Network-1 Technologies, Inc 10-K for FY2021

Network-1 Technologies, Inc. (NTIP)

10-K 2022-03-30 For: 2021-12-31

Added on April 08, 2026

About this 10-K

Network-1 Technologies, Inc filed this 10-K on March 30, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $36.03M; up 718.3% from $4.4M a year earlier
Net income: $14.28M; compared with a net loss of $1.71M a year earlier
Diluted EPS: $0.58; compared with -$0.07 a year earlier

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Delaware		11-3027591
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

65 Locust Avenue New Canaan, Connecticut 06840
(Address of Principal Executive Offices)

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock $.01 par value	NTIP	NYSE American

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

Item 1.     Business	2
Item 1A. Risk Factors	11
Item 1B. Unresolved Staff Comments	20
Item 2.    Properties	20
Item 3.     Legal Proceedings	21
Item 4.    Mine Safety Disclosures	22
PART II
Item 5.    Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.     (Reserved)	25
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.    Financial Statements and Supplementary Data	32
Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	32
Item 9A. Controls and Procedures	32
Item 9B. Other Information	34
Item 9C.  Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	34
PART IIII
Item 10.   Directors, Executive Officers and Corporate Governance	35
Item 11.  Executive Compensation	39
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13.   Certain Relationships and Related Transactions and Director Independence	46
Item 14.   Principal Accountant Fees and Services	47
PART IV
Item 15.   Exhibits and Financial Statement Schedules	48
Signatures	50

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
October 1, 2021 to October 31, 2021	—	—	—	$4,869,200
November 1, 2021 to November 30, 2021	57,600	$2.78	57,600	$4,709,163
December 1, 2021 to December 31, 2021	280,875	$2.77	280,875	$3,930,729
Total	338,475	$2.77	338,475

	Number of securities to be issued upon exercise of outstanding options and rights	Weighted-average exercise price of outstanding options and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
	(a)	(b)	(c)

Equity compensation plans approved by security holders	12,500⁽¹⁾	$ —⁽³⁾	1,837,500

Equity compensation plans not approved by security holders	500,000⁽²⁾	$1.19	—

Total	512,500	$1.19⁽³⁾	1,837,500

NAME	AGE	POSITION
Corey M. Horowitz	67	Chairman, Chief Executive Officer and Chairman of the Board of Directors
David C. Kahn	70	Chief Financial Officer, Secretary and a Director
Jonathan Greene	60	Executive Vice President
Emanuel Pearlman	62	Director
Niv Harizman	57	Director
Allison Hoffman	51	Director

Name and Principal Position	Year	Salary ($)		Bonus ($)			Stock Awards($)(3)			All Other Compensation($)(1)			Total($)

Corey M. Horowitz	2021	$	535,000	$	1,976,000	⁽²⁾	$	—		$	38,500	⁽⁴⁾	$	2,549,500
Chairman and Chief Executive Officer	2020	$	527,000	$	345,000	⁽²⁾	$	—		$	81,250	⁽⁴⁾	$	953,250

David C. Kahn	2021	$	175,000	$	22,500		$	—	⁽³⁾	$	29,291	⁽⁵⁾	$	226,791
Chief Financial Officer	2020	$	175,000	$	15,000		$	25,200	⁽³⁾	$	34,828	⁽⁵⁾	$	250,028

Jonathan Greene	2021	$	200,000	$	40,000		$	—	⁽³⁾	$	36,120	⁽⁶⁾	$	276,120
Executive Vice President	2020	$	200,000	$	25,000		$	33,600	⁽³⁾	$	43,000	⁽⁶⁾	$	301,600

Name	Fees earned or paid in cash ($)⁽¹⁾	Stock Awards ($)^{(2) (3)}	All other compensation ($)⁽⁴⁾	Total ($)
Emanuel Pearlman	$ 50,000	$ 46,988	$ 1,125	$ 98,113
Niv Harizman	$ 46,250	$ 46,988	$ 1,125	$ 94,363
Allison Hoffman	$ 48,830	$ 46,988	$ 1,125	$ 96,943

