Network-1 Technologies, Inc. (the Company ) is engaged in the development, licensing and protection of its intellectual property assets. The Company presently owns eighty (80) patents including (i) the remote power patent (the Remote Power Patent ) covering 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; (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 actions to be performed after such identification; (iv) M2M/IoT patent portfolio (the M2M/IoT Patent Portfolio ) relating to, among other things, enabling technology for authenticating, provisioning and using embedded sim cards in next generation IoT, Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers; and (v) QoS patents (the QoS Patents ) covering systems and methods for the transmission of audio, video and data in order to achieve high quality of service (QoS).

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. At December 31, 2019, the Company had twenty-seven (27) license agreements with respect to its Remote Power Patent. The Company s Remote Power Patent expired on March 7, 2020 and the Company will no longer receive licensing revenue for its Remote Power Patent that accrues for any period subsequent to the expiration date. The Company also has two license agreements with respect to its Mirror Worlds Patent Portfolio. The Company s current strategy includes continuing to pursue licensing opportunities for its intellectual property assets. In addition, the Company continually reviews opportunities to acquire or license additional intellectual property as well as other strategic alternatives. The Company s patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as the Company has achieved with respect to its Remote Power Patent and Mirror Worlds Patent Portfolio. In addition, the Company may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.

On August 30, 2018, the Company appealed to the U.S. Court of Appeals for the Federal Circuit the decision of the U.S. District Court for the Eastern District of Texas denying its motion for a new trial on infringement with respect to the November 13, 2017 jury finding that its Remote Power Patent was not infringed by Hewlett Packard. Oral argument on the appeal took place on November 4, 2019 and a decision is pending (see Note K[1] hereof). The Company has been dependent upon its Remote Power Patent for a significant portion of its revenue. As a result of the jury verdict in November 2017 with respect to the Company s trial with Hewlett-Packard, several of the Company s largest licensees, including Cisco Systems, Inc. ( Cisco ), its largest licensee, notified the Company in late November 2017 and January 2018 that they will no longer make ongoing royalty payments to the Company pursuant to their license agreements. If the Company successfully overturns the District Court order of non-infringement in its appeal to the U.S. Court of Appeals for the Federal Circuit, certain licensees of the Remote Power Patent, including Cisco, will be obligated to pay the Company significant royalties that accrued but were not paid beginning in the fourth quarter of 2017 through March 7, 2020 (the expiration of the Remote Power Patent). If the Company is unable to reverse the District Court order of non-infringement on appeal, the Company will not likely receive significant licensing revenue from Cisco and certain other licensees for such period unless the Company obtains an arbitration ruling that the District Court order does not affect the obligation of Cisco and other licensees to pay the Company royalties under applicable license agreements or we reach a satisfactory resolution with such licensees (see Note K[1] and Note K[2] hereof).

Consistent with the Company s revenue recognition policy (see Note B[5] hereof), the Company did not record revenue in 2019 and 2018 from certain licensees, including Cisco, who notified the Company they would not pay the Company ongoing royalties as a result of the jury verdict in the Company s trial with HP. The Company disagrees with the position taken by such licensees and may pursue arbitration if it does not achieve a satisfactory resolution (see Note K[1] and K[2] hereof).