Delaware
|
|
11-3027591
|
(State or Other Jurisdiction
|
|
(IRS Employer
|
of Incorporation or Organization)
|
|
Identification Number)
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Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
Common Stock $.01 par value
|
|
NYSE American
|
|
|
|
Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller Reporting Company ☒
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Emerging growth company ☐
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PART I
|
||
PART II
|
||
PART III
|
||
PART IV
|
||
•
|
Cisco Systems, Inc.*
|
•
|
Motorola Solutions, Inc.*
|
•
|
Microsemi Corporation*
|
•
|
NEC Corporation*
|
•
|
Dell, Inc.*
|
•
|
Polycom, Inc.*
|
•
|
Extreme Networks, Inc.*
|
•
|
Adtran, Inc.
|
•
|
Samsung Electronics Co., Ltd
|
•
|
Huawei Technologies Co., Ltd.
|
•
|
Netgear, Inc.*
|
•
|
Allied Telesis, Inc.*
|
•
|
Transition Networks, Inc.*
|
•
|
Enterasys Networks, Inc.
|
•
|
GarretCom,Inc.*
|
•
|
Foundry Networks, Inc.
|
•
|
Shoretel,Inc.*
|
•
|
SEH Technology, Inc.*
|
•
|
D-Link Corporation and D-Link Systems, Inc.*
|
•
|
Buffalo Technology (USA), Inc.*
|
•
|
BRG Precision Products, Inc.*
|
•
|
Sony Corporation
|
•
|
Alcatel-Lucent USA/Alcatel-Lucent Holdings, Inc.
|
•
|
ALE USA Inc.
|
•
|
Axis Communications, Inc.
|
•
|
Avaya, Inc.*
|
•
|
Juniper Networks, Inc.
|
·
|
our ability to overturn the HP Jury Verdict;
|
·
|
the outcome of our other legal proceedings;
|
·
|
our ability to receive future material revenue from licensees of our Remote Power Patent;
|
·
|
our ability to license and monetize our Cox Patent Portfolio;
|
·
|
our ability to further license or monetize our Mirror Worlds Patent Portfolio;
|
·
|
our ability to further develop, license and monetize our M2M/IoT Patent Portfolio;
|
·
|
our ability to acquire additional intellectual property;
|
·
|
our ability to continue to achieve material revenue and profits;
|
·
|
our ability to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property;
|
·
|
variations in our quarterly and annual operating results;
|
·
|
our ability to raise capital if needed;
|
·
|
sales of our common stock;
|
·
|
technology changes;
|
·
|
legislative, regulatory and competitive developments; and
|
·
|
economic and other external factors.
|
YEAR ENDED DECEMBER 31, 2017
|
HIGH
|
LOW
|
|
Fourth Quarter
|
$4.60
|
$2.25
|
|
Third Quarter
|
$4.45
|
$3.50
|
|
Second Quarter
|
$5.00
|
$3.80
|
|
First Quarter
|
$5.05
|
$3.30
|
|
YEAR ENDED DECEMBER 31, 2016
|
HIGH
|
LOW
|
|
Fourth Quarter
|
$3.50
|
$2.50
|
|
Third Quarter
|
$3.29
|
$2.33
|
|
Second Quarter
|
$2.96
|
$1.90
|
|
First Quarter
|
$2.17
|
$1.70
|
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, 2017 to
October 31, 2017 |
―
|
―
|
―
|
$ 3,875,050
|
November 1, 2017 to
November 30, 2017
|
90,033
|
2.62
|
90,033
|
$ 3,639,191
|
December 1, 2017 to
December 31, 2017
|
283,923
|
2.42
|
283,923
|
$ 2,919,001
|
Total
|
373,956
|
2.53
|
373,956
|
(a)
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)
|
||||
Equity compensation plans approved by security holders
|
1,205,000(1)
|
$1.84(3)
|
1,253,099
|
|||
Equity compensation plans not approved by security holders
|
1,625,000(2)
|
$1.15
|
—
|
|||
Total
|
2,830,000
|
$1.28 (3)
|
1,253,099
|
(1)
|
Includes 385,000 shares of our common stock issuable upon exercise of outstanding stock options and 820,000 shares issuable upon vesting of outstanding restricted stock units.
|
(2)
|
Represents aggregate individual option grants outside of, and prior to the establishment of, the 2013 Stock Incentive Plan in October 2013 referred to in the above table which represents individual option grants issued to our officers, directors, employees and consultants in consideration for certain services rendered to us. The option agreements pertaining to such individual option grants contain customary anti-dilution provisions.
|
(3)
|
Does not take into account outstanding restricted stock units as these awards have no exercise price.
|
·
|
Revenue Recognition;
|
·
|
Patents;
|
·
|
Impairment of Long-Lived Assets; and
|
·
|
Stock-Based Compensation.
|
AGE
|
POSITION
|
|||
Corey M. Horowitz
|
63
|
Chairman, Chief Executive Officer and Chairman of the Board of Directors
|
||
David C. Kahn
|
66
|
Chief Financial Officer, Secretary and a Director
|
||
Jonathan Greene
|
56
|
Executive Vice President
|
||
Emanuel Pearlman
|
58
|
Director
|
||
Niv Harizman
|
53
|
Director
|
||
Allison Hoffman
|
47
|
Director
|
Name and
Principal Position |
Year
|
Salary ($)
|
Bonus ($)
|
Stock
Awards($)(3) |
All Other
Compensation($)(1) |
Total($)
|
||||||||||||||||
Corey M. Horowitz
|
2017
|
$
|
482,000
|
$
|
998,000
|
(2)
|
$
|
—
|
$
|
36,000
|
(4)
|
$
|
1,516,000
|
|||||||||
Chairman and Chief
|
2016
|
$
|
440,000
|
$
|
4,902,000
|
(2)
|
$
|
1,696,000
|
(3)
|
$
|
35,000
|
(4)
|
$
|
7,073,000
|
||||||||
Executive Officer
|
||||||||||||||||||||||
David C. Kahn
|
2017
|
$
|
175,000
|
$
|
30,000
|
$
|
—
|
$
|
36,000
|
(5)
|
$
|
241,000
|
||||||||||
Chief Financial Officer
|
2016
|
$
|
166,000
|
$
|
75,000
|
$
|
124,000
|
$
|
33,375
|
(5)
|
$
|
398,315
|
||||||||||
Jonathan Greene
|
2017
|
$
|
200,000
|
$
|
40,000
|
$
|
—
|
$
|
36,000
|
(6)
|
$
|
276,000
|
||||||||||
Executive Vice President
|
2016
|
$
|
200,000
|
$
|
125,000
|
$
|
124,000
|
$
|
33,375
|
(6)
|
$
|
482,375
|
(1)
|
We have concluded that the aggregate amount of perquisites and other personal benefits paid in 2017 and 2016 to either Mr. Horowitz, Mr. Kahn or Mr. Greene did not exceed $10,000.
|
(2)
|
Mr. Horowitz received the following cash incentive bonus payments for 2017: (i) an annual discretionary bonus of $175,000 and (ii) incentive bonus compensation of $823,000 pursuant to his employment agreement (see "Employment Agreements-Termination of Employment and Change In-Control Arrangements" below). Mr. Horowitz received the following cash incentive bonus payments for 2016: (i) an annual discretionary bonus of $650,000 and (ii) incentive bonus compensation of $4,252,000 pursuant to his employment agreement.
|
(3)
|
The amounts in this column represent the aggregate grant date fair value of restricted stock units awards granted to the Named Executive Officers computed in accordance with FASB ASC Topic 718. In accordance with SEC rules, the grant date fair value of an award that is subject to a performance condition is based on the probable outcome of the performance condition. See Note F[1] to our consolidated financial statements included in this Annual Report for a discussion of the assumptions made by the Company in determining the grant date fair value.
|
(4)
|
Includes 401K matching funds contributions by the Company and profit sharing under the Company's 401k Plan for the benefit of Mr. Horowitz of $36,000 for 2017 and $35,000 for 2016, respectively.