	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options		Option Exercise Price ($)	Option Expiration Date	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested	Equity incentive plan awards: Market value of unearned shares, units or other rights that have not vested(1) ($)
Name	Exercisable	Unexercisable	Option Exercise Price ($)	Option Expiration Date
Corey M. Horowitz Chairman and CEO	500,000	—	$1.19	11/01/22	—	$   —
David Kahn Chief Financial Officer	—	—	—	—	3,750⁽²⁾	$10,575
Jonathan Greene Executive Vice President	—	—	—	—	5,000⁽³⁾	$14,100

NAME AND ADDRESS OF BENEFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP ⁽¹⁾⁽²⁾		PERCENTAGE OF COMMON STOCK BENEFICIALLY OWNED⁽²⁾
Executive Officers and Directors: Corey M. Horowitz⁽³⁾		7,016,751		28.8%
CMH Capital Management Corp⁽⁴⁾		2,291,372		9.6%
Niv Harizman⁽⁵⁾		275,985		1.2%
David C. Kahn⁽⁶⁾		116,053		*
Allison Hoffman⁽⁷⁾		105,811		*
Emanuel Pearlman ⁽⁸⁾		102,059		*
Jonathan E. Greene⁽⁹⁾		85,717		*
All officers and directors as a group (6 Persons)		7,702,376		31.6%
5% Stockholders:
Steven D. Heinemann⁽¹⁰⁾		1,961,201		8.2%
Goose Hill Capital LLC⁽¹¹⁾		1,376,068		5.8%


Index to Consolidated Financial Statements	PAGE

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID #711)	F-1

Consolidated Balance Sheets as of December 31, 2021 and 2020	F-2

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020	F-3

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2021 and 2020	F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020	F-5

Notes to Consolidated Financial Statements	F-6


	December 31,
	2021			2020
ASSETS:

CURRENT ASSETS:
Cash and cash equivalents	$	44,497,000		$	25,505,000
Marketable securities, at fair value		15,126,000			19,366,000
Other current assets		150,000			120,000

Total Current Assets		59,773,000			44,991,000

OTHER ASSETS:
Deferred tax assets, net		—			954,000
Patents, net of accumulated amortization		1,384,000			1,578,000
Equity investment		2,651,000			3,650,000
Convertible note investment		1,000,000			—
Security deposits		13,000			21,000

Total Other Assets		5,048,000			6,203,000

TOTAL ASSETS	$	64,821,000		$	51,194,000

LIABILITIES AND STOCKHOLDERS’ EQUITY:

CURRENT LIABILITIES:
Income taxes payable	$	2,952,000		$	—
Accounts payable		459,000			597,000
Accrued contingency fees and related costs		137,000			932,000
Accrued payroll		380,000			277,000
Other accrued expenses		180,000			226,000

Total Current Liabilities	$	4,108,000		$	2,032,000

LONG TERM LIABILITIES:
Deferred tax liability		554,000			—

TOTAL LIABILITIES	$	4,662,000		$	2,032,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 par value; authorized 10,000,000 shares; none issued and outstanding at December 31, 2021 and December 31, 2020		—			—

Common stock, $0.01 par value; authorized 50,000,000 shares; 23,792,212 and 24,105,879 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively		238,000			241,000

Additional paid-in capital		66,361,000			66,124,000
Accumulated deficit		(6,428,000	)		(17,193,000	)
Accumulated other comprehensive loss		(12,000	)		(10,000	)

TOTAL STOCKHOLDERS’ EQUITY		60,159,000			49,162,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	64,821,000		$	51,194,000


	Years Ended December 31,
	2021			2020
REVENUE	$	36,029,000		$	4,403,000

OPERATING EXPENSES:
Costs of revenue		12,147,000			1,653,000
Professional fees and related costs		1,500,000			2,407,000
General and administrative		2,263,000			2,162,000
Amortization of patents		295,000			292,000
Stock-based compensation		238,000			302,000

