U.S.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

Washington, D.C. 20549


_________________

FORM 10-Q


_________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

For the quarterly period ended September 30, 2017

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to__________

For the transition period from ______ to ______

Commission File Number  1-15288


NETWORK-1 TECHNOLOGIES, INC.

(Exact

 (Exact Name of Registrant as Specified in Its Charter)


Delaware

11-3027591

(State or Other Jurisdictionother jurisdiction of Incorporation

incorporation or Organization)organization)

11-3027591

(IRSI.R.S. Employer

Identification No.)

445 Park

65 Locust Avenue Suite 912

, Third Floor

New York, New York


Canaan, Connecticut

06840
(Address of Principal Executive Offices)principal executive offices)
10022

(Zip Code)

203-920-1055

 

              212-829-5770              

(Registrant'sRegistrant’s Telephone Number)


Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbolName of each exchange on which registered

Common Stock, par value $0.01 per share

NTIP

NYSE American

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  ☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§S-T (§223.405) of this chapter)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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer”, "smaller“smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐
Accelerated  filer ☐
Non-accelerated filer
Smaller reporting company
Emerging growth Company company

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒


The number of shares of the registrant'sregistrant’s common stock, $.01 par value per share, outstanding as of November 13, 2017May 3, 2024 was 24,131,012.

23,414,473.

 

1


NETWORK-1 TECHNOLOGIES, INC.

Form 10-Q Index

Page No.
PART I.Financial Information
PART I.  Financial Information
Item 1.

Condensed Consolidated Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2024 and December 31, 20162023

34
Condensed Consolidated Statements of Income and Comprehensive IncomeOperations for the three and nine months ended September 30, 2017March 31, 2024 and 20162023

45
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

6
Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2024 and 20162023

57
Notes to Unaudited Condensed Consolidated Financial Statements68
Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2322
Item 3.Quantitative and Qualitative Disclosures About Market Risk3126
Item 4.Controls and Procedures3126
PART II.Other Information
Item 1.Legal Proceedings3228
Item 1A.Risk Factors3528
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds3528
Item 3.Defaults Upon Senior Securities3628
Item 5.Other Information3628
Item 6.  Exhibits36Exhibits29
Signatures3730

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include any expectation of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; factors that may affect our operating results; statements related to future performance and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Factors that could cause or contribute to such differences include various risks and uncertainties described below and elsewhere in this Quarterly Report on Form 10-Q as well as in our Annual Report on Form 10-K for the year ended December 31, 2023 (filed with the SEC on March 8, 2024). Furthermore, such forward-looking statements speak only as of the date of this report. Such risks and uncertainties include, but are not limited to, the following:

our uncertain revenue from licensing our intellectual property;
uncertainty of the outcome of our pending litigations;
our ability to achieve future revenue from our patent portfolios;
our ability to protect our patents;
our ability to execute our strategy to acquire or make investments in high quality patents with significant licensing opportunities;
our ability to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property;
our ability to achieve a return on our investment in ILiAD Biotechnologies, LLC;
our ability to continue to acquire additional intellectual property;
uncertainty as to whether cash dividends will continue to be paid;
variations in our quarterly and annual operating results;
the increasing development of artificial intelligence could materially impact our business;
the risk that we may be determined to be a personal holding company in 2024 or future years which may result in our issuing a special cash dividend to our stockholders to the extent we have undistributed personal holding company income resulting in less cash available for our operations and strategic transactions; and
legislative, regulatory and competitive developments.


- 2 -

PART I.  FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

NETWORK-1 TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

  
September 30,
2017
  
December 31,
2016
 
ASSETS:      
       
CURRENT ASSETS:      
Cash and cash equivalents $
52,265,000
  $50,918,000 
Marketable securities, available for sale  1,064,000   1,065,000 
Royalty receivables, net  3,570,000   2,879,000 
Prepaid taxes  300,000   1,195,000 
Other current assets  18,000   83,000 
         
Total Current Assets  57,217,000   56,140,000 
         
OTHER ASSETS:        
Deferred tax assets  168,000   207,000 
Patents, net of accumulated amortization  1,131,000   1,231,000 
Security deposits  19,000   19,000 
         
Total Other Assets  1,318,000   1,457,000 
         
TOTAL ASSETS $58,535,000  $57,597,000 
         
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY:        
         
CURRENT LIABILITIES:        
Accounts payable $70,000  $171,000 
Income taxes payable  930,000    
Accrued contingency fees and related costs  1,789,000   2,681,000 
Accrued payroll  240,000   1,748,000 
Other accrued expenses  87,000   125,000 
         
TOTAL LIABILITIES  3,116,000   4,725,000 
         
         
COMMITMENTS AND CONTINGENCIES        
         
STOCKHOLDERS' EQUITY        
         
Preferred stock, $0.01 par value, authorized 10,000,000 shares;        
none issued and outstanding at September 30, 2017 and December 31, 2016      
         
Common stock, $0.01 par value; authorized 50,000,000 shares;        
24,131,012 and 23,744,829 shares issued and outstanding at        
September 30, 2017 and December 31, 2016, respectively  241,000   238,000 
         
Additional paid-in capital  64,141,000   62,367,000 
Accumulated deficit  (8,931,000)  (9,702,000)
Accumulated other comprehensive loss  (32,000)  (31,000)
         
TOTAL STOCKHOLDERS' EQUITY  55,419,000   52,872,000 
         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $58,535,000  $57,597,000 

  

March 31,

2024  

  

December 31,

2023

 

ASSETS

 

CURRENT ASSETS:

        
Cash and cash equivalents $18,105,000  $16,896,000 
Marketable securities, at fair value  25,289,000   28,571,000 
Other current assets  218,000   206,000 

 

TOTAL CURRENT ASSETS

  43,612,000   45,673,000 

 

OTHER ASSETS:

        
Patents, net of accumulated amortization  1,296,000   1,326,000 
Equity investment  4,621,000   5,249,000 
Operating leases right-of-use asset  75,000   16,000 
Security deposit  13,000   13,000 

 

Total Other Assets

  6,005,000   6,604,000 

 

TOTAL ASSETS

 $49,617,000  $52,277,000 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

CURRENT LIABILITIES:

        
Accounts payable $306,000  $125,000 
Accrued payroll     378,000 
Other accrued expenses  182,000   297,000 
Operating lease obligation, current  57,000   23,000 
         
Total Current Liabilities  545,000   823,000 

 

LONG TERM LIABILITIES:

        
Deferred tax liability  615,000   762,000 
Operating lease obligation, non-current  24,000    

 

TOTAL LIABILITIES

 1,184,000  1,585,000 
COMMITMENTS AND CONTINGENCIES (Note G)        

 

STOCKHOLDERS’ EQUITY

        
Preferred stock, $0.01 par value, authorized 10,000,000 shares;
none issued and outstanding at March 31, 2024 and December 31, 2023
      
Common stock, $0.01 par value; authorized 50,000,000 shares; 23,552,561 and 23,553,908 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively  235,000   235,000 
Additional paid-in capital  67,560,000   67,446,000 
Accumulated deficit  (19,362,000)  (16,989,000)
         
TOTAL STOCKHOLDERS’ EQUITY  48,433,000   50,692,000 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 $49,617,000  $52,277,000 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

- 3 -


NETWORK-1 TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

OPERATIONS

(UNAUDITED)

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
             
REVENUE $3,237,000  $34,326,000  $14,320,000  $59,963,000 
                 
OPERATING EXPENSES:                
Costs of revenue  964,000   16,943,000   4,339,000   24,183,000 
Professional fees and related costs  534,000   633,000   1,154,000   1,458,000 
General and administrative  434,000   428,000   1,358,000   1,256,000 
Amortization of patents  50,000   49,000   150,000   760,000 
Stock-based compensation  237,000   189,000   711,000   233,000 
Contingent patent cost           500,000 
TOTAL OPERATING EXPENSES  2,219,000   18,242,000   7,712,000   28,390,000 
                 
OPERATING INCOME  1,018,000   16,084,000   6,608,000   31,573,000 
 
OTHER INCOME:
      ��         
Interest income, net  55,000   24,000   89,000   50,000 
                 
INCOME BEFORE INCOME TAXES  1,073,000   16,108,000   6,697,000   31,623,000 
                 
                 
INCOME TAXES:                
Current  425,000   3,817,000   2,198,000   4,198,000 
Deferred taxes, net     1,459,000   39,000   4,543,000 
Total income taxes  425,000   5,276,000   2,237,000   8,741,000 
                 
NET INCOME $648,000  $10,832,000  $4,460,000  $22,882,000 
                 
Net Income Per Share                
Basic $0.03  $0.46  $0.18  $0.98 
Diluted $0.02  $0.43  $0.17  $0.93 
                 
Weighted average common shares outstanding:                
Basic  24,150,388   23,320,514   24,185,129   23,291,408 
Diluted  26,412,139   25,198,142   26,480,084   24,700,784 
                 
Cash dividends declared per share $0.05  $  $0.10  $ 
                 
NET INCOME $648,000  $10,832,000  $4,460,000  $22,882,000 
                 
OTHER COMPREHENSIVE INCOME:                
Unrealized holding gain (loss) on securities available-for-sale arising during the period  (2,000)  (4,000)  (1,000)  39,000 
                 
                 
COMPREHENSIVE INCOME $646,000  $10,828,000  $4,459,000  $22,921,000 

         
  Three Months Ended
March 31,
 
  2024  2023 
       
REVENUE $  $537,000 
         
OPERATING EXPENSES:        
Costs of revenue     151,000 
Professional fees and related costs  219,000   298,000 
General and administrative  669,000   781,000 
Amortization of patents  30,000   83,000 
         
TOTAL OPERATING EXPENSES  918,000   1,313,000 
         
OPERATING LOSS  (918,000)  (776,000)

 

OTHER INCOME:

        
Interest and dividend income, net  431,000   310,000 
Net realized and unrealized gain on marketable securities  48,000   364,000 
Total other income, net  479,000   674,000 
         
LOSS BEFORE INCOME TAXES AND EQUITY IN NET LOSSES OF EQUITY METHOD INVESTEE  (439,000)  (102,000)
         
INCOME TAX PROVISION:        
Current      
Deferred taxes  (147,000)  (153,000)
Total income tax benefit  (147,000)  (153,000)
         
(LOSS) INCOME BEFORE SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE  (292,000)  51,000 
         
SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE  (628,000)  (674,000)
         
NET LOSS $(920,000) $(623,000)
         
Net loss per share:        
Basic $(0.04) $(0.03)
Diluted $(0.04) $(0.03)
         
Weighted average common shares outstanding:        
Basic  23,540,468   23,866,821 
Diluted  23,540,468   23,866,821 
         

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.


- 4 -

NETWORK-1 TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

  
Nine Months Ended
September 30,
 
  2017  2016 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net Income $4,460,000  $22,882,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Amortization of patents  150,000   760,000 
Stock-based compensation  711,000   233,000 
Deferred tax provision  39,000   4,543,000 
         
Changes in operating assets and liabilities:        
Royalty receivables  (691,000)  123,000 
Prepaid Taxes  895,000    
Other current assets  65,000   176,000 
Accounts payable  
(101,000
)  323,000 
Accrued expenses  (2,521,000)  4,020,000 
Income taxes payable  930,000   4,080,000 
NET CASH PROVIDED BY OPERATING ACTIVITIES  3,937,000   37,140,000 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of patents  (50,000)  (4,000)
         
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash dividends  (2,421,000)   
Value of shares delivered to fund withholding taxes on exercise of options  (56,000)  (44,000)
Repurchases of common stock, net of commissions  (1,131,000)  (1,000)
Proceeds from exercise of options and warrants  1,068,000   60,000 
         
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  (2,540,000)  15,000 
         
NET INCREASE IN CASH AND CASH EQUIVALENTS  1,347,000   37,151,000 
         
         
CASH AND CASH EQUIVALENTS, beginning of period  50,918,000   20,608,000 
         
CASH AND CASH EQUIVALENTS, end of period $52,265,000  $57,759,000 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION        
CASH PAID DURING THE PERIOD FOR:        
Interest $  $ 
Taxes  440,000  $ 
         
NON-CASH FINANCING ACTIVITY        
Accrued dividend rights on restricted stock units  84,000    

THREE MONTHS ENDED MARCH 31, 2024

             Accumulated    
        Additional     Other  Total 
  Common Stock  Paid-in  Accumulated  Comprehensive  Stockholders’ 
  Shares  Amount  Capital  Deficit  Income (Loss)  Equity 
Balance – January 1, 2024  23,553,908  $235,000  $67,446,000  $(16,989,000)    $50,692,000 
Dividends and dividend equivalents declared           (1,207,000)     (1,207,000)
Stock-based compensation        115,000         115,000 
Vesting of restricted stock units  111,250   1,000   (1,000)         
Value of shares delivered to pay withholding taxes  (28,853)        (61,000)     (61,000)
Treasury stock purchased and retired  (83,744)  (1,000)     (185,000)     (186,000)
Net loss           (920,000)     (920,000)
Balance – March 31, 2024  23,552,561  $235,000  $67,560,000  $(19,362,000)    $48,433,000 

THREE MONTHS ENDED MARCH 31, 2023

             Accumulated    
        Additional     Other  Total 
  Common Stock  Paid-in  Accumulated  Comprehensive  Stockholders’ 
  Shares  Amount  Capital  Deficit  Loss  Equity 
Balance – January 1, 2023  23,863,639  $239,000  $66,939,000  $(12,055,000) $(14,000) $55,109,000 
Dividends and dividend equivalents declared           (1,196,000)     (1,196,000)
Stock-based compensation        161,000         161,000 
Vesting of restricted stock units  123,750   1,000   (1,000)         
Value of shares delivered to pay withholding taxes  (39,099)        (83,000)     (83,000)
Treasury stock purchased and retired  (136,785)  (1,000)     (305,000)     (306,000)
Net loss           (623,000)     (623,000)
Balance – March 31, 2023  23,811,505  $239,000  $67,099,000  $(14,262,000) $(14,000) $53,062,000 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statementsstatements.

