covering foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system. As consideration for the patent acquisition, the Company paid Mirror Worlds, LLC $3,000,000 in cash and issued 5-year warrants to purchase an aggregate of 1,750,000 shares of the Company's common stock (875,000 shares of common stock at an exercise price of $1.40 per share and 875,000 shares of common stock at an exercise price of $2.10 per share) (the "Looking Glass Warrants"). On June 3, 2014, the Company repurchased the Looking Glass Warrants from Looking Glass LLC at a cost of $505,000. Cox Patent Portfolio.("Recognition"(“Recognition”), an entity that financed the commercialization of the patent portfolio prior pursuant to its sale to Mirror Worlds, LLC and also retained an interest in the licensing proceeds of the patent portfolio held by Mirror Worlds, LLC. Pursuant to the terms of the Company's agreement withwhich Recognition Recognition received (i) 5-year warrants to purchase 250,000 shares of the Company's common stock at $1.40 per share, and (ii) 5-year warrants to purchase 250,000 shares of common stock at $2.10 per share. Recognition also received from the Company an interest in the net proceeds realized from the monetization of the Mirror Worlds Patent Portfolio, as follows: Obligated to pay recognition, net proceeds (i) 10% of the first $125 million of net proceeds; (ii) 15% of the next $125 million of net proceeds; and (iii) 20% of any portion of the net proceeds in excess of $250 million. DuringSince entering into the year ended December 31, 2016 and December 31, 2015,agreement with Recognition in May 2013, the Company has paid Recognition an aggregate of $2,909,000 and $218,000, respectively, for its3,127,000 with respect to such net proceeds interest in proceeds from the monetization ofrelated to the Mirror Worlds Patent Portfolio. During the year ended December 31, 2016 and in January 2017, Recognition exercise warrants to purchase an aggregate of 750,000 shares of the Company's common stock, resulting in gross proceeds to the Company of $1,312,500 (see Note G[3] hereof). As part of the acquisition of the Mirror Worlds Patent Portfolio, professional fees and filing fees of $409,000No such payments were capitalized as patent cost.[3]Amended Patent Purchase Agreement:On January 18, 2005, the Company and Merlot Communications, Inc., which subsequently changed its name to BAXL Technologies, Inc. (the "Seller"), amended the Patent Purchase Agreement originally entered into in November 2003 (the "Amendment") pursuant to which the Company paid an additional purchase price of $500,000 to Seller for the restructuring of future contingent payments to Seller from the licensing or sale of the patents (including the Remote Power Patent and the QoS Patents). The Amendment provided for future contingent paymentsmade by the Company to Seller of $1.0 million upon achievement of $25 million of Net Royalties (as defined) which payment was made in 2012, an additional contingency payment of $1.0 million upon achievement of $50 million of Net Royalties the "Second Contingent Payment") and an additional contingency payment of $500,000 upon achievement of $62.5 million of Net Royalties from the licensing or sale of the patents acquired from Seller. On March 11, 2015, the Company entered into an agreement with a secured creditor of the Seller, who had all rights with respect to the Second Contingent Payment, pursuant to which the Company paid the secured creditor $900,000 in full satisfaction of the second contingent payment of $1.0 million. During the year ended December 31, 2016, the Company paid the final contingent payment of $500,000.F-19NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note H - Commitments and Contingencies (continued)[4]Services Agreement:On November 30, 2004, the Company entered into a master services agreement (the "Agreement") with ThinkFire Services USA, Ltd. ("ThinkFire") pursuant to which ThinkFire was granted the exclusive worldwide rights (except for direct efforts by the Company and related companies) to negotiate license agreements for the Remote Power Patent with respect to certain potential licensees agreed to between the parties. The Company was obligated to pay ThinkFire a fee not to exceed 20% of the royalty payments received from license agreements consummated by ThinkFire on its behalf after the Company recovers its expenses. On February 10, 2015, the Company entered into an agreement with ThinkFire pursuant to which the Agreement was terminated with no further obligations in consideration of the Company's payment of $285,000 to ThinkFire ($261,000 of such payment has been included as general and administrative expenses for the year ended December 31, 2015).[5]Operating leases:The Company leases its principal office space in New York City at a monthly base rent of approximately $3,700 which lease expires on May 31, 2017.The Company entered into a lease agreement to rent office space, for offices in New Canaan, Connecticut. In August 2015, the Company entered into an agreement to extend the lease for a four year period (expiring September 30, 2019) at a base rent of $7,000 per month for the first year (increasing $100 per month each year), which is subject to annual adjustments to reflect increases in real estate taxes and operating expenses.Mirror Worlds Technologies, LLC, the Company's wholly-owned subsidiary, entered into a one year lease, at a base rent of $620 per month, to rent office space in Tyler, Texas (expiring April 30, 2017).Rental expense forRecognition during the years ended December 31, 20162023 and 2015 aggregated $148,0002022.