|
(5)
|
Includes 401K matching funds contributions by the Company and profit sharing under the Company's 401k Plan for the benefit of Mr. Kahn of $36,000 for 2017 and $33,375 for 2016.
|
(6)
|
Represents 401K matching funds contributions by the Company and profit sharing under the Company's 401k Plan for the benefit of Mr. Greene of $36,000 for 2017 and $33,375 for 2016.
|
Name
|
Fees earned or paid in cash ($)(1)
|
Stock Awards(2) (3)
($)
|
All other compensation ($)
|
Total
($)
|
||||||||||||
Emanuel Pearlman
|
$
|
50,000
|
$
|
51,300
|
—
|
$
|
101,300
|
|||||||||
Niv Harizman
|
$
|
46,250
|
$
|
51,300
|
—
|
$
|
97,550
|
|||||||||
Allison Hoffman
|
$
|
48,750
|
$
|
51,300
|
—
|
$
|
100,050
|
(1)
|
Represents director's fees payable in cash to each non-management director of $10,000 per quarter ($40,000 per annum) for 2017 plus additional cash fees for serving on Board committees as disclosed in the text above.
|
(2)
|
The amounts included in this column represent the grant date fair value of restricted stock unit awards granted to directors, computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions see Note F[1] to our consolidated financial statements included in this Annual Report. The 13,500 restricted stock units (RSUs) granted to each non-management director vested on a quarterly basis beginning March 15, 2017. Each restricted stock unit represents the contingent right to receive one share of common stock.
|
(3)
|
As of December 31, 2017, the above listed directors also held outstanding stock options to purchase shares of our common stock as follows: Mr. Pearlman – options to purchase 95,000 shares; Mr. Harizman – options to purchase 395,000 shares; and Ms. Hoffman - options to purchase 95,000 shares.
|
Option Awards
|
Stock Awards
|
|||||||||||
Name
|
Number of Securities
Underlying Unexercised Options |
Option Exercise Price ($)
|
Option
Expiration
Date
|
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested ($)
|
Equity incentive plan awards: Market value of unearned shares, units or other rights that have not vested
(1) ($) |
|||||||
Exercisable
|
Unexercisable
|
|||||||||||
Corey M. Horowitz
|
500,000
|
—
|
$ 1.19
|
11/01/22
|
750,000(2)
|
$1,800,000
|
||||||
Chairman and CEO
|
750,000
|
—
|
$ 0.83
|
6/08/19 | ||||||||
David Kahn
Chief Financial Officer
|
50,000
|
—
|
$ 1.65
|
4/09/19
|
25,000(3)
|
$ 60,000
|
||||||
Jonathan Greene
Executive Vice President
|
50,000
|
—
|
$ 1.65
|
4/09/19
|
25,000(4)
|
$ 60,000
|
(1)
|
In accordance with SEC rules, market value is based on $2.40 per share representing the closing price of our common stock on the last trading day of the year.
|
(2)
|
Represents (i) 250,000 based restricted stock units that vest on July 14, 2018, subject to Mr. Horowitz's continued employment by us; and (2) an aggregate of 500,000 performance based restricted stock units that vest at anytime beginning July 14, 2018 through July 14, 2021, subject to Mr. Horowitz's continued employment by us and our stock price achieving closing prices of $3.25 (250,000 restricted stock units shall vest) and $4.25 (250,000 additional restricted stock units shall vest), which stock price vesting conditions have been satisfied, all of which is described in detail under Executive Compensation – Narrative Disclosure to Summary Compensation Table on pages 52-54 of this Annual Report.
|
(3)
|
Represents 25,000 restricted stock units which vest on June 9, 2018, subject to Mr. Kahn's continued employment by us. Such restricted stock units were part of a grant of 50,000 RSUs on June 9, 2016.
|
(4)
|
Represents 25,000 restricted stock units which vest on June 9, 2018, subject to Mr. Greene's continued employment by us. All such restricted stock units were part of a grant to Mr. Greene of 50,000 RSUs on June 9, 2016.
|
NAME AND ADDRESS
OF BENEFICIAL OWNER
|
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)(2)
|
PERCENTAGE OF COMMON STOCK BENEFICIALLY OWNED(2)
|
||
Corey M. Horowitz(3)
|
7,118,769
|
28.5%
|
||
CMH Capital Management Corp(4)
|
2,291,372
|
9.7%
|
||
Steven D. Heinemann (5)
|
3,027,815
|
12.8%
|
||
Goose Hill Capital LLC(6)
|
2,442,582
|
10.2%
|
||
John Herzog(7)
|
1,200,130
|
5.1%
|
||
Niv Harizman(8)
|
454,360
|
1.9%
|
||
Allison Hoffman(9)
|
177,250
|
*
|
||
Emanuel Pearlman(10)
|
138,590
|
*
|
||
David C. Kahn(11)
|
101,264
|
*
|
||
Jonathan E. Greene(12)
|
76,512
|
*
|
||
All officers and directors as a group
(6 Persons) |
8,066,745
|
31.5%
|
(1)
|
Unless otherwise indicated, we believe that all persons named in the above table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them. Unless otherwise indicated the address for each listed beneficial owner is c/o Network-1 Technologies, Inc., 445 Park Avenue, Suite 912, New York, New York 10022.
|
(2)
|
A person is deemed to be the beneficial owner of shares of common stock that can be acquired by such person within 60 days from March 15, 2018 upon the exercise of options or restricted stock units that vest within such 60 day period. Each beneficial owner's percentage ownership is determined by assuming that all options and restricted stock units held by such person (but not those held by any other person) and which are exercisable or vested within 60 days from March 15, 2017 have been exercised and vested. Assumes a base of 23,741,812 shares of our common stock outstanding.
|
(3)
|
Includes (i) 3,124,385 shares of common stock held by Mr. Horowitz, (ii) 1,250,000 shares of common stock subject to currently exercisable stock options held by Mr. Horowitz, (iii) 2,165,472 shares of common stock held by CMH Capital Management Corp., an entity solely owned by Mr. Horowitz, (iv) 125,900 shares of common stock owned by the CMH Capital Management Corp. Profit Sharing Plan, of which Mr. Horowitz is the trustee, (v) 67,471 shares of common stock owned by Donna Slavitt, the wife of Mr. Horowitz, (vi) an aggregate of 383,250 shares of common stock held by two trusts and a custodian account for the benefit of Mr. Horowitz's three children, and (vii) 2,291 shares of common stock held by Horowitz Partners, a general partnership of which Mr. Horowitz is a partner. Does not include 750,000 shares of common stock from restricted stock units that will not vest within 60 days of March 15, 2018.
|
(4)
|
Includes 2,165,472 shares of common stock owned by CMH Capital Management Corp. and 125,900 shares of common stock owned by CMH Capital Management Corp. Profit Sharing Plan. Corey M. Horowitz, by virtue of being the sole officer, director and shareholder of CMH Capital Management Corp. and the trustee of the CMH Capital Management Corp. Profit Sharing Plan, has the sole power to vote and dispose of the shares of common stock owned by CMH Capital Management Corp. and the CMH Capital Management Corp. Profit Sharing Plan.
|
(5)
|
Includes 585,233 shares of common stock owned by Mr. Heinemann and 2,442,582 shares of common stock owned by Goose Hill Capital LLC. Goose Hill Capital LLC is an entity in which Mr. Heinemann is the sole member. Mr. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon a Form 4 filed by Mr. Heinemann with the SEC on December 1, 2017. The address for Mr. Heinemann is c/o Goose Hill Capital, LLC, 12378 Indian Road, North Palm Beach, Florida 33408.
|
(6)
|
Includes 2,442,582 shares of common stock. Steven D. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon a Form 4 filed by Mr. Heinemann with the SEC on December 1, 2017. The address for Goose Hill Capital LLC is 12378 Indian Road, North Palm Beach, Florida 33408.
|
(7)
|
Includes 1,200,130 shares of common stock. The aforementioned beneficial ownership is based upon a Schedule 13G filed by Mr. Herzog with the SEC on February 10, 2016. The address of Mr. Herzog is 824 Harbor Road, Southport, Connecticut 06890-1410.