- 5 -


NETWORK-1 TECHNOLOGIES, INC.

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS

(UNAUDITED)

         
  Three Months Ended
March 31,
 
  2024  2023 
       
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(920,000) $(623,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
        
Amortization of patents  30,000   83,000 
Stock-based compensation  115,000   161,000 
Loss allocated from equity method investment  628,000   674,000 
Unrealized (gain) loss on marketable securities  20,000   (270,000)
Deferred tax (benefit) expense  (147,000)  (153,000)
Amortization of operating leases – right of use assets  16,000   16,000 
         
Changes in operating asset and liabilities:        
Other current assets  (12,000)  229,000 
Other assets     (13,000)
Accounts payable  181,000   94,000 
Operating lease obligations  (17,000)  (17,000)
Accrued expenses  (490,000)  (471,000)

 

NET CASH USED IN OPERATING ACTIVITIES

  (596,000)  (290,000)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Sales of marketable securities  5,756,000   7,671,000 
Purchases of marketable securities  (2,494,000)  (9,330,000)
         
         
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES  3,262,000   (1,659,000)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash dividends paid  (1,210,000)  (1,191,000)
Value of shares delivered to fund payment of withholding taxes  (61,000)  (83,000)
Repurchases of common stock, inclusive of commissions  (186,000)  (306,000)
         
NET CASH USED IN FINANCING ACTIVITIES:  (1,457,000)  (1,580,000)
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  1,209,000   (3,529,000)
         
CASH AND CASH EQUIVALENTS, beginning of period  16,896,000   13,448,000 
         
CASH AND CASH EQUIVALENTS, end of period $18,105,000  $9,919,000 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION        
Cash paid during the period for:        
Interest      
Income taxes      
         
NON-CASH FINANCING ACTIVITIES        
Accrued dividend rights on restricted stock units $32,000  $8,000 
Right of use asset and lease liability $75,000    
         

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

NETWORK-1 TECHNOLOGIES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE A – BASIS OF PRESENTATION AND NATURE OF BUSINESS:

BUSINESS

[1] BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements are unaudited, but, in the opinion of the management of Network-1 Technologies, Inc. (the "Company"“Company”), contain all adjustments consisting only of normal recurring items which the Company considers necessary for the fair presentation of the Company'sCompany’s financial position as of September 30, 2017,March 31, 2024, and the results of its operations, and comprehensive income for the three and nine month periods ended September 30, 2017 and September 30, 2016changes in stockholders’ equity, and its cash flows for the ninethree month periods ended September 30, 2017March 31, 2024 and September 30, 2016.March 31, 2023.  The unaudited condensed consolidated financial statements included herein have been prepared in accordance with the accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP may have been omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 20162023 included in the Company'sCompany’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2017.8, 2024. The results of operations for the three and nine months ended September 30, 2017March 31,2024 are not necessarily indicative of the results of operations to be expected for the full year.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary,subsidiaries, Mirror Worlds Technologies, LLC and HFT Solutions, LLC.

All intercompany balances and transactions have been eliminated in consolidation.

[2] BUSINESS:

BUSINESS

The Company is engaged in the development, licensing and protection of its intellectual property assets. The Company presently owns thirty-six (36)one-hundred two (102) 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 Internet of Things (“IoT”), Machine-to-Machine, and other mobile devices, including (i)smartphones, tablets and computers, as well as 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 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) patents covering 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) (the "QoS Patents").cameras.

NOTE A – BASIS OF PRESENTATION AND NATURE OF BUSINESS (continued)

The 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.  As of September 30, 2017, the Company has entered into twenty-six (26) 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 patent portfolios. In addition, the Company reviews opportunities to acquire or license additional intellectual property assets.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. The Company's Remote Power Patent has generated licensing revenue in excess of $119,000,000 from May 2007 through September 30, 2017.  As a result of the Company's acquisition of the Mirror Worlds Patent Portfolio in May 2013, the Company achieved licensing and other revenue of $47,150,000 through September 30, 2017.

- 6 -

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In addition, the Company may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.
Use of Estimates and Assumptions

The Company has also made equity investments totaling $7,000,000 in ILiAD Biotechnologies, LLC (“ILiAD”), a clinical stage biotechnology company (see Note J hereof).

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]Use of Estimates and Assumptions

The preparation of the unaudited condensed 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 unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The significant estimates and assumptions made in the preparation of the Company'sCompany’s unaudited condensed consolidated financial statements include revenue recognition, income taxes,costs related to the Company’s assertion of litigation, valuation of patentsthe Company’s patent portfolios, stock-based compensation, the recoverability of deferred tax assets and stock-based compensation.the carrying value of the Company’s equity method investments. Actual results could be materially different from those estimates upon which the carrying values were based.

Patents

Certain amounts recorded to reflect the Company’s share of 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 of the equity method investee is complete. The Company owns patents that relate to various technologies.  The Company capitalizesreports its share of the costs associated with acquisition, registration and maintenanceresults of its acquired patents and amortizes these assets over their remaining useful livesequity method investee on a straight-lineone quarter lag basis.  Any further payments made to maintain or develop

[2]Revenue Recognition

Under ASC 606, revenue is recognized when the patents would be capitalized and amortized over the balance of the useful life for the patents.

Revenue Recognition

The Company recognizes revenue received fromcompletes the licensing of its intellectual property and other relatedto its licensees, obtains a final judgment awarding damages or enters into a litigation settlement agreement involving its patents. With respect to licensing its intellectual property, activities.  Revenueobtaining a final judgment or entering into a litigation settlement agreement, revenue is recognized when (i) persuasive evidencein an amount that reflects the consideration the Company expects to be entitled to in exchange for licensing its intellectual property, obtaining a final judgment or in a settlement of an arrangement exists, (ii) all obligations havethe litigation.

The Company determines revenue recognition through the following steps:

identification of the license agreement, the final judgment or the litigation settlement agreement;
identification of the performance obligations in the license agreement, the final judgment or the litigation settlement agreement;
determination of the consideration for the license, final judgment 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.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue disaggregated by source is as follows:

  Three Months Ended March 31, 
  2024  2023 
       
Litigation settlements $  $537,000 
Total Revenue $  $537,000 

During the three months ended March 31, 2024, the Company had no revenue. During the three months ended March 31, 2023, the Company entered into settlement agreements with three defendants with respect to patent infringement litigation involving its Remote Power Patent, resulting in aggregate settlements paid of $537,000 which were recognized as revenue and a conditional payment of $150,000 which has not been performed pursuant torecognized as revenue as of March 31, 2024, because the terms of the conditional payment have not yet been satisfied.

Revenue from the Company’s patent licensing and enforcement business is typically generated from negotiated license agreements or other applicablesettlement agreements with respect to any of the Company’s 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 a litigation settlement related to the Company’s assertion of patent infringement involving its intellectual property, defendants may 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.

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 orand determinable, and (iv) collectability of amounts 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.

[3]Equity Method Investments

Equity method investments are equity securities in entities the Company reliesdoes 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 J 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 royaltya one-quarter lag. When the Company’s carrying value in an equity method investment is reduced to zero, no further losses are recorded in the Company’s financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports received from third party licensees toincome, the Company will not record its revenue.  From time to time the Company may audit royalties reported from licensees. Any adjusted royalty revenue as a resultshare of such audits is recorded byincome until it equals the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined.amount of its share of losses not previously recognized.

10 

Costs of Revenue
The Company includes in costs of revenue for the three and nine months ended September 30, 2017 and 2016 contingent legal fees payable to patent litigation counsel (see Note H[1] hereof), incentive bonus compensation payable to its Chairman and Chief Executive Officer (see Note I[1] hereof) and payments of certain percentages of net proceeds to Recognition Interface, LLC and others with respect to monetization of the Company's Mirror Worlds Patent Portfolio (see Note H[2] hereof).
Income Taxes

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

[4]Income Taxes

The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (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.

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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
As of March 31, 2024, the Company had total deferred tax assets generated from its activities totaling $1,319,000. The Company’s deferred tax assets were offset by a valuation allowance of $1,319,000 as it was determined that it is more likely than not that certain deferred tax assets will not be realized. As of March 31, 2024, the Company also had a deferred tax liability of $615,000.

The personal holding company (“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC’s undistributed personal holding company income (“UPHCI”), which means, in general, taxable income subject to certain adjustments and reduced by certain distributions to shareholders. 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 five or fewer individuals at any 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”) 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 2023, based on available information concerning the Company’s shareholder ownership, the Company did not satisfy the Ownership Test. In addition, the Company did not satisfy the Income Test in the second half of 2023. Thus, the Company was not a PHC in 2023. However, the Company may subsequently be determined to be a PHC in 2024 or in future years if it satisfies both the Ownership Test and Income Test. If the Company were to become a PHC in 2024 or any future year, it would be subject to the 20% tax on its UPHCI. In such event, the Company may issue a special cash dividend to its shareholders in an amount equal to the UPHCI rather than incur the 20% tax.

ASC 740-10, "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 September 30, 2017March 31, 2024.

The Company recognizes interest and December 31, 2016.penalties, if any, related to income tax in the income tax provision in the unaudited condensed consolidated statements of operations.

11 

United States

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

U.S. federal, state and local income tax returns prior to 20142020 are not subject to examination by any applicable tax authorities, except that tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent they generated loss carry-forwards that are available for those future years.

Effective January 1, 2017,

[5]New Accounting Standards

Segments

In November 2023, the Company adopted FASB issued ASU 2016-09,2023-07, Segment Reporting (Topic 280): Improvements to Employee Share Based Accounting, which impacts the Company's presentation of certain taxes.  See "Accounting Standards Adopted in Period" section of this Note B for further details.

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")Reportable Segment Disclosures. In the second half of 2017 (as well as during the second half of prior years), the Company did not meet the Ownership Test.  Due to theASU 2023-07 updates reportable segment disclosure requirements primarily through enhanced disclosures about significant number of shares held by the Company's largest shareholders, the Company continually assesses its share ownership to determine whether it meets the Ownership 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 constitute a PHC and the Company would be subject to a 20% tax on the amount of any PHC Income that it does not distribute to its shareholders.


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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of long-lived assets
Intangible 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 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 September 30, 2017, there was no impairment to the Company's patents.
Stock-Based Compensation
The Company accounts for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718Compensation - Stock Compensation ("ASC 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 unaudited condensed consolidated statements of income and comprehensive income 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 service period of the award, which is generally the vesting term. Share-based compensation 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 granted and either the quoted market price of the Company'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 D hereof for further discussion of the Company's stock–based compensation).
Earnings Per Share
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 takes into account the potential dilution that could occur if securities or other contracts, such as warrants and options to purchase common stock were exercised and shares were issued pursuant to outstanding restricted stock units.  Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share (see Note E hereof).
Financial Instruments
U.S. GAAP regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
- 9 -

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The three levels of inputs are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset 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 carrying value of cash, marketable securities, royalty receivables, other assets, accounts payable, and accrued expenses approximates fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.  Marketable securities available for sale are measured at fair value on a recurring basis based on Level 1 inputs (see Note G hereof).
Dividends
Dividends are recorded when declared by the Company's Board of Directors.  Common stock dividends are charged against retained earnings when declared or paid (see Note N hereof).
Recent Accounting Pronouncements

In August 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows. Thissegment expenses. ASU provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. The guidance2023-07 is effective for interim and annual periodsall entities for fiscal years beginning after December 15, 2017,2023, 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 currently evaluating ASU 2023-07 to determine its impact on the Company's disclosures, however, the Company does not believe that the adoption of thisexpect ASU will2023-07 to have a material impact on its consolidated financial statements.
impact.