$140,000, respectively.[ 6]3]Savings and investment plan: contributions and profit sharing contributions in amounts determined by the Board of Directors, subject to statutory limits. The 401(k) Plan expense for the years ended December 31, 20162023 and 20152022 was $102,000$73,000 and $91,000, respectively.$78,000, respectively, all of which was accrued as of December 31, 2023 and 2022 and is recorded within payroll on the Company’s consolidated balance sheets.[4] Leases: - – Commitments and Contingencies (Continued)Schedule of operating leases obligations As of As of December 31, 2023 December 31, 2022 Operating lease right-of-use assets $ 16,000 $ 161,000 Operating lease obligations – current 23,000 79,000 Operating lease obligations – non-current — 94,000 Total lease obligations $ 23,000 $ 173,000 Schedule of leases cost For the Year Ended
December 31, 2023 2022 Operating lease cost $ 68,000 $ 48,000 Short-term lease cost — 82,000 Total lease cost $ 68,000 $ 130,000 Schedule of future minimum leases payments Operating Leases 2024 $ 23,000 2025 — 2026 — 2027 — 2028 — Total future minimum lease payments 23,000 Less imputed interest — Total operating lease liability $ 23,000 [1]On July 14, 2016, the Company entered into a new employment agreement ("Agreement") with its Chairman and Chief Executive Officer, pursuant to which he continues to serve as Chairman and Chief Executive Officer for a five year term, at an annual base salary of $475,000 which shall be increased by 3% per annum during the term of the Agreement. The Agreement established an annual target bonus of $175,000 for the Chairman and Chief Executive Officer based upon performance. During the years ended December 31, 2016 and December 31, 2015, the Company's Chairman and Chief Executive Officer received an annual discretionary bonus of $650,000 and $200,000, respectively. In addition, the Company granted to the Chairman and Chief Executive Officer, under its 2013 Plan, 750,000 restricted stock units (the "RSUs", each RSU awarded by the Company represents a contingent right to receive one share of the Company's common stock) which vest in three tranches, as follows: (i) 250,000 RSUs shall vest on July 14, 2018, subject to the Chairman and Chief Executive's continued employment by the Company through the vesting date (the "Employment Condition"); (ii) 250,000 RSUs shall vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company's common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $3.25 per share (subject to adjustment for stock splits) at any time during the term of employment; and (iii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being satisfiedF-20Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015I -J – Employment Arrangements and Other Agreements (continued)annual vesting date and(the “Employment Condition”) (“Tranche 1”); (2) RSUs shall vest if at any time during the Company'sTerm that the Company’s common stock achievingachieves a closing price (for 20for twenty (20) consecutive trading days)days (“Closing Price”) of a minimum of $4.25 per share (subject to adjustment for stock splits) and the Employment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 2”); (3) RSUs shall vest if at any time during the termTerm that the common stock achieves a Closing Price of employment. Notwithstandinga minimum of per share (subject to adjustment for stock splits) and the aforementioned, inEmployment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 3”); and (4) RSUs shall vest if at any time during the Term, that the common stock achieves a Closing Price of a minimum of per share (subject to adjustment for stock splits) and the Employment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 4”). In the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employmentby the Chairman and Chief Executive Officer for Good Reason (as defined), all in each case prior to the last day of the 750,000Term, the vesting of all RSUs (Tranches 1, 2, 3 and 4) shall accelerate (and not be subject to any conditions) and all RSUs shall become immediately fully vested. All RSUs granted by the Company to its officers, directors or consultants have dividend equivalent rights. Company's Chairman and Chief Executive Officer continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, hethe Chairman and Chief Executive Officer shall also receive incentive compensation in an amount equal to 5% of the Company'sCompany’s gross royalties or other payments from Licensing Activities (as defined) (without deduction of legal fees or any other expenses) with respect to itsthe Remote Power Patent and a 10% net interest (gross royalties and other payments after deduction of all legal fees and litigation expenses related to