SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission File Number: 1-15288
NETWORK-1 TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of
Incorporation or Organization)
445 Park Avenue, Suite 912
New York, New York 10022
|(Address of Principal Executive Offices)|
Registrant's telephone number, including area code: (212) 829-5770
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading symbol||Name of each exchange on which registered|
|Common Stock $.01 par value||NTIP||NYSE American|
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|Large accelerated filer ☐||Accelerated filer ☐|
|Non-accelerated filer ☐||Smaller Reporting Company ☒|
|Emerging growth 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold as of June 30, 2020 was $30,716,475.90. Shares of voting stock held by each officer and director and by each person, who as of June 30, 2020, may be deemed to have beneficially owned more than 10% of the voting stock have been excluded. This determination of affiliate status is not necessarily a conclusive determination of affiliate status for any other purpose.
The number of shares outstanding of Registrant’s common stock as of March 25, 2021 was 24,117,129.
We are filing this Amendment No. 1 on Form 10-K/A (the “Amendment”) to our Annual Report on Form 10-K for the year ended December 31 2020, filed with the Securities and Exchange Commission on March 31, 2021 (the “Original Filing”), for the sole purpose of correcting an error in which the signature of Friedman LLP was inadvertently omitted from the Report of Independent Registered Public Accounting Firm in the Edgar filing on page F-2 of the Original Filing. The Amendment contains currently dated Section 302 and Section 906 certifications as Exhibits 31.1, 31.2, 32.1 and 32.2.
No other changes were made to the Original Filing. This Amendment speaks as of the date of the Original Filing, does not reflect events that may have occurred subsequent to such date and, except as described above, does not modify or update in any way disclosures made in the Original Filing.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Network-1 Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Network-1 Technologies, Inc. and Subsidiary (“the Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years ended December 31, 2020 and 2019, and the related notes and schedules (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition and Associated Contingency Fees
As described in Note B to the consolidated financial statements, the Company relies on royalty reports received from third party licensees to record its revenue for its royalty bearing licenses. Revenue earned on the Company’s Fully-Paid Licenses, for which the Company has no future obligations or performance requirements is generally recognized when the Company has obtained the signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. The timing and amount of revenue recognized depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations.
As described in Note B to the consolidated financial statements, the Company includes in cost of revenue and related costs contingent legal fees payable to patent litigation counsel related to net proceeds from settlements.
We identified revenue recognition and the associated contingency fees as a critical audit matter because the license agreements and contingency agreements involve interpretation and estimates by management in determining the consideration for each specific license agreement and the amount of the associated contingency fees.
Our audit procedures related to the Company’s royalty bearing and fully paid licenses, and associated contingency fees included the following:
|-||We evaluated management’s significant accounting policies and estimates related to royalty bearing and fully-paid license revenue.|
|-||We obtained and examined the final settlement and license agreements entered into during the year and tested management’s identification of the significant terms for completeness. We evaluated the appropriateness of management’s application of their accounting principles, in their determination of revenue recognition.|
|-||We reviewed the contingency fee agreements with the Company’s legal counsel and evaluated management’s estimates and calculations of contingency fees.|
|-||We confirmed with third party legal counsel all outstanding legal costs and contingency fees outstanding as of December 31, 2020.|
We have served as the Company’s auditor since 2014.
/s/ Friedman LLP
New York, New York
March 31, 2021
|31.1*||Section 302 Certification of Chief Executive Officer.|
|31.2*||Section 302 Certification of Chief Financial Officer.|
|32.1*||Section 906 Certification of Chief Executive Officer.|
|32.2*||Section 906 Certification of Chief Financial Officer.|
* Filed herewith
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NETWORK-1 TECHNOLOGIES, INC.
By: /s/ Corey M. Horowitz
Corey M. Horowitz
Chairman and Chief Executive Officer
April 22, 2021