Income Tax Disclosure

In February 2016,December 2023, the FASB issued ASU No. 2016-02, Leases (Topic 842)ASU 2023-09, Improvements to Income Tax Disclosures. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provides additional implementation guidance2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on the previously issued ASU 2016-02 Leases (Topic 842)ASU No. 2016-02 isincome taxes paid. The new requirements will be effective for annual periods beginning after December 15, 2018, and requires2024. The guidance will be applied on a lesseeprospective basis with the option 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 useapply the leased asset (the underlying asset) for the lease term.standard retrospectively. Early applicationadoption is permitted. The Company does not believe that the adoption of this accounting standard will have a materialis currently evaluating ASU 2023-09 to determine its impact on its consolidated financial statements.

In May 2014, FASB issued 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 ofCompany's disclosures, however, 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
- 10 -

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  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 intends to adopt ASU 2014-09 on January 1, 2018.  The Company has elected to apply the modified retrospective method of adoption.  The Company does not expect the impact of the adoption of the new revenue standardASU 2023-09 to have a material impact on its consolidated financial statements.  The Company will continue to evaluate any new license agreements entered into in the future to determine the impact upon adoption.
In May 2017, FASB issued ASU No. 2017-09 Compensation – Stock Compensation (Topic 718) which provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting in Topic 718.  The new standard is effective beginning after December 15, 2017 with early adoption permitted.  The Company does not believe the adoption of this standard will have a material impact on its financial statements.

Accounting Standards Adopted in the Period

In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification ("ASC") Topic 718, Compensation - Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Prior to this amendment, excess tax benefits resulting from the difference between the deduction for tax purposes and the compensation costs recognized for financial reporting were not recognized until the deduction reduced taxes payable.  Under the new method the Company will recognize excess tax benefits in the current accounting period.  Additionally, ASU 2016-09 requires that the Company present excess tax benefits on the Statement of Cash Flows as an operating activity. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016. The Company adopted ASU 2016-09 in the first quarter of 2017 and elected to apply this adoption prospectively. Prior periods have not been adjusted. The effective tax rate for the nine months ended September 30, 2017 differed from the federal statutory rate primarily due to the recognition of excess tax benefits as a component of the provision for income taxes attributable to the adoption of ASU 2016-09.

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impact.

NOTE C - PATENTS

The Company'sCompany’s intangible assets at September 30, 2017March 31, 2024 include patents with estimated remaining economic useful lives ranging from 3.09 to 4.015 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 September 30, 2017March 31, 2024 and December 31, 20162023 were as follows:

       
  March 31, 2024  December 31, 2023 
Gross carrying amount – patents $8,473,000  $8,473,000 
Accumulated amortization – patents  (7,177,000)  (7,147,000)
Patents, net $1,296,000  $1,326,000 

12 

  September 30, 2017  December 31, 2016 
         
Gross carrying amount – patents $6,477,000  $6,427,000 
Accumulated amortization – patents  (5,346,000)  (5,196,000)
Patents, net $1,131,000  $1,231,000 

NOTE C – PATENTS (continued)

Amortization expense for the three months ended September 30, 2017March 31, 2024 and September 30, 20162023 was $50,000$30,000 and $49,000, respectively.  Amortization expense for the nine months ended September 30, 2017 and September 30, 2016 was $150,000 and $760,000,$83,000, respectively. Future amortization of current intangible assets netfor the next five years and thereafter is as follows:

  
Twelve Months Ended September 30,
 
 
            2018 $200,000 
            2019 $193,000 
            2020 $193,000 
            2021 $193,000 
            2022 and thereafter $352,000 
                             Total $1,131,000 
     

The Company's Remote Power Patent expires in March 2020.

      
 For the years ended December 31, 
 2024 – remaining  $90,000 
 2025   120,000 
 2026   120,000 
 2027   119,000 
 2028   116,000 
 Thereafter   731,000 
 Total  $1,296,000 
       

The expiration dates of patents within the Company’s M2M/IoT Patent Portfolio range from September 2033 to May 2034. The expiration dates within the Company’s HFT Patent Portfolio range from October 2039 to November 2039. All of the patents within the Company'sCompany’s Mirror Worlds Patent Portfolio, range from April 2018 to February 2020 (six of the patents in the Mirror Worlds Patent Portfolio expired during the nine months ended September 30, 2016 and two of the patents in the Mirror Worlds Patent Portfolio expired during the nine months ended September 30, 2017).  The expiration dates of the patents within the Cox Patent Portfolio range from September 2021 to November 2023 and the expiration date of the QoS Patents is June 2019.

Remote Power Patent have expired.

NOTE D – STOCK-BASED COMPENSATION

Restricted Stock Units

During

The Company adopted the nine months ended2022 Stock Incentive Plan, (the “2022 Plan”), approved by its Board of Directors on July 25, 2022 and its stockholders on September 30, 2017,20, 2022. The 2022 Plan provides for the Company issued 13,500grant of any or all of the following types of awards: (a) stock options, (b) restricted stock, units to each of its three non-management directors as an annual grant for 2017 for service on the Company's Board of Directors.  Each(c) deferred stock, (d) stock appreciation rights, and (e) other stock-based awards including restricted stock unit represents a contingent right to receive one shareunits.

As of the Company's common stock.  The restricted stock units vest in four equal quarterly installments of 3,375March 31, 2024, there were 121,250 shares of common stock on March 15, 2017, June 15, 2017, September 15, 2017 and December 15, 2017, subject to continued service onoutstanding awards under the Board2022 Plan and 2,110,000 shares of Directors.

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NOTE D – STOCK-BASED COMPENSATION (continued)
common stock available for issuance under the 2022 Plan.

A summary of restricted stock unit activity for the ninethree months ended September 30, 2017March 31, 2024 is as follows (each restricted stock unit issued by the Company represents the right to receive one share of the Company'sCompany’s common stock):


  Number of Shares  
Weighted-Average Grant Date Fair Value
 
Balance of restricted stock units outstanding at December 31, 2016  
890,000
  $2.29 
Grants of restricted stock units  40,500  $3.80 
Vested restricted stock units  (100,375) $(2.87)
         
Balance of unvested restricted stock units at September 30, 2017  
830,125
  $2.30 

       
  Number of Shares  Weighted-Average Grant Date Fair Value 
Balance of restricted stock units outstanding at December 31, 2023  587,500  $1.81 
Grants of restricted stock units  70,000   2.17 
Vested restricted stock units  (111,250)  (2.45)
Balance of restricted stock units outstanding at March 31, 2024  546,250  $1.72 

Restricted stock unit compensation expense was $237,000$115,000 and $711,000$161,000 for the three and nine months ended September 30, 2017,March 31, 2024 and 2023, respectively. Restricted stock unitStock-based compensation expense was $189,000is included in general and $221,000 foradministrative expenses in the three and nine months ended September 30, 2016, respectively.

unaudited condensed consolidated statements of operations.

The Company hashad an aggregate of $1,097,000$545,000 of unrecognized restricted stock unit compensation expense as of September 30, 2017March 31, 2024 to be expensed over a weighted average period of 1.61.7 years.

13 

All of the Company's 830,125 outstanding restricted stock units at September 30, 2017 have dividend equivalent rights.
Stock Options
There were no stock option grants during the three or nine months ended September 30, 2017 and September 30, 2016.

The following table presents information relating to all stock options outstanding and exercisable at September 30, 2017:

      Weighted  
    Weighted Average  
Range of   Average Remaining  
Exercise Options Exercise Life in Options
Price Outstanding Price Years Exercisable
         
$0.83 - $2.34 2,110,000 $1.28 2.25 2,110,000

The Company had no recorded stock-based compensation related to stock option grants for the three months ended September 30, 2017 and September 30, 2016, respectively.  The Company recorded stock-based compensation related to stock option grants of $-0- and $12,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively.
The Company had no unrecognized stock-based compensation cost as of September 30, 2017.  The aggregate intrinsic value of options exercisable at September 30, 2017 was $5,431,000.
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NOTE D – STOCK-BASED COMPENSATION (continued)

(continued)

All of the Company’s outstanding (unvested) restricted stock units have dividend equivalent rights. During the ninethree months ended September 30, 2017,March 31, 2024, the Company's Chief Financial Officer and threeCompany paid a total of his children exercised stock options to purchase an aggregate$35,000 of 75,000 shares of the Company's common stock at an exercise price of $1.40 per share.  In addition, during the nine months ended September 30, 2017, a former director exercised a stock option to purchase 125,000 shares of the Company's common stock at an exercise price of $1.40 per share.

Warrants
such dividend equivalent rights. As of September 30, 2017,March 31, 2024 and December 31, 2023, there was $96,000 and $99,000, respectively, accrued for dividend equivalent rights which were no outstanding warrants to purchase shares of the Company's common stock.
During the nine months ended September 30, 2017, Recognition Interface, LLC exercised its remaining warrants to purchase an aggregate of 375,000 shares of the Company's common stock, at an exercise price of $2.10 per share, which resultedincluded in gross proceeds to the Company of $787,500.
other accrued expenses.

NOTE E – EARNINGSLOSS PER SHARE

Basic Earningsloss per share is calculated by dividing the net incomeloss by the weighted average number of outstanding common shares during the period. Diluted per share data includes the dilutive effects of options warrants and restricted stock units. PotentialPotentially dilutive shares of 2,940,125546,250 and 4,061,250571,250 at September 30, 2017March 31, 2024 and September 30, 2016,2023, respectively, consisted of options, warrants andoutstanding restricted stock units. and stock options. However, since the Company generated a net loss in 2024 and 2023, 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 were as follows:

         
  

Three Months Ended
March 31,

 
  

2024

  

2023

 

 

Weighted-average common shares outstanding – basic

  23,540,468   23,866,821 

 

Dilutive effect of restricted stock units and stock options

      

 

Weighted-average common shares outstanding – diluted

  23,540,468   23,866,821 

 

Restricted stock units excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive

  546,250   571,250 
         

14 

  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
 
  2017  2016  2017  2016 
             
Weighted-average common shares outstanding – basic  
24,185,129
   
23,291,408
   
24,150,388
   
23,320,514
 
                 
Dilutive effect of options, warrants and restricted stock units  
2,294,955
   
1,409,376
   
2,261,751
   
1,877,628
 
                 
Weighted-average common shares outstanding – diluted  
26,480,084
   
24,700,784
   
26,412,139
   
25,198,142
 
                 
Options and warrants excluded from the computation of diluted income per share because the effect of inclusion would have been anti-dilutive  
   
141,304
   
   
423,913
 

NOTE F – CASH AND CASH EQUIVALENTS


The Company places cash investments in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC").  At September 30, 2017, the Company maintained a cash balance of $51,366,000 in excess of FDIC limits.
The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents.

- 14 -

NOTE F – CASH AND CASH EQUIVALENTS (continued)

Cash and cash equivalentsMARKETABLE SECURITIES

Marketable securities as of September 30, 2017March 31, 2024 and December 31, 20162023 were composed of: 


  September 30, 2017  December 31, 2016 
       
Cash $9,395,000  $9,452,000 
Money market fund  42,870,000   41,466,000 
Total $52,265,000  $50,918,000 

NOTE G - MARKETABLE SECURITIES
Marketableof the following: 

                
  March 31, 2024 
  

Cost
Basis

  

Unrealized
Gains

  

Unrealized
Losses

  

Fair
Value

 
             
Certificates of deposit $6,170,000  $  $(17,000) $6,153,000 
Government securities  11,357,000   63,000   (21,000)  11,399,000 
Fixed income mutual funds  7,610,000   127,000      7,737,000 
Total marketable securities $25,137,000  $190,000  $(38,000) $25,289,000 

  December 31, 2023 
  

Cost
Basis

  

Unrealized
Gains

  

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 

The Company’s marketable securities are classified as available-for-sale and are recorded atwithin Level 1 of the fair market value.  Unrealized gains and losses are reported as other comprehensive income or loss.  Realized gains and losses are reclassified from other comprehensive income or loss to net income or loss in the periodvalue hierarchy because they are realized.  At September 30, 2017 and December 31, 2016, the Company's marketable securities consisted of two corporate bonds (aggregate face value $1,000,000) with a 3.9% and 4.5% coupon and term of greater than three months when purchased.  The Company's marketable securities maturevalued using quoted market prices in 2021 and it is not the intention of the Company to hold such securities until maturity.

an active market.