licensing, enforcement and sale activities, but in no event shall he receive less than 6.25% of the gross recovery) of the Company'sCompany’s royalties and other payments relating to Licensing Activities with respect to patents other than the Remote Power Patent (including all of the Company's Mirror Worlds Patent PortfolioCompany’s patent portfolios and Cox Patent Portfolio)its investment in ILiAD) (collectively, the "Incentive Compensation"“Incentive Compensation”). During the year ended December 31, 20162023 and December 31, 2015,2022, the Company's Chairman and Chief Executive Officer earned Incentive Compensation of $4,252,000$130,000 and $886,000,$-0-, respectively.Company'sCompany’s patents with respect to licenses entered into with third parties during the term of his employment or at anytimeany time thereafter, whether he is employed by the Company or not; provided,, that,, the employment of the Chairman and Chief Executive Officer has not been terminated by us "For Cause"the Company “For Cause” (as defined) or terminated by him without "Good Reason"“Good Reason” (as defined). In the event of a merger or sale of substantially all of the Company'sCompany’s assets, the Company has the option to extinguish the right of the Chairman and Chief Executive Officer to receive future Incentive Compensation by payment to him of a lump sum payment, in an amount equal to the fair market value of such future interest as determined by an independent third party expert if the parties do not reach agreement as to such value. In the event that the Chairman and Chief Executive OfficerOfficer’s employment is terminated by the Company "Other“Other Than For Cause"Cause” (as defined) or by him for "Good Reason"“Good Reason” (as defined), the Chairman and Chief Executive Officer shall also be entitled to (i) a lump sum severance payment of 12 months base salary, (ii) a pro-rated portion of the $175,000$175,000 target bonus provided bonus criteria have been satisfied on a pro-rated basis through the calendar quarter in which the termination occurs and (iii) accelerated vesting of all unvested stock options, RSUs or other awards. the Company's the Chairman and Chief Executive Officer has also agreed not to compete with the Company as follows: (i) during the termTerm of the Agreement and for a period of 12 months thereafter if his employment is terminated "Other“Other Than For Cause"Cause” (as defined) provided he is paid his 12 monthmonths base salary severance amount and (ii) for a period of two years from the termination date, if terminated "For Cause"“For Cause” by the Company or "Without“Without Good Reason"Reason” by the Chairman and Chief Executive Officer.Prior to entering into the new employment agreement in July 2016 as referenced above, the Company's Chairman and Chief Executive Officer received a base salary of $415,000, an annual discretionary target bonus of $150,000, the same Incentive Compensation, non-compete and other similar provisions as set forth in his new employment agreement.[2]The Company's Chief Financial Officer serves on an at-will basis pursuant to an offer letter, dated April 9, 2014, at an annual base salary of $175,000 (increased in June 2016 from $157,000). The Company's Chief Financial Officer received an annual bonus of $75,000 for the year ended December 31, 2016 and $30,000 for the year ended December 31, 2015. In connection with the offer letter, the Chief Financial Officer was issued, under the 2013 Plan, a 5-year stock option to purchase 50,000 shares of the Company's common stock, at an exercise price of $1.65 per share, which option vested in two equal amounts (25,000 shares each) on each of December 31, 2014 and December 31, 2015. On June 9, 2016, the Company's Chief Financial Officer was granted 50,000 restricted stock units. Each restricted stock unit vests 50% on the one year anniversary of the grant (June of 2017) and 50% on the two year anniversary of grant (June 9, 2018). In addition, in the event the Chief Financial Officer's employment is terminated without "Good Cause" (as defined), he shall receive (i) (a) 6F-21Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015I -J – Employment Arrangements and Other Agreements (continued)monthsor (b) 12 months base salary in the event of $200,000. The Executive Vice President received a termination without "Good Cause" within 6 months following a "Changediscretionary annual bonus of Control"$25,000 and for each of the Company (as defined) and (ii) accelerated vesting of all remaining unvested shares underlying his options, restricted stock units or any other awards he may receive in the future.