|
(8)
|
Includes (i) 84,360 shares of common stock and (ii) 370,000 shares of common stock subject to currently exercisable options owned by Mr. Harizman. Does not include 11,250 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2018.
|
(9)
|
Includes (i) 107,250 shares of common stock and (ii) 70,000 shares of common stock subject to currently exercisable options owned by Ms. Hoffman. Does not include 11,250 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2018.
|
(10)
|
Includes (i) 68,590 shares of common stock and (ii) 70,000 shares of common stock subject to currently exercisable stock options owned by Mr. Pearlman. Does not include 11,250 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2018.
|
(11)
|
Includes (i) 51,264 shares of common stock and (ii) 50,000 shares of common stock subject to currently exercisable stock options owned by Mr. Kahn. Does not include (i) 25,000 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2018 and (ii) 132,800 shares of common stock owned by Mr. Kahn's children.
|
(12)
|
Includes (i) 26,512 shares of common stock and (ii) 50,000 shares of common stock subject to currently exercisable options owned by Mr. Greene. Does not include 25,000 shares of common stock from restricted stock units that do not vest within 60 days from March 15, 2018.
|
Index to Consolidated Financial Statements | Page |
Report of independent registered public accounting firm
|
F-1
|
Consolidated Balance Sheets as of December 31, 2017 and 2016
|
F-2
|
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2017 and 2016
|
F-3
|
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2017 and 2016
|
F-4
|
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016
|
F-5
|
Notes to Consolidated Financial Statements
|
F-6
|
December 31,
|
||||||||
2017
|
2016
|
|||||||
ASSETS:
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
53,101,000
|
$
|
50,918,000
|
||||
Marketable securities, available for sale
|
1,054,000
|
1,065,000
|
||||||
Royalty receivables, net
|
575,000
|
2,879,000
|
||||||
Prepaid taxes
|
125,000
|
1,195,000
|
||||||
Other current assets
|
83,000
|
83,000
|
||||||
Total Current Assets
|
54,938,000
|
56,140,000
|
||||||
OTHER ASSETS:
|
||||||||
Deferred tax assets
|
168,000
|
207,000
|
||||||
Patents, net of accumulated amortization
|
2,169,000
|
1,231,000
|
||||||
Security deposits
|
19,000
|
19,000
|
||||||
Total Other Assets
|
$
|
2,356,000
|
1,457,000
|
|||||
TOTAL ASSETS
|
$
|
57,294,000
|
$
|
57,597,000
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY:
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
244,000
|
$
|
171,000
|
||||
Accrued contingency fees and related costs
|
1,780,000
|
2,681,000
|
||||||
Accrued payroll
|
709,000
|
1,748,000
|
||||||
Other accrued expenses
|
149,000
|
125,000
|
||||||
TOTAL LIABILITIES
|
2,882,000
|
4,725,000
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
STOCKHOLDERS' EQUITY
|
||||||||
Preferred stock, $0.01 par value; authorized 10,000,000 shares;
none issued and outstanding at December 31, 2017 and December 31, 2016
|
—
|
—
|
||||||
Common stock, $0.01 par value; authorized 50,000,000 shares;
23,843,915 and 23,744,829 issued and outstanding at December 31, 2017 and December 31, 2016, respectively
|
238,000
|
238,000
|
||||||
Additional paid-in capital
|
64,435,000
|
62,367,000
|
||||||
Accumulated deficit
|
(10,219,000
|
)
|
(9,702,000
|
)
|
||||
Accumulated other comprehensive loss
|
(42,000
|
)
|
(31,000
|
)
|
||||
TOTAL STOCKHOLDERS' EQUITY
|
54,412,000
|
52,872,000
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
57,294,000
|
$
|
57,597,000
|
||||
Years Ended
December 31, |
||||||||
2017
|
2016
|
|||||||
REVENUE
|
$
|
16,451,000
|
$
|
65,088,000
|
||||
OPERATING EXPENSES:
|
||||||||
Costs of revenue
|
4,970,000
|
25,794,000
|
||||||
Professional fees and related costs
|
2,057,000
|
2,590,000
|
||||||
General and administrative
|
2,255,000
|
2,782,000
|
||||||
Amortization of patents
|
206,000
|
813,000
|
||||||
Stock-based compensation
|
949,000
|
509,000
|
||||||
Contingent patent cost
|
―
|
500,000
|
||||||
TOTAL OPERATING EXPENSES
|
10,437,000
|
32,988,000
|
||||||
OPERATING INCOME
|
6,014,000
|
32,100,000
|
||||||
OTHER INCOME:
|
||||||||
Interest income, net
|
215,000
|
61,000
|
||||||
INCOME BEFORE INCOME TAXES
|
6,229,000
|
32,161,000
|
||||||
INCOME TAXES:
|
||||||||
Current
|
2,057,000
|
4,187,000
|
||||||
Deferred taxes, net
|
39,000
|
4,751,000
|
||||||
Total income taxes
|
2,096,000
|
8,938,000
|
||||||
NET INCOME
|
$
|
4,133,000
|
$
|
23,223,000
|
||||
Net Income Per Share
|
||||||||
Basic
|
$
|
0.17
|
$
|
1.00
|
||||
Diluted
|
$
|
0.16
|
$
|
0.93
|
||||
Weighted average common shares outstanding: | ||||||||
Basic
|
24,147,908
|
23,320,065
|
||||||
Diluted
|
26,396,160
|
24,885,282
|
||||||
Cash dividends declared per share
|
$
|
0.10
|
―
|
|||||
NET INCOME
|
$
|
4,133,000
|
$
|
23,223,000
|
||||
OTHER COMPREHENSIVE INCOME (LOSS):
|
||||||||
Unrealized holding gain (loss) on securities available-for-sale
arising during the year |
(11,000
|
)
|
4,000
|
|||||
Total other comprehensive income (loss)
|
(11,000
|
)
|
4,000
|
|||||
COMPREHENSIVE INCOME
|
$
|
4,122,000
|
$
|
23,227,000
|
Common Stock
|
Additional
Paid-in Capital |
Accumulated Deficit
|
Accumulated Other Comprehensive Income
(loss) |
Total Stockholders' Equity
|
||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||
Balance – January 1, 2016
|
23,211,149
|
$
|
232,000
|
$
|
61,249,000
|
$
|
(32,756,000
|
)
|
$
|
(35,000
|
)
|
$
|
28,690,000
|
|||||||||||
Stock-based compensation
|
―
|
―
|
509,000
|
―
|
―
|
509,000
|
||||||||||||||||||
Vesting of restricted stock units
|
45,000
|
*
|
―
|
―
|
―
|
―
|
||||||||||||||||||
Proceeds from exercise of options
|
59,749
|
1,000
|
88,000
|
―
|
―
|
89,000
|
||||||||||||||||||
Cashless exercise of options
|
470,251
|
5,000
|
―
|
―
|
―
|
5,000
|
||||||||||||||||||
Value of shares delivered to fund option exercise
|
(351,541
|
)
|
(4,000
|
)
|
―
|
―
|
―
|
(4,000
|
)
|
|||||||||||||||
Value of shares delivered to pay withholding taxes
|
(21,379
|
)
|
*
|
―
|
(49,000
|
)
|
―
|
(49,000
|
)
|
|||||||||||||||
Proceeds from exercise of warrants
|
375,000
|
4,000
|
521,000
|
―
|
―
|
525,000
|
||||||||||||||||||
Treasury stock purchased and retired
|
(43,400
|
)
|
*
|
―
|
(120,000
|
)
|
―
|
(120,000
|
)
|
|||||||||||||||
Unrealized gain on securities available-for-sale
|
―
|
―
|
―
|
―
|
4,000
|
4,000
|
||||||||||||||||||
Net income
|
―
|
―
|
―
|
23,223,000
|
―
|
23,223,000
|
||||||||||||||||||
Balance – December 31, 2016
|
23,744,829
|
$
|
238,000
|
$
|
62,367,000
|
$
|
(9,702,000
|
)
|
$
|
(31,000
|
)
|
$
|
52,872,000
|
Dividends and dividend equivalents declared
|
―
|
―
|
―
|
(2,505,000
|
)
|
―
|
(2,505,000
|
)
|
||||||||||||||||
Stock-based compensation
|
―
|
―
|
949,000
|
―
|
―
|
949,000
|
||||||||||||||||||
Vesting of restricted stock units
|
110,500
|
1,000
|
―
|
―
|
―
|
1,000
|
||||||||||||||||||
Value of shares delivered to pay withholding taxes
|
(13,599
|
)
|
*
|
|
―
|
(56,000
|
)
|
―
|
(56,000
|
)
|
||||||||||||||
Proceeds from exercise of options
|
250,000
|
2,000
|
335,000
|
―
|
―
|
337,000
|
||||||||||||||||||
Cashless exercise of options
|
50,000
|
*
|
|
―
|
―
|
―
|
―
|
|||||||||||||||||
Value of shares delivered to fund option exercise
|
(23,266
|
)
|
*
|
|
―
|
―
|
―
|
―
|
||||||||||||||||
Proceeds from exercise of warrants
|
375,000
|
4,000
|
784,000
|
―
|
―
|
788,000
|
||||||||||||||||||
Treasury stock purchased and retired
|