TOTAL OPERATING EXPENSES		16,443,000			6,816,000

OPERATING INCOME (LOSS)		19,586,000			(2,413,000	)
OTHER INCOME
Interest and dividend income, net		327,000			522,000
Net realized and unrealized gain (loss) on marketable securities		(173,000	)		15,000
Total other income, net		154,000			537,000

INCOME (LOSS) BEFORE INCOME TAXES AND SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE		19,740,000			(1,876,000	)

INCOME TAXES PROVISION (BENEFIT):
Current		2,952,000			(464,000	)
Deferred taxes, net		1,508,000			(490,000	)
Total income taxes (benefit)		4,460,000			(954,000	)
INCOME (LOSS) BEFORE SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE:		15,280,000			(922,000	)
SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE	$	(999,000	)	$	(787,000	)

NET INCOME (LOSS)	$	14,281,000		$	(1,709,000	)

Net Income (Loss) Per Share:
Basic	$	0.59		$	(0.07	)
Diluted	$	0.58		$	(0.07	)

Weighted average common shares outstanding:
Basic		24,136,821			24,011,354
Diluted		24,530,568			24,011,354

Cash dividends declared per share	$	0.10		$	0.10

NET INCOME (LOSS)	$	14,281,000		$	(1,709,000	)

OTHER COMPREHENSIVE LOSS
Net unrealized holding loss on corporate bonds and notes arising during the year, net of tax		(2,000	)		(89,000	)

COMPREHENSIVE INCOME (LOSS)	$	14,279,000		$	(1,798,000	)


	Common Stock
	Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity

Balance – January 1, 2020		24,036,071		$	240,000		$	65,824,000		$	(12,636,000	)	$	79,000		$	53,507,000
Dividends and dividend equivalents declared		—			—			—			(2,435,000	)		—			(2,435,000	)
Stock-based compensation		—			—			302,000			—			—			302,000
Vesting of restricted stock units		247,500			3,000			(3,000	)		—			—			—
Value of shares delivered to pay withholding taxes		(66,510	)		(1,000	)		1,000			(161,000	)		—			(161,000	)
Cashless exercise of options		105,000			1,000			—			—			—			1,000
Value of shares delivered to pay withholding taxes		(100,293	)		(1,000	)		—			—			—			(1,000	)
Treasury stock purchased and retired		(115,889	)		(1,000	)		—			(252,000	)		—			(253,000	)
Net unrealized loss on corporate bonds and notes		—			—			—			—			(89,000	)		(89,000	)
Net loss		—			—			—			(1,709,000	)		—			(1,709,000	)
Balance – December 31, 2020		24,105,879		$	241,000		$	66,124,000		$	(17,193,000	)	$	(10,000	)	$	49,162,000
Dividends and dividend equivalents declared		—			—			—			(2,429,000	)		—			(2,429,000	)
Stock-based compensation		—			—			238,000			—			—			238,000
Vesting of restricted stock units		70,000			1,000			(1,000	)		—			—			—
Value of shares delivered to pay withholding taxes		(5,192	)		—			—			(14,000	)		—			(14,000	)
Treasury shares purchased and retired		(378,475	)		(4,000	)		—			(1,073,000	)		—			(1,077,000	)
Net unrealized loss on corporate bonds and notes		—			—			—			—			(2,000	)		(2,000	)
Net income		—			—			—			14,281,000			—			14,281,000
Balance – December 31, 2021		23,792,212		$	238,000		$	66,361,000		$	(6,428,000	)	$	(12,000	)	$	60,159,000

Schedule of disaggregation of revenue
	Years Ended December 31,
	2021			2020
Fully-Paid Licenses	$	17,000,000	⁽¹⁾	$	—
Royalty Bearing Licenses		19,029,000	⁽²⁾		4,403,000	⁽³⁾
Total Revenue	$	36,029,000		$	4,403,000

Schedule of patent
	2021			2020
Gross carrying amount	$	7,949,000		$	7,848,000
Accumulated amortization		(6,565,000	)		(6,270,000	)
Patents, net	$	1,384,000		$	1,578,000