[3]The Company's Executive Vice President serves on an at-will basis at an annual base salary of $200,000. The Executive Vice President received an annual bonus of $125,000 for the year ended December 31, 2016 and $40,000 for the year ended December 31, 2015. On June 9, 2016, the Executive Vice President was granted 50,000 restricted stock units. The restricted stock units vest 50% on the one year anniversary of grant (June 9, 2017) and 50% of the two year anniversary of grant (June 9, 2018).Note J – Legal Proceedings[1]In September 2011, the Company initiated patent litigation against sixteen (16) data networking equipment manufacturers (and affiliated entities) in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of its 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, Inx., Motorola Solutions, Inc., NEC Corporation, Polycom Inc., Samsung Electronics Co., Ltd., ShoreTel, Inc., Sony Electronics, Inc., and Transitions Networks, Inc. The Company seeks monetary damages based upon reasonable royalties. During the year ended December 31, 2012, the Company reached settlement agreements with defendants Motorola Solutions, Inc. ("Motorola"), Transition Networks, Inc. ("Transition Networks") and GarretCom, Inc. ("GarretCom"). In February 2013, the Company reached settlement agreements with Allied Telesis, Inc. ("Allied Telesis") and NEC Corporation ("NEC"). As part of the settlements, Motorola, Transition Networks, GarretCom, Allied Telesis and NEC each entered into a non-exclusive license agreement for the Company'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 or annual royalties based on their sales of PoE products. In March 2015 and July 2015, the Company reached settlement agreements with Samsung Electronics Co., Ltd. ("Samsung"), Huawei Technologies Co., Ltd. ("Huawei") and ShoreTel Inc. ("ShoreTel"). Samsung and Huawei each received a non-exclusive fully-paid license for the Remote Power Patent for its remaining life. ShoreTel entered into a non-exclusive license agreement for the Remote Power Patent for its full term and paid a license initiation fee and is obligated to pay quarterly royalties based upon its sales of PoE products.In June 2016, the Company reached a settlement with Sony Corporation and affiliated entities ("Sony"). With respect to the settlement, Sony received a non-exclusive fully-paid license for the Remote Power Patent for its remaining life. In July 2016, the Company reached a settlement with Dell, Inc. Under the terms of the settlement, Dell received a non-exclusive license for the Remote Power Patent for its full term, Dell paid a license initiation fee of $6,000,000 and agreed to pay quarterly royalties based on its sales of PoE products. In July 2016, the Company also reached settlement agreements with Alcatel-Lucent USA, Inc. and Alcatel-Lucent Holdings Inc. (collectively, "Alcatel") and ALE, USA. Under the terms of the settlement agreements, Alcatel and ALE, USA received a non-exclusive fully paid license for the Remote Power Patent for its remaining life. The aggregate consideration to be received by the Company from Alcatel and ALE for the fully-paid license is $4,200,000 of which $1,900,000 has been paid and the balance of $2,300,000 is payable in three equal quarterly payments beginning sixty (60) days after a ruling by the Court (which is pending) confirming the report and recommendation rendered by the Magistrate which found all of the asserted claims of the Remote Power Patent were not invalid.On October 3, 2016, the Company entered a settlement agreement with Polycom, Inc. ("Polycom"). Under the terms of the settlement, Polycom entered into a non-exclusive license for the Company's Remote Power Patent for its full term and is obligated to pay a license initiation fee of $5,000,000 for past sales of its Power over Ethernet ("PoE") products and ongoing royalties based on its sales of PoE products. $2,000,000 of the license initiation fee was paid within 30 days and the balance will be paid in three annual installments of $1,000,000 beginning in October, 2017. Payments due in October 2018 and October 2019 need not be paid by Polycom if all asserted claims of the Remote Power Patent have been found invalid. Such payments in October 2018 and October 2019 have not been included in the Company's revenue for the yearyears ended December 31, 2016.F-22NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 20162023 and 2015Note J – Legal Proceedings (continued)As a result2022, respectively. On January 8, 2024, the Company’s Executive Vice President was granted 15,000 RSUs under the 2022 Plan, 50% of such RSUs vest on the one year anniversary of the aforementioned settlements,date of grant (January 8, 2025) and 50% of such RSUs vest on the remaining four defendantstwo year anniversary of the grant (January 8, 2026), subject to continued employment. On January 24, 2023, the Company’s Executive Vice President was granted 15,000 RSUs under the 2022 Plan, 50% of such RSUs vested on the one year anniversary of the date of grant (January 24, 2024) and 50% of such RSUs will vest on the two year anniversary of the date of grant (January 24, 2025), subject to continued employment.litigation pending in the United States District Court for the Eastern District of Texas are Hewlett Packard Company, Inc., Juniper Networks, Inc, AXIS Communications Inc. and Avaya Inc. The litigation has been consolidated for pre-trial issues and there will be a separate trial for each defendant. The first of the trials is scheduled to commence on November 6, 2017.