(649,549
|
)
|
(7,000
|
)
|
―
|
(2,089,000
|
)
|
―
|
(2,096,000
|
)
|
||||||||||||||
Unrealized loss on securities available-for-sale
|
―
|
―
|
―
|
―
|
(11,000
|
)
|
(11,000
|
)
|
||||||||||||||||
Net income
|
―
|
―
|
―
|
4,133,000
|
―
|
4,133,000
|
||||||||||||||||||
Balance – December 31, 2017
|
23,843,915
|
238,000
|
$
|
64,435,000
|
$
|
(10,219,000
|
)
|
$
|
(42,000
|
)
|
$
|
54,412,000
|
Years Ended
December 31, |
||||||||
2017
|
2016
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
4,133,000
|
$
|
23,223,000
|
||||
Adjustments to reconcile net income to net cash
provided by operating activities:
|
||||||||
Amortization of patents
|
206,000
|
813,000
|
||||||
Stock-based compensation
|
949,000
|
509,000
|
||||||
Deferred tax provision
|
39,000
|
4,751,000
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Royalty receivables
|
2,304,000
|
(1,342,000
|
)
|
|||||
Prepaid taxes
|
1,070,000
|
(1,195,000
|
)
|
|||||
Other current assets
|
―
|
113,000
|
||||||
Accounts payable
|
73,000
|
32,000
|
||||||
Accrued expenses
|
(2,000,000
|
)
|
3,002,000
|
|||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
6,774,000
|
29,906,000
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of patents
|
(1,144,000
|
)
|
(42,000
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Cash dividends paid
|
(2,420,000
|
)
|
―
|
|||||
Value of shares delivered to fund withholding taxes
on vesting of restricted stock units
|
(56,000
|
)
|
(49,000 | ) | ||||
Repurchases of common stock, net of commissions
|
(2,096,000
|
)
|
(120,000
|
)
|
||||
Proceeds from exercises of options and warrants
|
1,125,000
|
615,000
|
||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(3,447,000
|
)
|
446,000
|
|||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
2,183,000
|
30,310,000
|
||||||
CASH AND CASH EQUIVALENTS, beginning of year
|
50,918,000
|
20,608,000
|
||||||
CASH AND CASH EQUIVALENTS, end of year
|
$
|
53,101,000
|
$
|
50,918,000
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the years for:
|
||||||||
Interest
|
$
|
―
|
$
|
―
|
||||
Income taxes
|
$
|
1,290,000
|
$
|
5,265,000
|
||||
NON-CASH FINANCING ACTIVITY
|
||||||||
Accrued dividend rights on restricted stock units
|
$
|
84,000
|
―
|
[1]
|
Use of Estimates and Assumptions
|
[2]
|
Cash and Cash Equivalents
|
December 31, 2017
|
December 31, 2016
|
|||||||
Cash and cash equivalents
|
$
|
9,764,000
|
$
|
9,452,000
|
||||
Money market funds
|
43,337,000
|
41,466,000
|
||||||
Total
|
$
|
53,101,000
|
$
|
50,918,000
|
[3]
|
Marketable Securities
|
[4]
|
Patents
|
[5]
|
Impairment of long-lived assets
|
[6]
|
Allowance for Doubtful Accounts
|
[7]
|
Revenue Recognition
|
[8]
|
Costs of Revenue
|
[9]
|
Income Taxes
|
[10]
|
Stock-Based Compensation
|
[11]
|
Earnings Per Share
|
[12]
|
Financial Instruments
|
[13]
|
Dividend Policy
|
[14]
|
Recently Issued Accounting Standards
|
2017
|
2016
|
|||||||
Gross carrying amount
|
$
|
7,571,000
|
$
|
6,427,000
|
||||
Accumulated amortization
|
(5,402,000
|
)
|
(5,196,000
|
)
|
||||
Patents, net
|
$
|
2,169,000
|
$
|
1,231,000
|
||||
For the year ended December 31,
|
||||
2018
|
$
|
278,000
|
||
2019
|
$
|
272,000
|
||
2020
|
$
|
272,000
|
||
2021
|
$
|
266,000
|
||
2022 and thereafter
|
$
|
1,081,000
|
||
Total
|
$
|
2,169,000
|
2017
|
2016
|
|||||||
Weighted-average common shares outstanding - basic
|
24,147,908
|
23,320,065
|
||||||
Dilutive effect of options, warrants and restricted stock units
|
2,248,252
|
1,565,217
|
||||||
Weighted-average common shares outstanding - diluted
|
26,396,160
|
24,885,282
|
||||||
Options, restricted stock units and warrants excluded from the computation of diluted income per share because the effect of inclusion would have been anti-dilutive
|
―
|
230,978
|
2017 | 2016 | |||||||
Current
|
||||||||
State and local
|
$
|
45,000
|
$
|
170,000
|
||||
Federal
|
2,012,000
|
4,017,000
|
||||||
Total Current Tax Expense
|
$
|
2,057,000
|
$
|
4,187,000
|
||||
Deferred
|
||||||||
State and local
|
1,000
|
163,000
|
||||||
Federal
|
38,000
|
4,588,000
|
||||||
Total Deferred Tax Expense
|
39,000
|
4,751,000
|
||||||
|
||||||||
Total Income Taxes
|
$
|
2,096,000
|
$
|
8,938,000
|
2017 | 2016 | |||||||
Deferred tax assets:
|
||||||||
Options, warrants and restricted stock units
|
168,000 |
207,000
|
||||||
|
$
|
168,000
|
$
|
207,000
|
Year Ended
|
|||
December 31,
|
|||
2017
|
2016
|
||
Income tax - statutory rate
|
34.0%
|
34.0%
|
|
State and local, net
|
0.73%
|
1.03%
|
|
Other – Net
|
(1.08%)
|
0.3%
|
|
Change in Valuation allowance on deferred tax assets
|
—
|
(7.3)%
|
|
33.65%
|
28.03%
|
[1]
|
Restricted Stock Units
|
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
|
(110,500
|
)
|
2.96
|
|||||
Balance of unvested restricted stock units at December 31, 2017
|
820,000
|
$
|
2.28
|
[2]
|
Stock Options
|
2017
|
2016
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Options
|
Exercise
|
Options
|
Exercise
|
|||||||||||||
Outstanding
|
Price
|
Outstanding
|
Price
|
|||||||||||||
at beginning of year
|
2,310,000
|
$
|
1.29
|
2,855,000
|
$
|
1.33
|
||||||||||
Granted
|
―
|
―
|
―
|
―
|
||||||||||||
Expired
|
—
|
—
|
(15,000
|
)
|
$
|
1.31
|
||||||||||
Exercised
|
(300,000
|
)
|
$
|
1.31
|
(530,000
|
)
|
$
|
1.53
|
||||||||
Options outstanding at end of year
|
2,010,000
|
$
|
1.28
|
2,310,000
|
$
|
1.29
|
||||||||||
Options exercisable at end of year
|
2,010,000
|
$
|
1.28
|
2,310,000
|
$
|
1.29
|
Weighted
|
||||||||
Weighted
|
Average
|
|||||||
Range of
|
Average
|
Remaining
|
||||||
Exercise
|
Options
|
Exercise
|
Life in
|
Options
|
||||
Price
|
Outstanding
|
Price
|
Years
|
Exercisable
|
||||
$0.83 - $2.34
|
2,010,000
|
$1.28
|
2.10
|
2,010,000
|
||||
[3]
|
Warrants:
|
Number of Warrants
|
Exercise Price
|
Expiration Date
|
||
250,000
|
$2.10
|
May 21, 2018
|
||
125,000
|
$2.10
|
July 26, 2018
|
||
375,000
|
||||
[1]
|
Legal fees:
|
[2]
|
Patent Acquisitions:
|
[3]
|
Operating leases:
|
[4]
|
Savings and investment plan:
|
[1] |
On July 14, 2016, the Company entered into a new employment agreement ("Agreement") with its Chairman and Chief Executive Officer, pursuant to which he continues to serve as Chairman and Chief Executive Officer for a five year term, at an annual base salary of $475,000 which shall be increased by 3% per annum during the term of the Agreement. The Agreement established an annual target bonus of $175,000 for the Chairman and Chief Executive Officer based upon performance. During the years ended December 31, 2017 and December 31, 2016, the Company's Chairman and Chief Executive Officer received an annual discretionary bonus of $175,000 and $650,000, respectively. In addition, the Company granted to the Chairman and Chief Executive Officer, under its 2013 Plan, 750,000 restricted stock units (the "RSUs", each RSU awarded by the Company represents a contingent right to receive one share of the Company's common stock) which vest in three tranches, as follows: (i) 250,000 RSUs shall vest on July 14, 2018, subject to the Chairman and Chief Executive's continued employment by the Company through the vesting date (the "Employment Condition"); (ii) 250,000 RSUs shall vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company's common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $3.25 per share (subject to adjustment for stock splits) at any time during the term of employment; and (iii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being 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 aforementioned, in the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employment for Good Reason (as defined), all of the 750,000 RSUs shall accelerate and become immediately fully vested. All RSUs granted by the Company to its officers, directors or consultants have dividend equivalent rights.