NOTE HGCOMMITMENTS AND CONTINGENCIES


[1] Legal Fees:

Russ, August & Kabat provides legal services to the Company with respect to its pending patent litigation filed in May 2017 against Facebook, Inc. (now Meta Platforms, Inc.) in the United StatesU.S. District Court for the Southern District of New York relating to several patents within the Company'sCompany’s Mirror Worlds Patent Portfolio (see Note J[4]I[2] hereof). The terms of the Company'sCompany’s agreement with Russ, August & Kabat provide for cash payments on a monthly basis subject to a cap plus a contingency fee ranging between 15%15% and 24%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 theapproved expenses incurred with respect to this litigation.

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 United StatesU.S. District Court for the Southern District of New York relating to certain patents within the Company'sCompany’s Cox Patent Portfolio (see Note J[3]I[1] hereof). The terms of the Company'sCompany’s agreement with Russ, August & Kabat provide for legal fees on a full contingency basis ranging from 15%15% to 30%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 of the approved expenses incurred with respect to this litigation.

Dovel & Luner, LLP (“Dovel”) provides legal services to the Company with respect to its patent litigation filed in September 2011 against sixteen (16) data networking equipment manufacturers inrelated to the United States District Court for the Eastern District of Texas, Tyler (seeRemote Power Patent (See Note J[1]I[4] hereof). The terms of the Company'sCompany’s agreement with Dovel & Luner LLP essentially provide, among other things, for legal fees on a full contingency basis ranging from 12.5%15% to 35% (with certain exceptions)40% of the net recovery (after deduction for expenses)of expenses where applicable) depending on the stage of the precedingproceeding in which athe result (settlement or judgment) is achieved. For the three months ended September 30, 2017 and September 30, 2016, the Company incurred aggregate contingent legal fees to Dovel & Luner, LLP with respect to the litigation of $523,000 and $2,348,000, respectively.  For the nine month period ended September 30, 2017 and September 30 2016, the Company incurred aggregate contingent legal

- 15 -


NOTE H – COMMITMENTS AND CONTINGENCIES (continued)

fees to Dovel & Luner, LLP with respect to the litigation of $1,789,000 and $2,706,000, respectively.  The Company is responsible for a certain portion of the expenses incurred with respect to thethis litigation.

15 


Dovel & Luner, LLP provided legal services to the Company with respect to the litigation settled in July 2010 against Cisco and several other major data networking equipment manufacturers (see Note J[2] hereof).  The terms of the Company's agreement with Dovel & Luner, LLP with respect to this litigation provided for legal fees of a maximum aggregate cash payment of $1.5 million plus a contingency fee of 24% (based on the settlement being achieved at the trial stage).  As a result of the royalty payments payable quarterly by Cisco in accordance with the Company's settlement and license agreement with Cisco, the Company has an obligation to pay Dovel & Luner, LLP (including local counsel) 24% of such royalties received.  During the three months ended September 30, 2017 and September 30, 2016, the Company incurred aggregate legal fees to Dovel & Luner LLP with respect to the litigation of $268,000 and $264,000, respectively.  During the nine months ended September 30, 2017 and September 30, 2016, the Company incurred aggregate legal fees to Dovel & Luner LLP with respect to the litigation of $1,801,000 and $1,824,000, respectively.

NOTE G – COMMITMENTS AND CONTINGENCIES (continued)

[2] Patent Acquisitions:

Acquisitions

On February 28, 2013,March 25, 2022, the Company completed the acquisition of foura new patent portfolio (HFT Patent Portfolio) currently consisting of nine U.S. patents (as well as aand two pending patent application) from Dr. Ingemar Cox (theseU.S. patents togethercovering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with subsequent related patent issuances comprisespeed and latency and provide critical latency gains in trading systems where the Cox Patent Portfolio), a technology leaderdifference between success and failure may be measured in digital watermarking content identification, digital rights managementnanoseconds. The Company paid the seller $500,000 at the closing and related technologies, for a purchase price of $1,000,000has an obligation to pay the seller an additional $500,000 in cash and 403,226 shares$375,000 of the Company'sCompany’s common stock.  stock (up to a maximum of 375,000 shares) upon achieving certain milestones with respect to the 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. No such payments were made by the Company during the three months ended March 31, 2024 and 2023.

In addition,connection with the Company’s acquisition of its Cox Patent Portfolio, the Company is obligated to pay Dr. Cox 12.5%12.5% of the net proceeds (after deduction of expenses) generated by the Company from licensing, sale or enforcement of the patents.  Since the acquisition of the patent portfolio from Dr. Cox,portfolio. No such payments were made by the Company has been issued sixteen (16) additional related patents byduring the USPTO resulting in an aggregate of twenty (20) patents within the Cox Patent Portfolio.  Professional feesthree ended March 31, 2024 and filing fees of $169,000 were capitalized as patent cost.

On May 21, 2013, the Company's wholly-owned subsidiary, Mirror Worlds Technologies, LLC, acquired all of the patents previously owned by Mirror Worlds, LLC (which subsequently changed its name to Looking Glass LLC ("Looking Glass")), consisting of nine issued United States patents and five pending applications covering foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system (these patents together with subsequent related patent issuances comprise the Mirror Worlds Patent Portfolio).  As consideration for the patent acquisition, the Company paid Looking Glass $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 at a cost of $505,000.
2023.

As part of the acquisition of the Mirror Worlds Patent Portfolio, the Company also entered into an agreement with Recognition Interface, LLC ("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.

- 16 -

NOTE H – COMMITMENTS AND CONTINGENCIES (continued)
Pursuant to the terms of the Company's agreement with Recognition,which Recognition received from the Company an interest in the net proceeds realized from the monetization of the Mirror Worlds Patent Portfolio, as follows: (i) 10%10% of the first $125 million of net proceeds; (ii) 15%15% of the next $125 million of net proceeds; and (iii) 20%20% of any portion of the net proceeds in excess of $250 million.  Since entering into the agreement with Recognition in May 2013, the Company has paid Recognition an aggregate of $3,127,000$3,127,000 with respect to such net proceeds interest related to the Mirror Worlds Patent Portfolio. No such payments were made by the Company during the three months ended March 31, 2024 and 2023.

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 5% of net proceeds greater than $100 million from Monetization Activities (as defined) related to the patent portfolio. In addition, Recognition (and an affiliated entity) also received warrantsM2M will be entitled to purchase an aggregatereceive from the Company $250,000 of 1,250,000 sharesadditional consideration upon the occurrence of the Company's common stock (500,000 shares at an exercise price of $2.05 per share, 375,000 shares at an exercise price of $2.10 per share and 375,000 shares at an exercise price of $1.40 per share).  All such warrants were exercised by Recognition (and its affiliate) as of January 2017, resulting in aggregate proceedscertain future events related to the patent portfolio. No such payments were made by the Company of $2,337,500.  As part ofduring the acquisition of the Mirror Worlds Patent Portfolio, professional feesthree months ended March 31, 2024 and filing fees of $409,000 were capitalized as patent cost.

2023.

[3] Lease Agreements:

Leases

The Company leaseshas one operating lease for its principal office space in New York City atCanaan, Connecticut that expires on April 30, 2025. The Company pays a monthly base rent of approximately $3,800$5,500 for such office space. On September 29, 2023, the Company exercised its early termination right under the lease effective December 31, 2023 which was subsequently extended to March 31, 2024. On March 28, 2024, the Company agreed to revoke its exercise of its early termination right and the lease expires on April 30, 2025.

16 

NOTE G – COMMITMENTS AND CONTINGENCIES (continued)

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. 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 agreement.

The remaining lease term as of March 31, 2018.2024 is thirteen (13) months.

Right of use lease assets and related lease obligations for the Company’s operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:

       
  

As of

March 31, 2024

  As of
December 31, 2023
 
         
Operating lease right-of-use assets $75,000  $16,000 
         
Operating lease obligations – current $57,000  $23,000 
Operating lease obligations – non-current  24,000    
Total lease obligations $81,000  $23,000 
         

The table below presents certain information related to the Company’s lease costs for the period ended:

         
  For the Three Months
Ended March 31,
 
  

2024

  

2023

 
         
Operating lease cost $17,000  $19,000 
Short-term lease cost      
Total lease cost $17,000  $19,000 

Future lease payments included in the measurement of lease liabilities on the unaudited condensed consolidated balance sheet as of March 31, 2024, were as follows:

     
  Operating Leases 
2024 – remaining period $59,000 
2025  26,000 
Total future minimum lease payments  85,000 
Less imputed interest  (4,000) 
Total operating lease liability $81,000 

17 

The Company entered into a lease agreement in July 2011 to rent office space in New Canaan, Connecticut.  In August 2015,

NOTE H – EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS

On March 22, 2022, 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, 2018).
NOTE I - EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS
[1]   On July 14, 2016, the Company entered into a new employment agreement ("Agreement"(“Agreement”) with its Chairman and Chief Executive Officer, pursuant to which he continues to serve as the Company in such positionsCompany’s Chairman and Chief Executive Officer for a fivefour- year term (“Term”), at an annual base salary of $475,000$535,000 which shall be increased by 3%3% per annum during the term of the Agreement. The Agreement established an annual target bonus of $175,000$175,000 for the Chairman and Chief Executive Officer based upon performance.In addition,

Under the Company granted toterms of the Agreement (which terms are substantially the same as the prior employment agreement with the Chairman and Chief Executive Officer, under its 2013 Stock Incentive Plan, 750,000 restricted stock units (the "RSUs") which vest in three tranches, as follows: (i) 250,000 RSUs shall 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 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

- 17 -

NOTE I - EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS (continued)
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) 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.  The aforementioned stock price vesting conditions of $3.25 per share and $4.25 per share have been satisfied.  Notwithstanding the above, in the event of a Change of Control (as defined)Officer), 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), all of the 750,000 RSUs shall accelerate and become immediately fully vested.
Under the terms of the Agreement, so long as the Chairman and Chief Executive Officer continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, the Chairman and Chief Executive Officer shall also receive incentive compensation in an amount equal to 5%10% 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 its Remote Power Patent and a 10%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 Mirror Worlds Patent PortfolioCompany’s patent portfolios and the Cox Patent Portfolio)its investment in ILiAD Biotechnologies) (collectively, the "Incentive Compensation"“Incentive Compensation”). During the three months ended September 30, 2017March 31, 2024 and September 30, 2016,2023, the Chairman and Chief Executive Officer earned Incentive Compensation of $162,000$0 and $2,029,000,$27,000, respectively. During the nine months ended September 30, 2017 and September 30, 2016, the Chairman and Chief Executive Officer earned incentive compensation of $716,000 and $3,996,000, respectively.  As of September 30, 2017 and December 31, 2016, $239,000 and $748,000 of such compensation were included in accrued expenses, respectively.  The Incentive Compensation shall continue to be paid to the Chairman and Chief Executive Officer for the life of each of the Company's patents with respect to licenses entered into with third parties during the term of his employment or at anytime thereafter, whether he is employed by the Company or not; provided, that, the Chairman and Chief Executive Officer's employment has not been terminated by the Company "For Cause" (as defined) or terminated by him without "Good Reason" (as defined).  In the event of a merger or sale of substantially all of the assets of the Company, 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 Officer's employment is terminated by the Company "Other Than For Cause" (as defined) or by him for "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 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, warrants, RSUs and other awards.
In connection with the Agreement, the Chairman and Chief Executive Officer has also agreed not to compete with the Company as follows: (i) during the term of the Agreement and for a period of 12 months thereafter if his employment is terminated "Other Than For Cause" (as defined) provided he is paid his 12 month base salary severance amount and (ii) for a period of two years
- 18 -

5

NOTE I - EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS (continued)

from the termination date, if terminated "For Cause" by the Company or "Without Good Reason" by the Chairman and Chief Executive Officer.
[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 $157,500) and is eligible to receive incentive or bonus compensation on an annual basis in the discretion of the Company's Compensation Committee.  In connection with the offer letter, the Chief Financial Officer was issued, under the Company's 2013 Stock Incentive 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, the Company granted 50,000 restricted stock units to its Chief Financial Officer, which vested 25,000 restricted stock units on June 9, 2017 and 25,000 restricted stock units will vest on June 9, 2018, subject to his continued employment.  In addition, in the event the Chief Financial Officer'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.
[3]  The Company's Executive Vice President serves on an at-will basis at an annual base salary of $200,000 and is eligible to receive incentive or bonus compensation on an annual basis in the discretion of the Company's Compensation Committee.  On June 9, 2016, the Company granted 50,000 restricted stock units to its Executive Vice President which vested 25,000 restricted stock units on June 9, 2017 and 25,000 restricted stock units will vest on June 9, 2018, subject to his continued employment.
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, Inc., 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.  As of September 30, 2017, the Company had achieved settlement agreements with thirteen (13) of the sixteen (16) defendants, the remaining three defendants were Hewlett-Packard Company, Juniper Networks, Inc. and Avaya Inc. 