[2]In July 2010, the Company settled its patent litigation pending in the United States District Court for the Eastern District of Texas, Tyler Division, 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. As part of the settlement, Adtran, Cisco, Enterasys, Extreme Networks and Foundry Networks each entered into a settlement agreement with the Company and entered into non-exclusive licenses for the Company's Remote Power Patent (the "Licensed Defendants"). Under the terms of the licenses, the Licensed Defendants paid the Company upon settlement approximately $32 million and also agreed to license the Remote Power Patent for its full term, which expires in March 2020. In accordance with the Settlement and License Agreement, dated May 25, 2011, Cisco is obliged to pay the Company royalties (which began in the first quarter of 2011) based on its sales of PoE products up to maximum royalty payments per year of $9 million beginning in 2016 ($8 million through 2015) for the remaining term of the patent. The royalty payments are subject to certain conditions including the continued validity of the Company's Remote Power Patent, and the actual royalty amounts received may be less than the cap stated above. Under the terms of the Agreement, if the Company grants other licenses with lower royalty rates to third parties (as defined in the Agreement), Cisco shall be entitled to the benefit of the lower royalty rates provided it agrees to the material terms of such other license. Under the terms of the Agreement, the Company has certain obligations to Cisco and if it materially breaches such terms, Cisco will be entitled to stop paying royalties to the Company. This would have a material adverse effect on the Company's business, financial condition and results of operations.[3]On April 4, 2014 and December 3, 2014, the Company initiated litigation against Google Inc.("Google") and YouTube, LLC (YouTube") in the United States District Court for the Southern District of New York for infringement of several of its patents within the Cox Patent Portfolio acquired from Dr. Cox (see Note H[2] hereof) which relate to the identification of media content on the Internet. The lawsuits allege that Google and YouTube have infringed and continue to infringe certain of the Company's patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube's Content ID system.The above referenced litigations that the Company commenced in the United StatesU.S. District Court for the Southern District of New York in April 2014for infringement of several of its patents within its Cox Patent Portfolio acquired from Dr. Cox which relate to the identification of media content on the Internet. The lawsuit alleges that Google and December 2014YouTube have infringed and continue to infringe certain of the Company’s patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube’s Content ID system. The litigations against Google and YouTube are currentlywere subject to a court ordered staystays which has beenwere in effect sincefrom July 2, 2015 until January 2, 2019 as a result of proceedings at the Patent Trial and Appeal Board (PTAB) and the pending appeals of PTAB Final Written Decisions to the United States DistrictU.S. Court of Appeals for the Federal Circuit, as described below.In December 2014, Google Inc. filed four petitionsCircuit. Pursuant to institute Inter Partes Review ata Joint Stipulation and Order Regarding Lifting of Stays, entered on January 2, 2019, the United States Patent and Trademark Office ("USPTO") pertaining to patents withinparties agreed, among other things, that the Company's Cox Patent Portfolio asserted in the litigation filed in April 2014 as described above. Google in each of the four Inter Partes Review petitions sought to invalidate certain claims of patents at issue within the Cox Patent Portfolio. On June 23, 2015, the Patent Trial and Appeal Board ("PTAB") of the USPTO issued an order instituting for oral hearing each of the four petitions for Inter Partes Review. The consolidated trial at the PTAB was held on March 9, 2016. On June 20, 2016, the PTAB issued its Final Written Decisions in the Company's favor in the four pending IPRs. On August 18, 2016, Google filed Notices of Appealstays with respect to the PTAB's Final Written Decision tolitigations were lifted. In January 2019, the United States Court of Appeals for the Federal Circuit and the appeal is pending.On April 13, 2015, Google filed a Petition for Covered Business Method Review (CBM) at the PTAB seeking to invalidate claims pertaining to the Company's U.S. Patent No. 8,904,464, the patent asserted in the Company's litigationtwo litigations against Google and YouTube filed on December 3, 2014 as referenced above. were consolidated. Discovery is complete and the parties have each submitted summary judgment motions which remain pending. A trial date has not been set.October 19, 2015, May 9, 2017, Mirror Worlds Technologies, LLC, the PTABCompany’s wholly-owned subsidiary, initiated litigation against Facebook, Inc. (“now Meta Platforms, Inc. (“Meta”)) in the U.S. District Court for the Southern District of New York, for infringement of U.S. Patent No. 6,006,227, U.S. Patent No. 7,865,538 and U.S. Patent No. 8,255,439 (among the patents within the Company’s Mirror Worlds Patent Portfolio). The lawsuit alleged that the asserted patents are infringed by Meta’s core