|
[2] |
The Company's Chief Financial Officer serves on an at-will basis pursuant to an offer letter, dated April 9, 2014, at an annual base salary of $175,000 (increased in June 2016 from $157,000). The Company's Chief Financial Officer received an annual bonus of $30,000 for the year ended December 31, 2017 and $75,000 for the year ended December 31, 2016. In connection with the offer letter, the Chief Financial Officer was issued, under the 2013 Plan, a 5-year stock option to purchase 50,000 shares of the Company's common stock, at an exercise price of $1.65 per share, which option vested in two equal amounts (25,000 shares each) on each of December 31, 2014 and December 31, 2015. On June 9, 2016, the Company's Chief Financial Officer was granted 50,000 restricted stock units. Each restricted stock unit vested 50% on the one year anniversary of the grant (June 9, 2017) and 50% will vest on the two year anniversary of grant (June 9, 2018). In addition, in the event the Chief Financial Officer's employment is terminated without "Good Cause" (as defined), he shall receive (i) (a) 6 months base salary or (b) 12 months base salary in the event of a termination
|
[3] |
The Company's Executive Vice President serves on an at-will basis at an annual base salary of $200,000. The Executive Vice President received an annual bonus of $40,000 for the year ended December 31, 2017 and $125,000 for the year ended December 31, 2016. On June 9, 2016, the Executive Vice President was granted 50,000 restricted stock units. The restricted stock units vested 50% on the one year anniversary of grant (June 9, 2017) and 50% will vest on the two year anniversary of grant (June 9, 2018).
|
[1] |
In September 2011, the Company initiated patent litigation against sixteen (16) data networking equipment manufacturers (and affiliated entities) in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of its Remote Power Patent. Named as defendants in the lawsuit, excluding related parties, were Alcatel-Lucent USA, Inc., Allied Telesis, Inc., Avaya Inc., AXIS Communications Inc., Dell, Inc., GarrettCom, Inc., Hewlett-Packard Company, Huawei Technologies USA, Juniper Networks, Inx., Motorola Solutions, Inc., NEC Corporation, Polycom Inc., Samsung Electronics Co., Ltd., ShoreTel, Inc., Sony Electronics, Inc., and Transitions Networks, Inc. The Company seeks monetary damages based upon reasonable royalties. As of December 31, 2017, the Company had reached settlements with fourteen (14) of the sixteen (16) defendants.
|
[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 (the "Agreement"), Cisco is obliged to pay the Company royalties (which began in the first quarter of 2011) based on its sales of PoE products up to maximum royalty payments per year of $9 million beginning in 2016 ($8 million through 2015) for the remaining term of the patent. The actual royalty payments received by the Company may be less than the caps 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.
|
[3] |
On April 4, 2014 and December 3, 2014, the Company initiated litigation against Google Inc. ("Google") and YouTube, LLC (YouTube") in the United States District Court for the Southern District of New York for infringement of several of its patents within the Cox Patent Portfolio acquired from Dr. Cox (see Note G[2] hereof) which relate to the identification of media content on the Internet. The lawsuits allege that Google and YouTube have infringed and continue to infringe certain of the Company's patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube's Content ID system.
|
[4] |
On May 23, 2013, the Company's wholly-owned subsidiary, Mirror Worlds Technologies, LLC, initiated patent litigation in the United States District Court for the Eastern District of Texas, Tyler Division, against Apple, Inc., Microsoft, Inc., Hewlett-Packard Company, Lenovo Group Ltd., Lenovo (United States), Inc., Dell, Inc., Best Buy Co., Inc., Samsung Electronics America, Inc. and Samsung Telecommunications America L.L.C., for infringement of the Company's '227 patent (the "227 Patent") (one of the patents the Company acquired as part of the acquisition of the Mirror Worlds Patent Portfolio). The lawsuit alleged that the defendants have infringed and continue to infringe the claims of the Company's '227 Patent by making, selling, offering to sell and using infringing products including Mac OS and Windows operating systems and personal computers and tablets that include versions of those operating systems, and by encouraging others to make, sell, and use these products. In December 2013, the litigation was severed into two consolidated actions, Mirror Worlds v. Apple, et. al. and Mirror Worlds v. Microsoft, et. al.
|
[5] |
On May 9, 2017, Mirror Worlds Technologies, LLC, the Company's wholly-owned subsidiary, initiated litigation against Facebook, Inc. ("Facebook") in the United States District Court for the Southern District of New York, for infringement of certain patents within the Company's Mirror Worlds Patent Portfolio. The lawsuit alleges that the asserted patents are infringed by Facebook's core technologies that enable Facebook's Newsfeed and Timeline features. The lawsuit further alleges that Facebook's unauthorized use of the stream based solutions of the asserted patents has helped Facebook become the most popular social networking site in the world. The Company seeks, among other things, monetary damages based upon reasonable royalties. On July 5, 2017, Facebook filed its Answer denying the Company's claims and asserting various affirmative defenses.
|
[1] |
On January 9, 2018, the Company sold its allowed general unsecured claim of $37,500,000 against Avaya, Inc. (see Note I[1] hereof) for $6,320,000 to an unaffiliated third party.
|
[2] |
On January 16, 2018, the Company revised and closed its settlement with defendant Juniper Networks, Inc. ("Juniper") with respect to patent litigation in the United States District Court for the Eastern District of Texas (See Note I[1] hereof). The Company agreed to revise the settlement to avoid the possibility of protracted litigation regarding enforcing the settlement. Under the terms of the revised settlement, Juniper paid the Company $12,700,000 and received a fully-paid license to the Company's Remote Power Patent (and certain other patents owned by the Company) for its full term, which will apply to its sales of PoE products.
|
[3] |
On February 9, 2018, the Board of Directors of the Company, pursuant to its dividend policy (see Note M above), declared a semi-annual cash dividend of $0.05 per common share which is payable on March 24, 2018 to all common stockholders of record as of March 3, 2018.
|
[4] |
On March 8, 2018, the Company issued 15,000 restricted stock units to each of its three non-management directors as a grant for the year 2018. Each restricted stock unit represents a contingent right to receive one share of the Company's common stock. The restricted stock units vest in four equal quarterly amounts of 3,750 shares of common stock on March 15, 2018, June 15, 2018, September 15, 2018 and December 15, 2018, subject to continued service on the Board of Directors.