On May 2, 2017, Judge Robert W. Schroeder of the United States District Court for the Eastern District of Texas, Tyler Division, in the Company's patent infringement action with respect to its Remote Power Patent as described above issued an order adopting the prior report and recommendation of the United States Magistrate Judge which found that all of the claims of the Remote Power Patent were not invalid.  As a result of the Court's decision, the balance of $2,300,000 of the Company's settlement with ALE USA Inc. reached in July 2016 is payable to the Company in three equal quarterly payments of $766,666 which began on July 1, 2017.  The settlement balance of $2,300,000 has been recorded in full by the Company as revenue for the nine months ended September 30, 2017.
- 19 -

NOTE J - LEGAL PROCEEDINGS (continued) 
[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 (March 2020).  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" (“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 its patents within theits 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 allegelawsuit alleges that Google and YouTube have infringed and continue to infringe certain of the Company'sCompany’s patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube'sYouTube’s Content ID system.
The above referenced litigations that the Company commenced in the United States District Court for the Southern District of New York in April 2014 and December 2014 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 whichCircuit. Pursuant to a Joint Stipulation and Order Regarding Lifting of Stays, 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 has been completed and the parties have been consolidatedeach submitted summary judgment motions. On April 24, 2024, the U.S. District Court for the Southern District of New York issued a judgment dismissing the Company’s patent infringement claims finding that the asserted claims of two of the patents are invalid for indefiniteness and granting summary judgment that the asserted claims of another asserted patent are schedulednot infringed by Google’s accused system. The Court’s ruling disposes of all of the Company’s claims in the case. The Company is evaluating its alternatives, including an appeal of the Court’s rulings to the U.S. Court of Appeals for oral argument on December 4, 2017.
the Federal Circuit.

[4]   2] On May9, 2017, the Company's wholly-owned subsidiary, Mirror Worlds Technologies, LLC, the Company’s wholly-owned subsidiary, initiated patent litigation against Facebook, Inc. (now Meta Platforms, Inc., “Meta”) in United Statesthe 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'sCompany’s Mirror Worlds Patent Portfolio.Portfolio). The lawsuit allegesalleged that the aforementionedasserted patents are infringed by Facebook'sMeta’s core technologies that enable Facebook'sMeta’s Newsfeed and Timeline features.

18 

NOTE I – LEGAL PROCEEDINGS (continued)

On August 11, 2018, the Court issued an order granting Meta’s motion for summary judgment of non-infringement and dismissed the case. On August 17, 2018, the Company filed a Notice of Appeal to appeal the summary judgment decision to the U.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 of the District Court and remanded the litigation to the Southern District of New York for further proceedings.

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 of the District Court on non-infringement and on April 4, 2022, the Company filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit. On April 18, 2022, Meta filed a notice of cross-appeal with respect to the Court’s ruling on validity. The appeal is pending.

[3] On 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, with the Company (the “Agreement”) for 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 Demand 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 1, 2022, the Court denied Netgear’s motion to compel arbitration. On April 22, 2022, Netgear filed a counterclaim in the Court action alleging that the Company breached the 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 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 respect to Netgear’s counterclaim for breach of the license agreement. The Company appealed the Court decision. On February 20, 2024, the Appellate Division of the Supreme Court, State of New York, 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 as to a third licensee. On March 17, 2024, the Company and Netgear settled the litigation and exchanged general releases ending the litigation.

[4] In October and November 2022, the Company initiated nine separate litigation against ten defendants for infringement of its Remote 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 Ubiquity 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 Central District of California; (iii) On November 4, 2022, the Company initiated such litigation against Panasonic Holdings Corporation and Panasonic Corporation of North America 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 the Central District of California.

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NOTE I – LEGAL PROCEEDINGS (continued)

The Company has entered into settlement agreements with all of the defendants in the above referenced litigations except Ubiquity Inc. and Honeywell International Inc. which remain pending. A conditional payment of $150,000 in one settlement has not yet been recognized as revenue because the terms of the conditional payment have not been satisfied.

NOTE J – INVESTMENT

During the period December 2018 through August 2022, the Company made aggregate investments of $7,000,000 in ILiAD Biotechnologies, LLC (“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 March 31, 2024, the Company 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 all outstanding options and warrants). In connection with its initial 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.

For the three months ended March 31, 2024 and 2023, the Company recorded an allocated net loss from its equity method investment in ILiAD of $628,000 and $674,000, respectively.

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 $6,054,000, which is accounted for as equity method goodwill.

The following table provides certain summarized financial information for ILiAD (the equity method investee) for the periods presented and has been compiled from ILiAD’s unaudited financial statements, reported on one quarter lag.

         
  Three Months Ended 
  December 31, 
  

2023

  

2022

 
Loss from continuing operations $(10,091,000) $(3,466,000)
Comprehensive loss $(9,470,000) $(9,911,000)

NOTE KSTOCK REPURCHASE

REPURCHASES

On June 14, 2017,13, 2023, the Board of Directors authorized an extension and increase of the Company'sCompany’s share repurchase program (the "Share“Share Repurchase Program"Program”) to repurchase up to $5,000,000$5,000,000 of common stock over the subsequent 24 month period (for a total authorization of approximately $17,000,000 since inception of the program in August 2011).period. The common stock may be repurchased from time to time in open market transactions or privately negotiated transactions inat the Company'sCompany’s discretion. The timing and amount of the shares repurchased is determined by management based on its evaluation of market conditions and other factors. The Share Repurchase Program may be increased, suspended or discontinued at any time.

Since inception of the Share Repurchase Program through September 30, 2017,March 31,2024, the Company has repurchased an aggregate of 7,201,5979,724,540 shares of its common stock at an aggregate cost of $12,589,253$18,894,986 (exclusive of commissions) or an average per share price of $1.75.  All such repurchased shares have been cancelled.  $1.97.

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NOTE K – STOCK REPURCHASES (continued)

During the three months ended September 30, 2017,March 31, 2024, the Company repurchased an aggregate of 39,87283,744 shares of its common stock at an aggregate cost of $149,253$182,070 (exclusive of commissions) or an average per share price of $3.74.  During$2.17.

On December 27, 2023, the nineCompany 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.

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 on certain repurchases of stock by publicly traded U.S. domestic corporations occurring on or after January 1, 2023. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. The excise tax applies in cases where the total value of the stock repurchase during the taxable year exceeds $1,000,000. As such, the Company did not incur the 1% excise tax during the three months ended September 30, 2017, the Company repurchased an aggregate of 275,593 shares of its common stock at an aggregate cost of $1,125,087 (exclusive of commissions) or an average per share price of $4.08.  March 31, 2024.

At September 30, 2017,March 31, 2024, the dollar value of remaining shares that may be repurchased under the Share Repurchase Program was $3,875,050.

$4,190,635.

NOTE L – CONCENTRATIONS

Revenue from three licensees constituted approximately 75%

The Company maintains cash and certificates of deposit in accounts at financial institutions. The accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. At March 31, 2024, the Company had $1,153,000 cash and certificates of deposit in excess of the Company's revenue for bothFDIC insured limit. The Company maintains cash equivalents in brokerage accounts at financial institutions. At March 31, 2024, the three and nine months ended September 30, 2017. For the three months ended September 30, 2017, one licensee with a fully-paid license constituted approximately 30%Company had cash equivalents of the Company's revenue and two other licensees with ongoing royalty bearing licenses constituted approximately 45% of the Company's revenue.  Revenue from three licensees constituted approximately 96% and 90% for the three and nine months ended September 30, 2016 (exclusive of revenue from our professional liability settlement – see Note M), respectively.  At September 30, 2017, royalty receivables from three licensees constituted approximately 36%, 27% and 21% of the Company's net royalty receivables.  At December 31, 2016, royalty receivables from three licenses constituted approximately 29%, 45% and 11% of the Company's net royalty receivables.

$18,040,000 in these brokerage accounts.

NOTE M – REVENUE FROM PROFESSIONAL LIABILITY SETTLEMENT

On April 22, 2016, Mirror Worlds Technologies, LLC ("MWT"), the Company's wholly-owned subsidiary, entered into an agreement pursuant to which it received $17.5 million in connection with the settlement of a professional liability claim relating to services rendered in 2008-2010.  DIVIDEND POLICY

The Company, through MWT, acquired the claim in May 2013 as part of its acquisition of the patent portfolio of Mirror Worlds, LLC.

NOTE N - DIVIDENDS
On December 7, 2016, the Board of Directors of the Company approved the initiation of aCompany’s dividend policy providing for the paymentconsists of a regular semi-annual cash dividenddividends of $0.05$0.05 per common share ($0.10 per common share annually) commencing in 2017.  The Company anticipates paying the semi-annual cash dividendsanticipated to be paid in March and September of each year. It is anticipated that theThe Company has paid semi-annual cash regulardividends consistent with its policy, including a cash dividend will continue to be paid throughin March 2020 (the expiration2024 of
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NOTE N – DIVIDENDS (continued)
the Company's Remote Power Patent) provided that the Company continues to receive royalties from licensees of its Remote Power Patent.
On February 2, 2017, $1,175,000. The Company’s dividend policy undergoes a periodic review by the Board of Directors of the Company declared an initial semi-annual cash dividend of $0.05 per common share with a payment date of March 24, 2017 to all common stockholders of record as of March 3, 2017.

On July 25, 2017, the Board of Directors of the Company declared a semi-annual cash dividend of $0.05 per annum share with a payment date of September 20, 2017 to all common stockholders of record as of September 1, 2017.

At September 30, 2017, the Company accrued dividends of $84,000 for unvested restricted stock units with dividend equivalent rights.

NOTE O – SUBSEQUENT EVENTS
[1]   On October 16, 2017, the U.S. Bankruptcy Court of the Southern District of New York approved the Company's settlement of its patent litigation against Avaya, Inc. ("Avaya") pending in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of Network-1's Remote Power Patent (U.S. Patent No. 6,218,930) (see Note J[1] hereof).  As part of the settlement, Avaya, which on January 19, 2007 had filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, entered into a non-exclusive license agreement for the full term of the Company's Remote Power Patent, which expires in March, 2020.  Under the terms of the license, Avaya paid a lump sum amount for sales of certain designated Power over Ethernet ("PoE") products and is obligatedsubject to pay an ongoing royalty  forchange at any time depending upon the Company’s earnings, financial requirements and other designated PoE products.  In addition, Avaya agreed thatfactors existing at the Company shall have an allowed general unsecured claim ("Allowed Claim") in the amount of $40,000,000 relating to all acts occurring on or before January 19, 2017.time.