technologies that enable Meta’s Newsfeed and Timeline features. On August 11, 2018, the Court issued an order institutinggranting Meta’s motion for oral hearingsummary judgment of non-infringement and dismissed the Covered Business Method Review on certain grounds. The oral hearing was held on May 11, 2016.case. On October 18, 2016,August 17, 2018, the PTAB issued its Final Written Decision inF-23NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015Note J – Legal Proceedings (continued)the Company's favor. On December 20, 2016, GoogleCompany filed a Notice of Appeal to appeal the PTAB's Final Written Decisionsummary judgment decision to the United StatesU.S. Court of Appeals for the Federal Circuit. On January 23, 2020, the U.S. Court of Appeals for the Federal Circuit ruled in the Company’s favor and reversed the summary judgment finding on non-infringement of the District Court and remanded the litigation to the Southern District of New York for further proceedings.[4]On May 23, 2013, the Company's wholly-owned subsidiary, Mirror Worlds Technologies, LLC, initiated patent litigation in the United States District Court for the Eastern District of Texas, Tyler Division, against Apple, Inc., Microsoft, Inc., Hewlett-Packard Company, Lenovo Group Ltd., Lenovo (United States), Inc., Dell, Inc., Best Buy Co., Inc., Samsung Electronics America, Inc. and Samsung Telecommunications America L.L.C., for infringement of the Company's '227 patent (the "227 Patent") (one of the patents the Company acquired as part of the acquisition of the Mirror Worlds Patent Portfolio). The lawsuit alleged that the defendants have infringed and continue to infringe the claims of the Company's '227 Patent by making, selling, offering to sell and using infringing products including Mac OS and Windows operating systems and personal computers and tablets that include versions of those operating systems, and by encouraging others to make, sell, and use these products. In December 2013, the litigation was severed into two consolidated actions, Mirror Worlds v. Apple, et. al. and Mirror Worlds v. Microsoft, et. al. November 6, 2015, December 15, 2020, the Company filed a lawsuit against Netgear, Inc. (“Netgear”) in the Supreme Court of the State of New York, County of New York, for breach of a Settlement and License Agreement, dated May 22, 2009 (the “License Agreement”), with the Company entered intofor failure to make royalty payments, and provide corresponding royalty reports, to the Company based on sales of Netgear’s PoE products. On October 22, 2021, Netgear filed a settlement agreementDemand for Arbitration at the American Arbitration Association (AAA) seeking to arbitrate certain issues raised in the litigation. The Company objected to jurisdiction at the AAA. On April 22, 2022, Netgear filed a counterclaim in the N.Y. court action alleging that the Company breached the License Agreement by not offering Netgear lower royalties. On September 22, 2022, the arbitration brought by Netgear was dismissed by the AAA on jurisdiction grounds. The case remained pending in the Supreme Court of the State of New York, County of New York. On August 27, 2023,the Court granted Netgear’s cross- motion for summary judgment and dismissed the Company’s claims and also denied the Company’s summary judgment motion with Microsoft pursuantrespect to which Microsoft (includingNetgear’s counterclaim for breach of the license agreement. The Company appealed the decision. On February 20, 2024, the Appellate Division, First Department, upheld the lower court ruling dismissing the Company’s complaint and granted the Company’s motion to dismiss Netgear’s counterclaim for breach of the most favored license provision concerning two licensees, but said there was a triable issue of fact as to a third licensee. As of December 31, 2023, the Company did not accrue for any liability related to the counterclaim.customers) received a non-exclusive fully paid licenseRemote Power Patent seeking monetary damages based upon reasonable royalties, as follows: (i) On October 6, 2022, the Company initiated such litigation against Arista Networks, Inc., Fortinet, Inc., Honeywell International Inc. and Ubiquiti Inc. in the United States District Court, District of Delaware; (ii) On October 27, 2022, and November 3, 2022, the Company initiated such litigation against TP-Link USA Corporation and Hikvision USA, Inc. in the United States District Court for the Mirror Worlds Patent Portfolio for its remaining life in considerationCentral District of a lump sum payment to usCalifornia; (iii) On November 4, 2022, the Company initiated such litigation against Panasonic Holdings Corporation and Panasonic Corporation of $4,650,000. In addition, as customers of Microsoft, the pending litigation was also dismissed against Hewlett-Packard Corporation, Lenovo Group Ltd., Lenovo, Inc., Dell, Inc., Best Buy Co., Inc., Samsung Electronics ofNorth America Inc. and Samsung Telecommunications America L.L.C.On July 8, 2016, Mirror Worlds Technologies, LLC, the Company's wholly-owned subsidiary, entered into a settlement agreement with Apple Inc. in connection with litigation in the United States District