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101*
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Interactive data files: *
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Scheme Document
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101.CAL
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XBRL Calculation Linkbase Document
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101.DEF
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XBRL Definition Linkbase Document
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101.LAB
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XBRL Label Linkbase Document
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101.PRE
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XBRL Presentation Linkbase Document
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NETWORK-1 TECHNOLOGIES, INC.
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By:
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/s/ Corey M. Horowitz | |
Corey M. Horowitz | |||
Chairman and Chief Executive Officer | |||
NAME
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TITLE
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DATE
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||
/s/ Corey M. Horowitz
Corey M. Horowitz
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Chairman and Chief Executive Officer, Chairman of the Board of Directors (principal executive officer)
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April 2, 2018
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/s/ David Kahn
David Kahn
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Chief Financial Officer, Secretary and a Director (principal financial officer and principal accounting officer)
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April 2, 2018
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||
/s/ Emanuel Pearlman
Emanuel Pearlman
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Director
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April 2, 2018
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/s/ Niv Harizman
Niv Harizman
|
Director
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April 2, 2018
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||
/s/ Allison Hoffman
Allison Hoffman
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Director
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April 2, 2018
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Name
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Jurisdiction
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Mirror Worlds Technologies, LLC
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Delaware
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Date: April 2, 2018
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By:
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/s/ Corey M. Horowitz | |
Corey M. Horowitz
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|||
Chairman and Chief Executive Officer
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Date: April 2, 2018
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By:
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/s/ David C. Kahn | |
David C. Kahn
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|||
Chief Financial Officer
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Mar. 26, 2018 |
Jun. 30, 2017 |
|
Document And Entity Information | |||
Entity Registrant Name | NETWORK 1 TECHNOLOGIES INC | ||
Entity Central Index Key | 0001065078 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 63,118,122 | ||
Entity Common Stock, Shares Outstanding | 23,749,312 | ||
Document Fiscal Year Focus | 2017 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 23,843,915 | 23,744,829 |
Common stock, shares outstanding | 23,843,915 | 23,744,829 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income | $ 4,133,000 | $ 23,223,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of Patents | 206,000 | 813,000 |
Stock -based compensation | 949,000 | 509,000 |
Deferred tax provision | 39,000 | 4,751,000 |
Changes in operating assets and liabilities: | ||
Royalty receivables | 2,304,000 | (1,342,000) |
Prepaid Taxes | 1,070,000 | (1,195,000) |
Other current assets | 113,000 | |
Accounts payable | 73,000 | 32,000 |
Accrued expense | (2,000,000) | 3,002,000 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 6,774,000 | 29,906,000 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of patents | (1,144,000) | (42,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Cash dividends | (2,420,000) | |
Value of shares delivered to fund withholding taxes on vesting of restricted stock units | (56,000) | (49,000) |
Repurchases of common stock, net of commissions | (2,096,000) | (120,000) |
Proceeds from exercises of options and warrants | 1,125,000 | 615,000 |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (3,447,000) | 446,000 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,183,000 | 30,310,000 |
CASH AND CASH EQUIVALENTS, beginning of year | 50,918,000 | 20,608,000 |
CASH AND CASH EQUIVALENTS, end of year | 53,101,000 | 50,918,000 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
CASH PAID DURING THE PERIOD FOR: Interest | ||
CASH PAID DURING THE PERIOD FOR: Income taxes | 1,290,000 | 5,265,000 |
NON-CASH FINANCING ACTIVITY | ||
Accrued dividend rights on restricted stock units | $ 84,000 |
BUSINESS |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Notes to Financial Statements | |
NOTE A - BUSINESS | Network-1 Technologies, Inc. (the "Company") is engaged in the development, licensing and protection of its intellectual property assets. The Company presently owns fifty-one (51) 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 action to be performed based on such identification; (iv) M2M/IoT patent portfolio (the "M2M/IoT Patent Portfolio") relating to, among other things, enabling technology for authenticating 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") relating to systems and methods for the transmission of audio, video and data over computer and telephony networks in order to achieve high quality of service (QoS). 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. The Company has entered into twenty-seven (27) 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'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 acquisition 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 November 13, 2017, a jury empaneled in the United States District Court for the Eastern District of Texas, Tyler Division, found that certain claims of the Company's Remote Power Patent were invalid and not infringed by Hewlett-Packard (the "HP Jury Verdict"). The Company has depended upon its Remote Power Patent for a significant portion of its revenue. As a result of the HP Jury Verdict several of the Company's largest licensees, including Cisco Systems, Inc. its largest licensee, have notified the Company that they will no longer make ongoing royalty payments to the Company pursuant to their license agreements. If the District Court enters an order confirming the HP Jury Verdict and finding certain claims of the Remote Power Patent obvious (invalid) and either (i) the Company is unable to reverse the District Court order on appeal, or (ii) there is an arbitration ruling that the District Court order relieves the obligation of certain of the Company's licensees, including Cisco Systems, Inc., to continue to pay the Company royalties and the District Court order is not subsequently reversed on appeal, the Company's business, results of operations and cash-flow will be materially adversely effected (see Note I[1] and I[2] hereof).
Consistent with the Company's revenue recognition policy (see Note B[7] hereof), the Company did not record revenue in the fourth quarter of 2017 from certain licensees, including Cisco, Dell and Netgear, who advised the Company they would not pay the Company ongoing royalties as a result of the HP Jury Verdict. The Company disagrees with the position taken by such licensees and intends to pursue arbitration if it does not achieve a satisfactory resolution (see Note I[1] hereof).
Principles of consolidation
The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiary, Mirror Worlds Technologies, LLC. All intercompany transactions and balances are eliminated in consolidation. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The significant estimates and assumptions made in the preparation of the Company's consolidated financial statements include revenue recognition, stock-based compensation, income taxes and valuation of patents. Actual results could be materially different from those estimates, upon which the carrying values were based.
The Company places cash investments in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC"). At December 31, 2017, the Company maintained a cash balance of $42,066,000 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.
Cash and cash equivalents as of December 31, 2017 and December 31, 2016 are composed of:
Marketable securities are classified as available-for-sale and are recorded at 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 period they are realized. At December 31, 2017 and December 31, 2016, the Company's marketable securities consisted of two corporate bonds (face value $1,000,000) with a 3.9% and 4.5% coupon and maturities greater than three months when purchased. The Company's marketable securities mature in 2021 and it is not the intention of the Company to hold such securities until maturity.
The Company owns patents that relate to various technologies. The Company capitalizes the costs associated with acquisition, registration and maintenance of its acquired patents and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the patents would be capitalized and amortized over the balance of the useful life for the patents.
Intangible assets with finite lives are tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Accordingly, the Company records impairment losses on long-lived assets used in operations or expected to be disposed of when indicators of impairment exist and the undiscounted cash flows expected to be derived from those assets are less than carrying amounts of these assets. At December 31, 2017 and December 31, 2016, there was no impairment to the Company's patents.
The Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to their expected net realizable value. There was no allowance for doubtful accounts at December 31, 2017 and 2016.