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Under the Debtors' (Avaya and certain affiliates) First Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and Its Debtor Affiliates, which the Debtors filed with the Bankruptcy Court on August 24, 2017, and the Modified Global Plan Settlement, dated October 11, 2017 (collectively the "Plan"), the Debtors have estimated that the total amount of general unsecured claims that will ultimately be allowed will total approximately $305,000,000 which, based on the treatment of general unsecured creditors therein, would result in estimated recoveries for the holders of general unsecured claims of approximately 18.9%.  The Debtors have acknowledged in the Plan that depending on its ability to successfully prosecute or otherwise reduce the remaining outstanding claims, the total amount of the general unsecured claims could be substantially higher which would decrease the percentage recoveries to the holders of general unsecured claims, including the Company.  In such an event, the amount recovered by the Company under its Allowed Claim could be substantially lower than 18.9%.  A hearing to consider confirmation of the Plan is currently scheduled to commence on November 15, 2017.  There is no assurance that the Bankruptcy Court will confirm the Plan or any other Chapter 11 plan, and no assurance of the recovery for general unsecured claims under either the Plan or any other Chapter 11 plan.
[2]   On November 1, 2017, the Company agreed to settle its patent litigation against Juniper Networks, Inc. ("Juniper") pending in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of Network-1's Remote Power Patent (See Note J[1] hereof).  Under the terms of the settlement, Juniper will pay $13,250,000 to the Company and receive a fully-paid license to the Company's Remote Power Patent for its full term.
[3]   On November 13, 2017, a jury in the United States District Court for the Eastern District of Texas, Tyler Division, determined that certain claims of the Company's Remote Power Patent (U.S. Patent No. 6,218,930) are invalid and not infringed by Hewlett-Packard.  The jury verdict of invalidity and non-infringement, or a final judgment based on this verdict, may be determined to relieve some of our licensees of our Remote Power Patent from their obligation to continue to pay royalties to the Company, including Cisco Systems, Inc., our largest licensee.  Such a determination would have a material adverse effect on our business and results of operations.
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ITEM 2: MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH ARE STATEMENTS THAT INCLUDE INFORMATION BASED UPON BELIEF OF OUR MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION AVAILABLE TO MANAGEMENT. STATEMENTS CONTAINING TERMS SUCH AS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS" OR SIMILAR WORDS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS.  ACTUAL RESULTS, EVENTS AND CIRCUMSTANCES (INCLUDING FUTURE PERFORMANCE, RESULTS AND TRENDS) COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN SUCH STATEMENTS DUE TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THOSE DISCUSSED ON PAGES 16-26 OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 2017 AND IN THIS QUARTERLY REPORT ON FORMOPERATIONS

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 Quarterly Report on Form 10-Q.

OVERVIEW

Our principal business is the development, licensing and protection of our intellectual property assets. We presently own thirty-six (36)one-hundred two (102) U.S. patents including and 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. 

With respect to our one-hundred two (102) 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 Portfolio relatingPortfolios (see Note I 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 orderunaudited condensed consolidated financial statements included herein). Our revenue is largely dependent upon our ability to achieve high qualitysuccessful litigation outcomes.

At March 31, 2024, our principal sources of service (QoS) over computerliquidity consisted of cash and telephony networks.  In addition,cash equivalents and marketable securities of $43,394,000 and working capital of $43,067,000. Based on our cash position, we continually review opportunities to acquire or license additional intellectual property.

property as well as evaluate other strategic opportunities.

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 J to our unaudited condensed consolidated financial statements included herein). Our investment continues to involve significant risk and the outcome is uncertain.

We have been 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).has generated licensing revenue in excess of $188,000,000 from May 2007 through March 31, 2024. We currently have twenty-seven (27) licenseesno longer receive licensing revenue for our Remote Power Patent which, among others, include license agreementsfor 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 the year ended December 31, 2023, we entered into settlements 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., Polycom, Inc.eight defendants with respect to the aforementioned litigation resulting in aggregate settlement payments made to us of $2,601,000 and Avaya, Inc.a future conditional payment of $150,000 (see Note I[4] hereof). 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.

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In addition, we have license agreements with Apple Inc.pending litigation involving certain patents within our Cox Patent Portfolio and Microsoft Corporation with respect tohave 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 also intend to commence efforts to monetize certain patents within our M2M/IoT Patent Portfolio and HFT Patent 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 intellectual property assets.assets and the monetization of our 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.

Our patent acquisition and development strategy 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 licensing

The significant components of expenses, when revenue in excess of $119,000,000 from May 2007 through September 30, 2017.  As a result ofis recorded, that may impact our acquisition of the Mirror Worlds Patent Portfolio in May 2013, we achieved licensing and other revenue from the portfolio of an aggregate of $47,150,000 through September 30, 2017.

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At September 30, 2017, our principal sources of liquidity consisted of cash and cash equivalents of $52,265,000 and working capital of $54,101,000.  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.
On December 7, 2016, our Board of Directors approved the initiation of a dividend policy.  The policy provides for the payment of regular semi-annual cash 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 cash dividend will continue to be paid through March 2020 (expiration of our 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 cash dividend of $0.05 per common share with a payment date of March 24, 2017 to all shareholders of record on March 3, 2017.  On July 25, 2017, our Board of Directors declared a semi-annual cash dividend of $0.05 per common share with a payment date of September 20, 2017 to all shareholders of record on September 1, 2017.
Our revenue from our patent licensing and enforcement business is generated from license agreements entered into as a result of litigation settlements or judgments (after a jury verdict).  Generally, in the event of settlement of litigation 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").
On November 13, 2017, a jury in the United States District Court for the Eastern District of Texas, Tyler Division, determined that certain claims of our Remote Power Patent (U.S. Patent No. 6,218,930) are invalid and not infringed by Hewlett-Packard.  The jury verdict of invalidity and non-infringement, or a final judgment based on this verdict, may be determined to relieve some of our licensees of our Remote Power Patent from their obligation to continue to pay royalties to us, including Cisco Systems, Inc., our largest licensee.  Such a determination would have a material adverse effect on our business and results of operations.
Royalty Bearing Licenses
We currently have Royalty Bearing Licenses for our Remote Power Patent with seventeen (17) 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 our Royalty Bearing Licenses was $2,263,000 and $11,046,000 for the three and nine months ended September 30, 2017, respectively, as compared to $7,426,000 and $14,663,000 for the three and nine months ended September 30, 2016, respectively.  At September 30, 2017, we had Royalty Bearing Licenses with sixteen (16) licencees as compared to fifteen (15) such licensees at September 30, 2016.  Cisco is our largest royalty bearing licensee.  Cisco constituted 43% and 64% of our ongoing royalty revenue from our Royalty Bearing Licenses for the three months ended September 30, 2017 and September 30, 2016, respectively.  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.
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Pending Litigation
We currently have pending patent infringement litigations involving our Remote Power Patent and certain patents within our Cox Patent Portfolio and Mirror Worlds Patent Portfolio (see "Legal Proceedings" at pages 32 – 34 hereof).
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 fifteen (15) of the sixteen (16) defendants.  The remaining defendant in the litigation is Hewlett-Packard Company.  On November 13, 2017, a jury determined that certain claims of our Remote Patent are invalid and not infringed by Hewlett-Packard (see "Legal Proceedings" at page 32 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 34 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 34 of this quarterly report).
In May 2017, we initiated patent infringement litigation against Facebook, Inc. ("Facebook") in the United States District Court for the Southern District of New York, for infringement of our U.S. Patent No. 6,006,227, U.S. Patent No. 7,865,538 and U.S. Patent No. 8,225,439 (among the patents we acquired as part of our acquisition of our Mirror Worlds Patent Portfolio) (see "Legal Proceedings" at page 33 hereof).
Settlements in the Periods
During the three and nine month periods ended September 30, 2017, we had revenue of approximately $970,000 and $3,270,000, respectively, from Fully-Paid Licenses and license initiation fees related to patent litigation settlements.  During the three and nine month periods ended September 30, 2016, we had revenue of $32,900,000 and $33,800,000, respectively, from Fully-Paid Licenses and license initiation fees related to patent litigation settlements.  In addition, during the nine month period ended September 30, 2016, we received $17,500,000 in connection with settlement of a professional liability claim which we had acquired as part of our acquisition of the Mirror Worlds Patent Portfolio in May 2013.
Taxes
We utilized our remaining net operating loss carry-forwards (NOLs) during the year ended December 31, 2016.  Current federal, state and local income taxes of $425,000 and $2,198,000 were recorded for the three and nine months ended September 30, 2017, respectively.  The remaining deferred tax assets of $168,000 at September 30, 2017(loss) relate to temporary (timing) differences with respect to outstanding options 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 2017 (as well as during the second half of prior years), we did not meet the Ownership Test.  Due to the significant number of shares held by our largest shareholders, we 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.
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RESULTS OF OPERATIONS
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
Revenue.  We had revenue of $3,237,000 for the three months ended September 30, 2017 as compared to revenue of $34,326,000 for the three months ended September 30, 2016.  The decrease in revenue of $31,089,000 for the three months ended September 30, 2017 was primarily due to revenue of $32,900,000 for the three months ended September 30, 2016 from Fully-Paid Licenses and license initiation fees related to patent litigation settlements with Apple Inc. ($25,000,000), Dell, Inc. ($6,000,000), and Alcatel and ALE USA Inc. ($1,900,000) (see "Legal Proceedings" at page 33 of this quarterly report).  Excluding revenue from Fully-Paid Licenses and license initiation fees related to litigation settlements, revenue for the three months ended September 30, 2017 increased $837,000 or 59% as compared to the three months ended September 30, 2016 due primarily to increased revenue from Royalty Bearing Licenses for our Remote Power Patent.
Operating Expenses.  Operating expenses for the three months ended September 30, 2017 were $2,219,000 as compared to $18,242,000 for the three months ended September 30, 2016.  The decrease in operating expenses of $16,023,000 was primarily due to an increase in costs of revenue of $15,979,000 for the three months ended September 30, 2016 associated with revenue of $32,900,000 from Fully-Paid Licenses and license initiation fees related to patent litigation settlements.  We had costs of revenue of $964,000 and $16,943,000 for the three months ended September 30, 2017 and September 30, 2016, respectively.  Included in the costs of revenue for three months ended September 30, 2017 were contingent legal fees and expenses of $802,000related to our patent litigation (see Note G[1] to our unaudited condensed consolidated financial statements included herein) and $162,000 of incentive bonus compensation payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note IH to our unaudited condensed 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.

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 J[1]B[4] to our unaudited condensed consolidated financial statements included in this quarterly report)Quarterly Report).

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenue. Included in the costs ofWe had no revenue for the three months ended September 30, 2016March 31, 2024 and revenue of $537,000 for the three months ended March 31, 2023. Our revenue for the three months ended March 31, 2023 was from litigation settlements involving our Remote Power Patent (see Note I[4] and Note B[2] to our unaudited condensed consolidated financial statements).

Operating Expenses. Operating expenses for the three months ended March 31, 2024 were contingent$918,000 as compared to $1,313,000 for the three months ended March 31, 2023. The decrease in operating expenses of $395,000 was primarily as a result of decreases in costs of revenue of $151,000 due to no litigation settlements, professional fees of $79,000 due to decreased legal fees, general and administrative expenses of $13,273,000, $2,029,000$112,000 and patent amortization of incentive bonus$53,000 due to patents expiring in 2023.

General and administrative expenses were $669,000 for the three months ended March 31, 2024 as compared to $781,000 for the three months ended March 31,2023. The decrease in general and administrative expenses of $112,000 was primarily due to a decrease in compensation payableexpense of $121,000 in 2024 as a result of severance payments accrued in the comparable period of 2023 and lower stock-based compensation expense of $46,000 as a result of increased restricted stock units vesting in 2023, offset by an increase in state franchise and capital taxes of $60,000.

Interest and Dividend Income. Interest and dividend income for the three months ended March 31, 2024 was $431,000 as compared to $310,000 for the three months ended March 31, 2023 primarily as a result of moderately higher interest rates in 2024 compared to 2023.

Realized and Unrealized Loss on Marketable Securities. For the three months ended March 31, 2024, we recorded realized and unrealized gains on marketable securities of $48,000, as compared to $364,000 for the three months ended March 31, 2023 largely due to the timing of the maturities of fixed income investments and a relatively stable interest rate environment.

Income Taxes. For the three months ended March 31, 2024, we had no current tax expense for federal, state and local income taxes and a deferred tax benefit of $147,000. For the three months ended March 31, 2023, we had no current tax expense for federal, state and local income taxes and a deferred tax expense of $153,000.

Share of Net Losses of Equity Method Investee. We recognized $628,000 of net losses during the three month period ended March 31, 2024 related to our Chairman and Chief Executive Officer pursuantequity share of ILiAD net losses, as compared to his employment agreement and other contractual paymentsa recognized net loss of $1,641,000 of certain percentages of net proceeds from$674,000 for the monetization of our Mirror Worlds Patent Portfoliothree months ended March 31, 2023. ILiAD, as a clinical stage biotechnology company, is anticipated to continue to incur losses (see note H[2]Note J to our unaudited condensed consolidated financial statements included in this quarterly report)herein).