Court for the Eastern District of Texas (Marshall Division); and (iv) On November 8, 2022 and November 16, 2022, the Company initiated such litigation against Antaira Technologies, LLC and Dahua Technology USA in the United States District Court for infringementthe Central District of California.Company's '227 Patent. Underyear ended December 31, 2023, the Company entered into settlement agreements with Arista Networks, Inc, Antaira Technologies, LLC, Panasonic Holdings Corporation, TP-Link USA Corporation, Hikvision USA Inc., Fortinet Inc., and Dahua Technology USA resulting in aggregate settlements paid and recognized as revenue of $2,601,000 and a conditional payment of $150,000 which has not yet been recognized as revenue because the terms of the settlement agreement, Apple received a fully paid non-exclusive license toconditional payment have not been satisfied. The above referenced litigations against Ubiquiti Inc. and Honeywell International Inc. remain pending.'227Company’s Remote Power Patent for its full term (which expired in June 2016), along with certain rights to other patents in the Company's patent portfolio. The Company received $25,000,000 from Apple for the settlement and fully paid non-exclusive license.NOTE K – REVENUE FROM PROFESSIONAL LIABILITY SETTLEMENTOn April 22, 2016, Mirror Worlds Technologies, LLC ("MWT"), the Company's wholly-owned subsidiary, entered into an agreement pursuant to which it received $17,500,000 in connection with the settlement of a professional liability claim relating to services rendered in 2008-2010. The Company, through MWT, acquired the claim in May 2013 as part of its acquisitionconstituted 100% of the Mirror Worlds Patent Portfolio.NOTE L – CONCENTRATIONSRevenue from three licensees constituted approximately 83% of the Company'sCompany’s revenue for the year ended December 31, 2016 (exclusive2023, of non-licensing revenue from our professional liability settlement – see Note K above). Revenue from two licensees constituted approximately 79%which four parties constitute an aggregate of 90% of the Company'sCompany’s revenue for such year. The Company had no revenue for the year ended December 31, 2015. At December 31, 2016, royalty receivables from three licensees constituted approximately 85% of the Company's net royalty receivables. At December 31, 2015, royalty receivables from two licensees constituted approximately 82% of the Company's net royalty receivables.NOTE2022.On August 22, 2011, the Company announced that its Board of Directors approved a share repurchase program to repurchase up to $2,000,000 of shares of its common stock over the next 12 months ("ShareStock Repurchase Program"). Program17, 2015,14, 2023, the Company'sCompany’s Board of Directors authorized its fifthan extension and increase to the Share Repurchase Program to repurchase up to an additional $2,000,000 of the Company's common stock over the subsequent 12 month period (for a total of up to $14,000,000 since inception of the Share Repurchase Program). On June 9, 2016, the Company's Board of Directors authorized the extension of the Share Repurchase Program to repurchase up to $2,654,000 of shares of the Company'sCompany’s common stock over the subsequent 12 month24-month period. The common stock may be repurchased from time to time in open market transactions or privately negotiated transactions in the Company'sF-24NETWORK-1 TECHNOLOGIES, INC.Notes to Consolidated Financial StatementsDecember 31, 2016 and 2015NOTE M – STOCK REPURCHASE PROGRAM (continued)will beare determined by management based on its evaluation of market conditions and other factors. The repurchase program may be increased, suspended or discontinued at any time.2016,2023, the Company repurchased an aggregate of 43,400 shares of its common stock pursuant to the Share Repurchase Program at a cost of $119,045approximately $955,000 (exclusive of commissions) or an average price per share of $2.74 per share..March 1, 2017,December 31, 2023, the Company has repurchased an aggregate of 6,926,004 shares of its common stock at a cost of $11,463,873approximately $18,713,000 (exclusive of commissions) or an average per share price of $1.66 per share.NOTE.DIVIDEND POLICYOn December 7, 2016, the Board of Directors of the Company approved the initiationDividend Policydividend policy providing for the payment of a regular semi-annual cash dividend of $0.05 per common share ($( per common share annually) commencing in 2017. The Company anticipates paying the semi-annual dividendswhich have been paid in March and September of each year. ItOn March 3, 2023, the Board of Directors declared a semi-annual cash dividend of per share with a payment date of March 31, 2023 to all common shareholders of record as of March 15, 2023. On September 8, 2023, the Board of Directors declared a semi-annual dividend of per share with a payment date of September 29, 2023 to all common shareholders of record as of September 19, 2023. The Company’s dividend policy undergoes a periodic review by the Board of Directors and is anticipated thatsubject to change at any time depending upon the Company’s earnings, financial requirements and other factors.regularcash