The Company recognizes revenue received from the licensing of its intellectual property and other related intellectual property activities. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been performed pursuant to the terms of the applicable license agreement, (iii) amounts are fixed or determinable, and (iv) collectability of amounts is reasonably assured. In connection with recurring revenue from royalty bearing licenses, the Company relies on royalty reports received from third party licensees to record its revenue. From time to time the Company may audit or otherwise dispute royalties reported from licensees.
Any adjusted royalty revenue as a result of such audits or dispute is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined.
Revenue from the Company's patent licensing and enforcement business is generated from negotiated license agreements. Generally, in the event of settlement of litigation related to the Company's assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license (a "Fully-Paid License"), or (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 (a "Royalty Bearing License").
The Company's license agreements, both Fully-Paid Licenses and Royalty Bearing Licenses, typically include some combination of the following: (i) the grant of a non-exclusive license to manufacture and/or sell products covered by its patented technologies; (ii) the release of the licensee from certain claims, and (iii) the dismissal of any pending litigation. The intellectual property rights granted pursuant to these licenses typically extend until the expiration of the related patents. Pursuant to the terms of these agreements, the Company typically has no further obligations with respect to the grant of the non-exclusive licenses. Generally, the license agreements provide for the grant of the licenses, releases, and other significant deliverables following execution of the agreement and the receipt of the up-front lump sum payment for a Fully-Paid License or a license initiation fee for a Royalty Bearing License.
Ongoing Royalty Payments: Certain of the Company's revenue from Royalty Bearing Licenses results from the calculation of royalties based on a licensee's actual quarterly sales (one licensee pays monthly royalties) or actual per unit activity, applied to a contractual royalty rate. Licensees that pay royalties on a quarterly basis generally report actual quarterly sales and related quarterly royalties due within 45 days after the end of the quarter in which such sales activity takes place. Licensees with Royalty Bearing Licenses are obligated to provide the Company with quarterly (or monthly) royalty reports that summarize their sales of licensed products and their related royalty obligations to the Company. The Company receives these royalty reports subsequent to the period in which its licensees underlying sales occurred. The amount of royalties due under Royalty Bearing Licenses, each quarter, cannot be reasonably estimated by management. Consequently, the Company recognizes revenue for the period in which the royalty report is received in arrears and other revenue recognition criteria are met.
Non-Refundable Up-Front Fees: 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 obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from Fully-Paid Licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations.
The Company includes in costs of revenue for the year ended December 31, 2017 and 2016 contingent legal fees payable to patent litigation counsel (see Note G[1] hereof), other contractual payments related to net proceeds from settlements (see Note G[2] hereof) and incentive bonus compensation payable to its Chairman and Chief Executive Officer (see Note H[1] hereof).
The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, "Income Taxes" (ASC 740), which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary (timing) differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.
ASC 740-10, "Accounting for Uncertainty in Income Taxes," defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company had no uncertain tax positions as of December 31, 2017 and December 31, 2016.
United States federal, state and local income tax returns prior to 2014 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.
On December 22, 2017, the 2017 Tax Cuts and Job Act was enacted into law and the new legislation contains key tax provisions that affect the Company. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring its U.S. deferred tax assets and liabilities as well as reassessing the net realizability of deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows the Company to record provisional amounts during a measurement period not extended beyond one year of the enactment date.
The Company accounts for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718, Compensation - Stock Compensation ("ASC 718"). ASC 718 requires all stock-based compensation to employees, including grants of employee stock options and restricted stock units, to be recognized in the 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 payments issued to non-employees are recorded at their fair values, and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period and are expensed using an accelerated attribution model. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of options granted. The fair value of restricted stock units is determined based on the number of shares 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 F for further discussion of the Company's stock based compensation).
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 D).
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.
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 receivable, 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 B[3]). The Company also measures the fair value of certain assets on a non-recurring basis, when events or circumstances indicate the carrying amount of the assets may be impaired.
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 M hereof).
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. The adoption of this ASU will not 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. The Company is required to adopt the amendments in ASU No. 2014-09 using one of the two acceptable methods. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU No. 2014-09 to annual periods beginning after December 2017, along with an option to permit early adoption as of the original effective date. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends the guidance in 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. The ASU does not change the core principle of the guidance in Topic 606. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. 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). In November 2017, the FASB issued ASU 2017-14, Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606), 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. The ASUs apply 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 is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company will adopt ASU 2014-09 on January 1, 2018 using the modified retrospective approach. The Company does not anticipate a modified retrospective adjustment to be recorded upon adoption as it relates to the amount and timing of revenue recognized from its existing license agreements for its intellectual property. The Company will continue to evaluate any new license agreements entered into in the future relating to the new revenue recognition policy which will be adopted on January 1, 2018.
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. This standard, adopted on a prospective basis, will not have a material impact on its consolidated financial statements.
Accounting Standards Adopted in 2017
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. The Company has evaluated this on a modified retrospective basis and determined that no adjustment was necessary. Under the new method the Company recognizes 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 as a result prior periods have not been adjusted. The effective tax rate for the year ended December 31, 2017 was not materially different from the federal statutory rate. |
PATENTS |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE C - PATENTS | The Company's intangible assets at December 31, 2017 include patents with estimated remaining economic useful lives ranging from 2.5 to 16 years. For all periods presented, all of the Company's patents were subject to amortization. The gross carrying amounts and accumulated amortization related to acquired intangible assets as of December 31, 2017 and 2016 are as follows:
Amortization expense for the years ended December 31, 2017 and 2016 was $206,000 and $813,000, respectively. Future amortization of current intangible assets, net is as follows:
The Company's Remote Power Patent expires in March 2020. The expiration dates of the patents within the Company's Mirror Worlds Patent Portfolio range from April 2018 to February 2020 (eight of the patents in the Mirror Worlds Patent Portfolio expired as of December 31, 2017). The expiration dates of the patents within the Cox Patent Portfolio range from September 2021 to November 2023. The expiration dates of patents within the Company's M2M/IoT Patent Portfolio range from January 2034 to May 2034 and the expiration date of patents within the Company's QoS patents is June 2019. |
EARNINGS PER SHARE |
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NOTE D - EARNINGS PER SHARE | Basic Earnings per share is calculated by dividing the net income by the weighted average number of outstanding common shares during the period. Diluted per share data included the dilutive effects of options, warrants and restricted stock units. Potential shares of 2,830,000 and 3,575,000 at December 31, 2017 and 2016, respectively, consisted of options, restricted stock units and warrants. Computations of basic and diluted weighted average common shares outstanding are as follows:
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NOTE E - INCOME TAXES | Significant components of the income taxes were as follows for the years ended December 31, 2017 and December 31, 2016.
Significant components of deferred tax assets as of December 31, 2017 and December 31, 2016 consist of the following:
The Company utilized its remaining federal, state and local net operating loss carry-forwards of approximately $20.7 million in 2016.
The reconciliation between the taxes as shown and the amount that would be computed by applying the statutory federal income tax rate to the net income before income taxes is as follows:
While only the tax returns for the three years ended prior to December 31, 2017 are open for examination for taxes payable for those years, tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent that they generated loss carry-forwards that are available for those future years.
The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are anticipated to reverse in the future, which is generally 21%. However, the Company is still examining certain aspects of the 2017 Tax Cuts and Job Act and refining calculations which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.
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"). In the second half of 2017 (as well as the second half of prior years), the Company did not meet the Ownership Test. Due to the 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. |
STOCKHOLDERS' EQUITY |
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NOTE F - STOCKHOLDERS' EQUITY | The 2013 Stock Incentive Plan ("2013 Plan") provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock, (c) deferred stock, (d) stock appreciation rights, and (e) other stock-based awards including restricted stock units. Awards under the 2013 Plan may be granted singly, in combination, or in tandem. Subject to standard anti-dilution adjustments as provided, the 2013 Plan provides for an aggregate of 2,600,000 shares of the Company's common stock to be available for distribution. The Company's Compensation Committee generally has the authority to administer the 2013 Plan, determine participants who will be granted awards, the size and types of awards, the terms and conditions of awards and the form and content of the award agreements representing awards. Awards under the 2013 Plan may be granted to employees, directors and consultants of the Company and its subsidiaries. As of December 31, 2017, there are 1,253,099 shares of common stock available for issuance under the 2013 Plan.