General and administrative expenses increased by $6,000 from $428,000 for the three months ended September 30, 2016 to $434,000 for the three months ended September 30, 2017.  Amortization of patents was $50,000 for the three months ended September 30, 2017 as compared to $49,000 for the three months ended September 30, 2016.  Stock-based compensation expense related to the issuance of restricted stock units was $237,000 for the three months ended September 30, 2017 as compared to $189,000 for the issuance of restricted stock units and the vesting of stock options for the three months ended September 30, 2016.  Professional fees and related costs were $534,000 for the three months ended September 30, 2017 as compared to $633,000 for the three months ended September 30, 2016.
Interest Income.  Interest income for the three months ended September 30, 2017 was $55,000 as compared to interest income of $24,000 for the three months ended September 30, 2016.
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Operating Income. We had operating income of $1,018,000 for the three months ended September 30, 2017 compared with operating income of $16,084,000 for the three months ended September 30, 2016.  The decreased operating income of $15,066,000 for the three months ended September 30, 2017 was primarily due to operating income associated with revenue of $32,900,000 from Fully-Paid Licenses and license initiation fees related to patent litigation settlements for the three months ended September 30, 2016.
Current Taxes.  Federal, state and local income taxes of $425,000 and $3,817,000 were recorded for the three months ended September 30, 2017 and September 30, 2016, respectively.  The decrease in such taxes of $3,392,000 for the three months ended September 30, 2017 was due to a decrease of $15,035,000 in income before taxes for the three months ended September 30, 2017.
Deferred Tax Expense.  We recorded deferred tax expense of $-0- and $1,459,000 for the three months ended September 30, 2017 and September 30, 2016, respectively.  The deferred tax expenses of $1,459,000 for the three months ended September 30, 2016 was due to utilization of our net-operating loss carry-forwards and temporary (timing) differences with respect to outstanding stock options and restricted stock units.  We have no remaining net operating loss carry-forwards as of September 30, 2017.

Net Income.Loss. As a result of the foregoing, we realized a net incomeloss of $648,000$920,000 or $0.03$0.04 per share (basic)basic and $0.02 per share (diluted)diluted for the three months ended September 30, 2017March 31,2024, compared with a net incomeloss of $10,832,000$623,000 or $0.46$0.03 per share (basic)basic and $0.43 per share (diluted)diluted for the three months ended September 30, 2016.  The decrease inMarch 31, 2023. Our increased net income of $10,184,000 was primarily due to income associated with revenue of $32,900,000 from Fully-Paid Licenses and license initiation fees related to patent litigation settlementsloss for the three months ended September 30, 2016.

Nine Months Ended September 30, 2017 ComparedMarch 31,2024 was primarily due to Nine Months Ended September 30, 2016
Revenue.  We hadno revenue of $14,320,000 for the nine months ended September 30, 2017period as compared to revenue of $59,963,000$537,000 for the nine monthsthree month period ended September 30, 2016.  The decrease in revenue of $45,643,000 for the nine months ended September 30, 2017 was due primarily to revenue of $33,800,000 for the nine months ended September 30, 2016 from Fully-Paid Licenses and license initiation fees related to litigation settlements and our $17,500,000 settlement of a professional liability claim (see "Legal Proceedings" at page 33 hereof and Note M to our unaudited condensed consolidated financial statements included in this quarterly report). Excluding revenue from Fully-Paid Licenses and license initiation fees related to patent litigation settlements and revenue from our one-time professional liability settlement, revenue for the nine months ended September 30, 2017 increased $2,384,000 or 27.5% compared to the nine months ended September 30, 2016 primarily due to increased revenue from Royalty Bearing Licenses for our Remote Power Patent.March 31, 2023.

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Operating Expenses.  Operating expenses for the nine months ended September 30, 2017 were $7,712,000 as compared to $28,390,000 for the nine months ended September 30, 2016.  The decrease in operating expenses of $20,678,000 was primarily due to a decrease in costs of revenue of $19,844,000 for the nine months ended September 30, 2016 associated with $33,800,000 of revenue from Fully-Paid Licenses and license initiation fees related to patent litigation settlements and our $17,500,000 professional liability settlement.  We had costs of revenue of $4,339,900 and $24,183,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively.
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Included in the costs of revenue for nine months ended September 30, 2017 were contingent legal fees and expenses of $3,623,000 and $716,000 of incentive bonus compensation payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note I and Note J[1] to our unaudited condensed consolidated financial statements included in this quarterly report).  Included in the costs of revenue for the nine months ended September 30, 2016 were contingent legal fees and expenses of $16,841,000 payable to our patent litigation counsel, $3,996,000 of incentive bonus compensation payable to our Chairman and Chief Executive Officer pursuant to his employment agreement and other contractual payments of $3,345,000 paid to Recognition Interface LLC and others of certain percentages of net proceeds from the monetization of our Mirror Worlds Patent Portfolio (see Note H[2] to our unaudited condensed consolidated financial statements included in this quarterly report).
General and administrative expenses increased by $102,000 from $1,256,000 for the nine months ended September 30, 2016 to $1,358,000 for the nine months ended September 30, 2017, primarily due to increased franchise taxes of $74,000.  Amortization of patents was $150,000 for the nine months ended September 30, 2017 as compared to $760,000 for the nine months ended September 30, 2016 due to the expiration of certain patents during the nine months ended September 30, 2016.  Stock-based compensation expense related to the issuance of restricted stock units was $711,000 for the nine months ended September 30, 2017 as compared to $233,000 for the issuance of restricted stock units and the vesting of stock options for the nine months ended September 30, 2016.  Professional fees and related costs were $1,154,000 for the nine months ended September 30, 2017 as compared to $1,458,000 for the nine months ended September 30, 2016.  Contingent patent cost was $-0- and $500,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively.
Interest Income.  Interest income for the nine months ended September 30, 2017 was $89,000 as compared to interest income of $50,000 for the nine months ended September 30, 2016.
Operating Income. We had operating income of $6,608,000 for the nine months ended September 30, 2017 compared with operating income of $31,573,000 for the nine months ended September 30, 2016.  The decreased operating income of $24,965,000 for the nine months ended September 30, 2017 was primarily due to revenue of $33,800,000 from Fully-Paid Licenses and license initiation fees related to patent litigation settlements and revenue of $17,500,000 from settlement of a professional liability claim.
Current Taxes.  Federal, state and local income taxes of $2,198,000 and $4,198,000 were recorded for the nine months ended September 30, 2017 and September 30, 2016, respectively.  The decrease in such taxes of $2,000,000 for the nine months ended September 30, 2017 was due to taxes associated with taxable income of $22,882,000 for the nine months ended September 30, 2016.
Deferred Tax Expense.  We recorded deferred tax expense of $39,000 and $4,543,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively.  The deferred tax expense of $39,000 for the nine months ended September 30, 2017 relates to temporary (timing) differences with respect to outstanding stock options and restricted stock units.  The deferred tax expenses of $4,543,000 for the nine months ended September 30, 2016 was due to utilization of our net operating loss carry-forwards.  We have no remaining net operating loss carry-forwards as of September 30, 2017.
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Net Income.  As a result of the foregoing, we realized net income of $4,460,000 or $0.18 per share (basic) and $0.17 per share (diluted) for the nine months ended September 30, 2017 compared with net income of $22,882,000 or $0.98 per share (basic) and $0.93 per share (diluted) for the nine months ended September 30, 2016.  The decrease in net income of $18,422,000 was primarily due to income associated with revenue for the nine months ended September 30, 2016 of $33,800,000 for Fully-Paid Licenses and license initiation fees related to litigation settlements and the $17,500,000 professional liability settlement.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily from revenue from licensing our patents. At September 30, 2017,March 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $52,265,000$43,394,000 and working capital of $54,101,000.  We believe based$43,067,000. 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.

At September 30, 2017, we had royalty receivables Our patent infringement litigation or realization of $3,570,000 consisting of $1,803,000 due from Royalty Bearing Licenses, which are typically paid within sixty days of the end of the quarter,our investment in ILiAD may result in a material increase in our liquidity and payments due with respect to a Fully-Paid License and a license initiation fee aggregating $1,767,000 due later in 2017.
capital resources.

Working capital increaseddecreased by $2,686,000$1,783,000 at March 31, 2024 to $54,101,000 at September 30, 2017$43,067,000 as compared to working capital of $51,415,000$44,850,000 at December 31, 2016.2023. The increasedecrease in working capital for the nine months ended September 30, 2017 was primarily due to increasespayment of dividends of $1,175,000, cash used in operating activities of $596,000, and repurchases of common stock of $186,000.

Net cash and cash equivalentsused in operating activities for the three months ended March 31, 2024 increased by $306,000 from $290,000 for the three months ended March 31, 2023, to $596,000 for the three months ended March 31, 2024, primarily as a result of $1,347,000 and royalty receivables of $691,000, decreasesa higher net loss in accrued payroll of $1,508,000 and accrued contingency fees and related costs of $892,000, offset by an increase in income taxes payable of $930,000 and a decrease in prepaid taxes of $895,000.

2024 compared to 2023.

Net cash provided by operatinginvesting activities during the three months ended March 31, 2024 increased by $4,921,000 to $3,262,000 as compared to net cash used by investing activities of $1,659,000 for the ninethree months ended September 30, 2017 decreased by $33,203,000March 31, 2023, primarily as a result of net investment shifting from $37,140,000 for the nine months ended September 30, 2016marketable securities to $3,937,000 for the nine months ended September 30, 2017.  The decreaseinvestments in netsecurities classified as cash provided by operating activities for the nine months ended September 30, 2017 compared with the same period in 2016 was primarily due to decreases in net income of $18,422,000, accrued expenses of $6,541,000, deferred taxes of $4,504,000 and income taxes payable of $3,150,000.

cash equivalents.

Net cash used in investing activities for the nine months ended September 30, 2017 and September 30, 2016 was $50,000 and $4,000, respectively, related to the purchase of patents.

Net cash provided by (used in) financing activities for the ninethree months ended September 30, 2017March 31,2024 and September 30, 20162023 was $(2,540,000)$1,457,000 and $15,000,$1,580,000, respectively. The change of $123,000 primarily resulted from the repurchasea reduction in repurchases of our common stocktreasury shares of $1,131,000 and cash dividends of $2,421,000 offset by $1,068,000 of proceeds from the exercise of options and warrants for the nine months ended September 30, 2017.
$120,000 in 2024.

We maintain our cash primarily 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.

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, operating lease obligations, purchase obligations or other long-term liabilities except for the lease obligations set forth in Note H[3] to our condensed consolidated financial statements included in this quarterly report.

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liabilities.

CRITICAL ACCOUNTING POLICIES

ESTIMATES

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these unaudited condensed consolidatedour financial statements included in this Quarterly Report on Form 10-Q requires usmanagement to make estimates and assumptions that affect the reported amounts of assets, liabilities revenue, costs and expenses, and related disclosures. These estimates form the basis for judgments we make about the carrying valuesdisclosure of ourcontingent assets and liabilities whichat the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are not readily apparent from other sources.material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates and judgments on our own historical experience and on various other assumptions that we believe are reasonable underafter taking account of our circumstances and expectations for the circumstances. Onfuture based on available information. We evaluate these estimates on an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.  basis.

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We believe that the assumptions and estimates associated with revenue recognition, patents, income taxes, and stock-based compensation have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider thesean accounting estimate to be our critical if: (i) the accounting policiesestimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and estimates.  There(ii) changes in the estimate that are reasonably likely to occur from the period to period or use of different estimates that we reasonably could have been no material changes to our critical accounting policies and estimates as compared toused in the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.  See also Note B to our unaudited condensed consolidated financial statements included in this report.

Effect of New Accounting Pronouncements
In August 2016, the FASB issued Accounting Standards Update ("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 this ASU willcurrent period, would have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.

For a detailed discussion of our significant accounting policies and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842)ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and requires a lesseerelated judgements, see Note B 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 that adoption of this accounting standard will have a material impact on our consolidated financial statements.