dividend will continueof per share with a payment date of March 29, 2024 to be paid through all common shareholders of record as of March 2020 (the expiration15, 2024.Company's Remote Power Patent) provided that the Company continues to receive royalties from licenseesCompany’s three non-management directors. The RSUs vest over a one year period in equal quarterly installments of its Remote Power Patent.3,750 shares of common stock on each of March 15, 2024, June 15, 2024, September 15, 2024 and December 15, 2024.NOTE O – SUBSEQUENT EVENTS[1]On January 19, 2017, Avaya Inc., one of four remaining defendants in the Company's patent litigation pending in the United States District Court for the Eastern District of Texas, Tyler Division (see Note J[1] hereof), filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. As a result of the filing the Company's litigation against Avaya Inc. is currently subject to an automatic stay (the litigation will continue in the Southern District of New York against the other three defendants). On March 7, 2017, the Company made a motion for relief from the automatic stay in the United States District Court for the Southern District of New York which is pending.[2]On February 2, 2017, the Board of Directors of the Company declared an initial semi-annual cash dividend of $0.05 per common share which is payable on March 24, 2017 to all common stockholders of record as of March 3, 2017. The Company's newly-adopted dividend policy, previously announced in December 2016 (see Note N above), provides for the payment of a regular semi-annual dividend of $0.05 per common share ($0.10 per common share annually).[3]On February 2, 2017, the Company issued 13,500 restricted stock units to each of its three non-management directors as an annual grant for 2017. Each restricted stock unit represents a contingent right to receive one share of the Company's common stock. The restricted stock units vest in four equal quarterly amounts of 3,375 shares of common stock on March 15, 2017, June 15, 2017, September 15, 2017 and December 15, 2017, subject to continued service on the Board of Directors.��F-25"“Financial Statements and Supplementary Data:"20162023 and 2015incomeoperations and comprehensive incomeloss for the years ended December 31, 20162023 and 201520162023 and 201520162023 and 2015Exhibits10.1+2013 Stock Incentive Plan. Previously filed as Appendix B to the Company's Schedule 14A (Proxy Statement) filed on August 20, 2013 and incorporated herein by reference.10.2 Patents Purchase, Assignment and License Agreement, dated November 18, 2003, between the Company and Merlot Communications, Inc. Previously filed as Exhibit 10.10 to the Company's Current Report on Form 8-K filed December 3, 2003 and incorporated herein by reference.10.3Amendment to Patents Purchase, Assignment and License Agreement, dated January 18, 2005, between the Company and Merlot Communications, Inc. Previously filed January 24, 2005 as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 18, 2005 and incorporated herein by reference.10.4Form of stock option agreement, previously filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8, filed on October 14, 2009 and incorporated herein by reference.10.5Settlement Agreement between the Company and Cisco Systems, Inc. and Cisco-Linksys, LLC. Portions of the Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to an order granting confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 20, 2010 and incorporated herein by reference.10.6Settlement and License Agreement, dated May 25, 2011, among the Company, Corey M. Horowitz, CMH Capital Management Corp. and Cisco Systems, Inc. and Cisco Consumer Products, LLC. Portions have been omitted pursuant to an order granting confidentiality treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 as amended. Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 1, 2011 and incorporated herein by reference.-48- 10.4+ 2013 Stock Incentive Plan. Previously filed as Appendix B to the Company’s Schedule 14A (Proxy Statement) filed on August 20, 2013 and incorporated herein by reference. 10.5+ 10.92022 Stock Incentive Plan Previously filed as Exhibit A to the Company's Schedule 14A (Proxy Statement) filed on July 27, 2022 and incorporated herein by reference.14 14Code of Ethics. Previously filed as Exhibit 14 to the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004 filed on April 14, 2004 and incorporated herein by reference. - 57 -23.1* 23.1*Consent of Friedman,Marcum LLP, Independent Registered Public Accounting Firmindependent registered public accounting firm.97.* Compensation Recovery Policy DocumentDocumentDocumentDocumentDocument________________________-49- - 58 -authorized, in the City of New York, State of New York, on the 20th day of authorized.2017.NETWORK-1 TECHNOLOGIES, INC.By:/s/ Corey M. HorowitzCorey M. HorowitzChairman and Chief Executive OfficerNAME TITLE DATE /s/20, 2017 /s/ David KahnDavid Kahn Secretary and a Director (principal financial officer and principal accounting officer)20, 2017 /s/ Emanuel PearlmanEmanuel PearlmanDirectorMarch 20, 2017 /s/ Niv HarizmanNiv HarizmanDirectorMarch 20, 2017 /s/20, 2017- 59 -