Schedule of future amortization of current intangible
For the years ended December 31,
2022	$	301,000
2023		236,000
2024		90,000
2025		90,000
2026 and thereafter		667,000
Total	$	1,384,000

Schedule of Earnings per share	2021		2020

Weighted-average common shares outstanding – basic		24,136,821		24,011,354

Dilutive effect of stock options and restricted stock units		393,747		—

Weighted-average common shares outstanding – diluted		24,530,568		24,011,354

Stock option and restricted stock units excluded from the computation of diluted income per share because the effect of inclusion would have been anti-dilutive		12,500		662,500

Schedule of components of the income taxes	2021		2020
Current
State and local	$	144,000	$	(34,000	)
Federal		2,808,000		(430,000	)
Total Current Tax Expense (Benefit)	$	2,952,000	$	(464,000	)

Deferred
State and local		83,000		(32,000	)
Federal		1,425,000		(458,000	)
Total Deferred Tax Expense (Benefit)		1,508,000		(490,000	)

Total Income Taxes	$	4,460,000	$	(954,000	)

Schedule of components of deferred tax assets	2021			2020
Deferred tax assets (liability): Net operating loss carry forwards	$	—		$	1,665,000

Deferred Tax Liability⁽¹⁾		(554,000	)		(711,000	)

Total deferred tax assets (liability)	$	(554,000	)	$	954,000

Schedule of reconciliation of income tax	Years Ended
	December 31,
	2021			2020

Income tax - statutory rate		21.00	%		21.0	%
Permanent difference		1.69	%		(5.05	)%
State and other		1.11	%		1.48	%
Valuation allowance on deferred tax assets		—	%		18.4	%
Total		23.80	%		35.83	%

Schedule of Restricted Stock Units	2021						2020
	Number of Shares			Weighted-Average Grant Date Fair Value			Number of Shares			Weighted-Average Grant Date Fair Value
Balance of restricted stock units outstanding at beginning of year		162,500		$	2.25			340,000		$	2.15
Grants of restricted stock units		45,000			3.51			70,000			2.68
Vested restricted stock units⁽¹⁾		(195,000	)		(2.47	)		(247,500	)		(2.23	)
Balance of restricted stock units outstanding at end of year		12,500		$	3.36			162,500		$	2.25

Schedule of stock option activity	2021				2020
			Weighted					Weighted
			Average					Average
	Options		Exercise		Options			Exercise
	Outstanding		Price		Outstanding			Price
Options outstanding at beginning of year		500,000	$	1.19		605,000		$	1.39
Granted		—		—		—			—
Expired		—		—		—			—
Exercised		—		—		(105,000	)	$	2.34
Options outstanding at end of year		500,000	$	1.19		500,000		$	1.19
Options exercisable at end of year		500,000	$	1.19		500,000		$	1.19

Schedule of Marketable Securities
	December 31, 2021
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Fixed income mutual funds	$	14,462,000	$	—	$	(137,000	)	$	14,325,000
Corporate bonds and notes		813,000		—		(12,000	)		801,000
Total marketable securities	$	15,275,000	$	—	$	(149,000	)	$	15,126,000

	December 31, 2020
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Certificates of deposit	$	3,534,000	$	7,000	$	—		$	3,541,000
Fixed income mutual funds		11,255,000		80,000		—			11,335,000
Corporate bonds and notes		4,500,000		18,000		(28,000	)		4,490,000
Total marketable securities	$	19,289,000	$	105,000	$	(28,000	)	$	19,366,000

NAME	TITLE	DATE
/s/ Corey M. Horowitz Corey M. Horowitz	Chairman and Chief Executive Officer, Chairman of the Board of Directors (principal executive officer)	March 30, 2022
/s/ David Kahn David Kahn	Chief Financial Officer, Secretary and a Director (principal financial officer and principal accounting officer)	March 30, 2022
/s/ Emanuel Pearlman Emanuel Pearlman	Director	March 30, 2022
/s/ Niv Harizman Niv Harizman	Director	March 30, 2022
/s/ Allison Hoffman Allison Hoffman	Director	March 30, 2022