In May 2014, the FASB issued 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. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  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 intend to adopt ASU 2014-09 on January 1, 2018.  We have elected to apply the modified retrospective method of adoption.  We do not expect the impact of the adoption of the new revenue standard to have a material impact on our consolidated financial statements.  We will continue to evaluate any new license agreements entered into in the future to determine the impact upon adoption.
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In May 2017, FASB issued ASU No. 2017-09 Compensation – Stock Compensation (Topic 718) which provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting in Topic 718.  The new standard is effective beginning after December 15, 2017 with early adoption permitted.  We do not believe the adoption of this standard will have a material impact on our consolidated financial statements.
Accounting Standards Adopted in the Period

In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification ("ASC") Topic 718, Compensation - Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Prior to this amendment, excess tax benefits resulting from the difference between the deduction for tax purposes and the compensation costs recognized for financial reporting were not recognized until the deduction reduced taxes payable.  Under the new method we will recognize excess tax benefits in the current accounting period.   Additionally, ASU 2016-09 requires that we present excess tax benefits on the Statement of Cash Flows as an operating activity. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016. We adopted ASU 2016-09 in the first quarter of 2017 and elected to apply this adoption prospectively. Prior periods have not been adjusted. The effective tax rate for the nine months ended September 30, 2017 differed from the federal statutory rate primarily due to the recognition of excess tax benefits as a component of the provision for income taxes attributable to the adoption of ASU 2016-09.

statements included herein.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

RISK

Not Applicable

ITEM 4.  CONTROLS AND PROCEDURES.

PROCEDURES

(a)            Evaluation of Disclosure Controls and Procedures.


Procedures

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 Quarterly Report on Form 10-Q. Based upon this review, these officers concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, 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)           Changes in Internal Controls

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2017March 31,2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1:1.  LEGAL PROCEEDINGS

Remote Power Patent

For a description of our legal proceedings see Note I to our unaudited condensed consolidated financial statements included in this Quarterly Report and Item 3. Legal Proceedings

In September 2011, we initiated patent litigation against sixteen (16) data networking equipment manufacturers (and affiliated entities) in the United States District Court of our Annual Report on Form 10-K for the Eastern District of Texas, Tyleryear ended December 31, 2023 (filed with the SEC on March 8, 2024). During the three months ended March 31, 2024 and to date, no material events occurred with respect to our legal proceedings, except (i) with respect to our litigation with Netgear, on February 20, 2024, the Appellate 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 TelesisSupreme Court, State of New York, First Department, upheld the lower court ruling dismissing our complaint and NEC each entered into a non-exclusive license agreementgranted our motion to dismiss Netgear’s counterclaim 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 termsbreach of the settlement, Dell receivedmost favored license provision concerning two licensees, but said there was a non-exclusive license for our Remote Power Patent for its full term, Dell paidtriable issue of fact as to 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, two installments of which have been received.
In August 2017,third licensee. On March 17, 2024, we entered into a settlement agreement with Axis Communications, Inc.Netgear and affiliated entities ("Axis").  With respectexchanged general releases ending the litigation (see Note I[3] to the settlement, Axis received a fully-paid license for our Remote Power Patent for its remaining life.
In October 2016, we entered a settlement agreementunaudited condensed consolidated financial statements included herein); and (ii) On April 24, 2024, in connection 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 our Remote Power Patent have been found invalid.  Such payments in October 2018 and October 2019 have not been included in our revenue to date.
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On October 16, 2017, the U.S. Bankruptcy Court of the Southern District of New York approved our settlement with Avaya, Inc. ("Avaya").  As part of the settlement, Avaya, which on January 19, 2007 had filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, entered into a non-exclusive license agreement for the full term of our Remote Power Patent.  Under the terms of the license, Avaya paid a lump sum amount for sales of certain designated Power over Ethernet ("PoE") products, and an ongoing royalty  for  other designated PoE products.  In addition, Avaya agreed we shall have an allowed general unsecured claim ("Allowed Claim") in the amount of $40,000,000 relating to all acts occurring on or before January 19, 2017.
Under the Debtors' (Avaya and certain of its affiliates) First Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and Its Debtor Affiliates which the Debtors filed with the Bankruptcy Court on August 24, 2017 and the Modified Global Plan Settlement, dated October 11, 2017 (collectively, the "Plan"), the Debtors have estimated that the total amount of general unsecured claims that will ultimately be allowed will total approximately $305,000,000 which, based on the treatment of general unsecured creditors therein, would result in estimated recoveries for the holders of general unsecured claims of approximately 18.9% of their Allowed Claim.  The Debtors have acknowledged in the Plan that depending on its ability to successfully prosecute or otherwise reduce the remaining outstanding claims, the total amount of the general unsecured claims could be substantially higher which would decrease the percentage recoveries to the holders of general unsecured claims, including our unsecured claim.  In such an event, the amount recovered by us under our Allowed Claim could be substantially lower than 18.9%.  A hearing to consider confirmation of the Plan is currently scheduled to commence on November 15, 2017.  There is no assurance that the Bankruptcy Court will confirm the Plan or any other Chapter 11 plan, and no assurance of the recovery for general unsecured claims under either the Plan or any other Chapter 11 plan.
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 November 1, 2017, we agreed to settle ourpatent infringement litigation against defendant Juniper Networks, Inc. ("Juniper").  UnderGoogle Inc and You Tube, LLC, the terms of the settlement, Juniper will pay $13,250,000 to us and receive a fully-paid license for the Remote Power Patent for its remaining life.
On November 13, 2017, a jury in the United States District Court for the Eastern District of Texas, Tyler Division, determined that certain claims of our Remote Power Patent (U.S. Patent No. 6,218,930) are invalid and not infringed by Hewlett-Packard.  The jury verdict of invalidity and non-infringement, or a final judgment based on this verdict, may be determined to relieve some of our licensees of our Remote Power Patent from their obligation to continue to pay royalties to us, including Cisco Systems, Inc., our largest licensee.  Such a determination would have a material adverse effect on our business and results of operations.
Mirror Worlds Patent Portfolio Litigation
Pending Facebook Litigation
On May 9, 2017, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, initiated litigation against Facebook, Inc. ("Facebook") in the United StatesU.S. District Court for the Southern District of New York forissued a judgment dismissing our patent 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 Mirror Worlds Patent Portfolio).  The lawsuit allegesclaims finding that the asserted claims of two of the patents are invalid for indefiniteness and granting summary judgment that the asserted claims of another asserted patent are not infringed by Facebook's core technologies that enable Facebook's Newsfeed and Timeline features.Google’s accused system. The lawsuit further alleges that Facebook's unauthorized useCourt’s ruling disposes of all of our claims in the case. We are evaluating our alternatives, including an appeal of the stream based solutions of our asserted patents has helped Facebook become the most popular social networking site in the world with more than 1.94 billion monthly active users as of March 2017.  We seek, among other things, monetary damages based upon reasonable royalties.  On July 5, 2017, Facebook filed its Answer denying our claims and asserting various affirmative defenses.
Prior Litigation
On May 23, 2013, we 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").  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 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).
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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 Company, 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 licenseCourt’s rulings 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
On April 4, 2014, we 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 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's Content ID system.  In May 2014, the defendants filed an answer to our complaint and asserted defenses of non-infringement and invalidity.
On December 3, 2014, we initiated a second litigation against Google and YouTube in the United States District Court for the Southern District of New York for infringement of our then newly issued patent (part of the Cox Patent Portfolio) relating to the identification and tagging of media content (U.S. Patent No. 8,904,464).  The lawsuit alleges that Google and YouTube have infringed and continue to infringe the 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 filed an answer to our complaint and asserted defenses of non-infringement and invalidity.
The above referenced litigations that we commenced in the United States District Court for the Southern District of New York in April 2014 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 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 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 pending in the United States District Court for the Southern 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 held on March 9, 2016.  On June 20, 2016, the PTAB issued its Final Written Decisions 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 Court of Appeals for the Federal Circuit and oral argument on the appeals (which have been consolidated) is scheduled for December 4, 2017.
On April 13, 2015, Google filed a Petition for Covered Business Method Review (CBM) at the PTAB seeking to invalidate claims pertaining(see Note I[1] 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 us with respect to the CBM and ruled that Google had failed to show that any of the thirty-four (34) claims of our U.S. Patent 8,904,464 were unpatentable.  On December 20, 2016, Google filed a Notice of Appeal to appeal the PTAB's Final Written Decision on the CBM to the United States Court of Appeals for the Federal Circuit and the appeal is pending.
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unaudited condensed consolidated financial statements included herein). 

ITEM 1A. Risk Factors.

Factors

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations and trading price of our common stock. In addition toInvestors should carefully consider the risks described below and elsewhere in this quarterly report, Quarterly Report on Form 10-Q for the three months ended March 31, 2024, and our Annual Report on Form 10-K for the year ended December 31, 20162023 (pages 16-26)10-19), filed with the Securities and Exchange CommissionSEC on March 20, 2017 includes a discussion of our risk factors and should be carefully considered by investors.

The Jury Verdict in the Hewlett-Packard Trial Invalidating Certain Claims of Our Remote Power Patent and Finding Non-Infringement May Have a Material Adverse Effect On Our Business and Results of Operations.
On November 13, 2017, a jury in the United States District Court for the Eastern District of Texas, Tyler Division, determined that certain claims of our Remote Power Patent (U.S. Patent No. 6,218,930) are invalid and not infringed by Hewlett-Packard.  The jury verdict of invalidity and non-infringement, or a final judgment based on this verdict, may be determined to relieve some of our licensees of our Remote Power Patent from their obligation to continue to pay royalties to us, including Cisco Systems, Inc., our largest licensee.  Such a determination would have a material adverse effect on our business and results of operations.
8, 2024.

ITEM 2.2.  Unregistered Sales of Equity Securities and Use of Proceeds.

Proceeds

Recent Issuances of Unregistered Securities

There were no such issuances during the three months ended September 30, 2017.

March 31, 2024.

Stock Repurchases

On August 22, 2011, we established a share repurchase program ("Share Repurchase Program"). 

On June 14, 2017,13, 2023, our Board of Directors authorized an extension and increase of the Share Repurchase Program to repurchase up to $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 inat our discretion. The timing and amount of the shares repurchased is determined by management based on its evaluation of market conditions and other factors. The Share Repurchase Program may be increased, suspended or discontinued at any time. Since inception of the Share Repurchase Program in August 2011 through September 30, 2017,March 31, 2024, we have repurchased an aggregate of 7,201,5979,724,540 shares of our common stock at an aggregate cost of $12,589,253$18,894,986 (exclusive of commissions) or an average per share price of $1.75.$1.97. During the three months ended September 30, 2017,March 31, 2024, we repurchased 39,872an aggregate of 83,744 shares of our common stock at an aggregate cost of $149,253 (exclusive of commissions)$182,070 or an average per share price of $3.74.$2.17. At September 30, 2017,March 31, 2024, the remaining dollar value of shares that may be repurchased under the Share Repurchase Program was $3,875,050.$4,190,635.

27 

Period
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(1)
 
July 1 to July 31, 2017-0-$  4,024,303
August 1 to August 31, 201725,022$3.7725,022$  3,929,875
September 1 to September 30, 201714,850$3.6914,850$  3,875,050
Total39,872$3.7439,872 
__________________
(1)   The dollar amounts in this column reflect an extension

During the months of January, February and increase of theMarch 2024, we purchased common stock pursuant to our Share Repurchase Program approved by the Board of Directors on June 14, 2017 to repurchase up to $5,000,000 shares of common stock over the subsequent 24 month period.


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as indicated below:


Period
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
1
January 1 to
January 31, 2024
11,7122.1511,7124,347,476
February 1 to
February 29, 2024
50,4142.2150,4144,236,291
March 1 to
March 31, 2024
21,6182.1121,618  4,190,635
Total83,7442.1783,744 

ITEM 3.  Defaults Upon Senior Securities.


Securities

None.


ITEM 5.  Other Information.OTHER INFORMATION

None.

28 

None.

ITEM 6.  Exhibits


(a) Exhibits





101101Interactive data files:**
101.INS101.INSXBRL Instance Document
101.SCH101.SCHXBRL Scheme Document
101.CAL101.CALXBRL Calculation Linkbase Document
101.DEF101.DEFXBRL Definition Linkbase Document
101.LAB101.LABXBRL Label Linkbase Document
101.PRE101.PREXBRL Presentation Linkbase Document

_____________________________

*Filed herewith

**    Furnished herewith

29 

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SIGNATURES


Pursuant to the requirements 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 authorized.


NETWORK-1 TECHNOLOGIES, INC.

Date:      May 10, 2024By:
Date:  November 14, 2017By:/s/ Corey M. Horowitz

Corey M. Horowitz


Chairman and Chief Executive Officer

(Principal Executive Officer)

Date:      May 10, 2024By:
/s/ Robert Mahan
Date:  November 14, 2017By:/s/ David C. Kahn
David C. Kahn

Robert Mahan
Chief Financial Officer

(Principal Financial Officer)

 30

 
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