During the year ended December 31, 2017, the Company granted 13,500 restricted stock units ("RSUs") under the 2013 Plan to each of its three non-management directors as an annual grant for 2017 for service on the Company's Board of Directors. Each RSU represented a contingent right to receive one share of the Company's common stock. The RSUs vested in four equal quarterly installments of 3,375 shares of common stock on March 15, 2017, June 15, 2017, September 15, 2017 and December 15, 2017, subject to continued service on the Board of Directors.
During the year ended December 31, 2016, the Company granted 15,000 RSUs under the 2013 Plan to each of its three non-management directors. The RSUs vested 7,500 shares of common stock on March 9, 2016 (the date of grant) and 3,750 shares on September 9, 2016 and December 9, 2016, subject to continued service on the Board of Directors.
On June 9, 2016, the Company also granted 50,000 RSUs under the 2013 Plan to each of its Chief Financial Officer and Executive Vice President, and 40,000 RSUs to a consultant to the Company. Each such RSUs vested 50% on the one year anniversary of grant (June 9, 2017) and will vest 50% on the two year anniversary of grant (June 9, 2018), subject to continue service to the Company.
In July 2016, the Company granted to the Chairman and Chief Executive Officer, under its 2013 Plan, 750,000 RSUs (each RSU awarded by the Company represents a contingent right to receive one share of the Company's common stock) which vest in three tranches, as follows: (i) 250,000 RSUs shall vest on July 14, 2018, subject to the Chairman and Chief Executive's continued employment by the Company through the vesting date (the "Employment Condition"); (ii) 250,000 RSUs shall vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company's common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $3.25 per share (subject to adjustment for stock splits) at any time during the term of employment; and (iii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being 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 aforementioned, in the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employment for Good Reason (as defined), all of the 750,000 RSUs shall accelerate and become immediately fully vested. All RSUs granted by the Company to its officers, directors or consultants have dividend equivalent rights.
The effect of a market condition is reflected in the estimate of the grant-date fair value of the restricted stock units utilizing a Monte Carlo valuation technique. The service period for restricted stock units with a market-based vesting condition is inferred from the application of the Monte Carlo valuation technique. Assumptions utilized in connection with the Monte Carlo valuation technique included estimated risk-free interest rate ranging from 0.67% to 1.10%; expected volatility of 38.8% and the expected dividend yield was based on expectations regarding dividend payments at the time of grant.
All of the Company's issued and RSUs have dividend equivalent rights. As of December 31, 2017, there was $84,000 accrued for dividend equivalent rights.
A summary of restricted stock units granted during the year ended December 31, 2017 is as follows (each restricted stock unit represents the contingent right to receive one share of the Company's common stock):
Restricted stock unit compensation expense was $949,000 for the year ended December 31, 2017 and $497,000 for the year ended December 31, 2016.
The Company has an aggregate of $860,000 of unrecognized restricted stock unit compensation expense as of December 31, 2017 to be expensed over a weighted average period of 1.58 years.
At December 31, 2017, stock options to purchase an aggregate of 385,000 shares of common stock were outstanding under the 2013 Plan and options to purchase 1,625,000 shares of common stock were outstanding representing option grants outside of the 2013 Plan (issued prior to the establishment of the 2013 Plan). There were no grants of stock options during the years ended December 31, 2017 and December 31, 2016.
The following table summarizes stock option activity for the years ended December 31:
During the year ended December 31, 2017 and December 31, 2016, the Company did not grant any stock options. During the year ended December 31, 2017, the Company did not recognize any stock-based compensation related to the vesting of prior issued stock options to employees and directors. During the year ended December 31, 2016, the Company recognized stock-based compensation of $12,000 related to the issuance of stock options and vesting of prior issued options. The Company at December 31, 2017 and 2016 has no remaining unrecognized expenses related to unvested stock options to employees and directors. The aggregate intrinsic value of all stock options exercisable at December 31, 2017 was $2,245,550.
During the year ended December 31, 2017, stock options to purchase an aggregate of 300,000 shares of the Company's common stock were exercised (50,000 shares of which were exercised on a net exercise (cashless) basis), by a former director of the Company (125,000 shares), the Company's Chief Financial Officer and his three children (an aggregate of 75,000 shares), and two directors of the Company (each 50,000 shares) at exercise prices ranging from $1.14 to $1.40 per share. With respect to the aforementioned stock option to purchase 50,000 shares exercised on a net exercise (cashless) basis by a director of the Company, net shares of 26,734 were delivered to the director.
During the year ended December 31, 2016, stock options to purchase an aggregate of 530,000 shares of common stock were exercised (470,251 of which were exercised on a net exercise (cashless) basis), by the Company's Chief Financial Officer (100,000 shares), Executive Vice President (240,000 shares), a director (75,000 shares), a consultant (90,000 shares) and a former director (25,000 shares), at prices ranging from $1.21 to $1.60 per share. With respect to the aforementioned stock option exercises on a net exercise (cashless) basis, aggregate net shares of 132,080 were delivered to the Chief Financial Officer (43,580 shares), Executive Vice President (23,944 shares), director (47,283) and a consultant (17,273 shares).
The following table presents information relating to all stock options outstanding and exercisable at December 31, 2017:
As of December 31, 2017, there were no outstanding warrants to purchase shares of the Company's common stock. As of December 31, 2016, the following are the outstanding warrants to purchase shares of the Company's common stock:
2016
The outstanding warrants to purchase an aggregate of 375,000 shares of common stock at December 31, 2016 pertain to 5-year warrants issued to Recognition Interface, LLC in connection with the Company's (through Mirror Worlds Technologies, LLC, its wholly-owned subsidiary) purchase of the Mirror Worlds Patent Portfolio in May 2013 (See Note G[2]).
During the year ended December 31, 2016, Recognition Interface, LLC exercised warrants to purchase an aggregate of 375,000 shares of the Company's common stock at an exercise price of $1.40 per share resulting in gross proceeds to the Company of $525,000. In January 2017, Recognition Interface, LLC exercised warrants to purchase an additional 375,000 shares of the Company's common stock at an exercise price of $2.10 per share, resulting in additional gross proceeds to the Company of $787,500. |
COMMITMENTS AND CONTINGENCIES |
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NOTE G - COMMITMENTS AND CONTINGENCIES |
Russ, August & Kabat provides legal services to the Company with respect to its pending patent litigation filed in May 2017 against Facebook, Inc. in the United States District Court for the Southern District of New York relating to several patents within the Company's Mirror Worlds Patent Portfolio (see Note [I[5]] to the Company's consolidated financial statements included in this Annual Report). The terms of the Company'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% and 24% of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all of the expenses incurred with respect to this litigation.
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 States District Court for the Southern District of New York relating to certain patents within the Cox Patent Portfolio acquired by the Company from Dr. Cox (see Note I[3] hereof). The terms of the Company's agreement with Russ, August & Kabat provide for legal fees on a full contingency basis ranging from 15% to 30% of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all of the expenses incurred with respect to this litigation.
Dovel & Luner, LLP provides legal services to the Company with respect to the Company's pending patent litigation filed in September 2011 against sixteen (16) data networking equipment manufacturers in the United States District Court for the Eastern District of Texas, (Tyler Division) (see Note I[1]). The terms of the Company's agreement with Dovel & Luner LLP essentially provide for legal fees on a full contingency basis ranging from 12.5% to 35% (with certain exceptions) of the net recovery (after deduction for expenses) depending on the stage of the preceding in which a result (settlement or judgment) is achieved. For the year ended December 31, 2017 and December 31, 2016, the Company incurred contingent legal fees and expenses to Dovel & Luner of $2,954,000 and $4,626,000, respectively, with respect to the litigation.
Dovel & Luner, LLP provided legal services to the Company with respect to the Company's patent litigation settled in July 2010 against several major data networking equipment manufacturers (see Note I[2]). The terms of the Company's agreement with Dovel & Luner, LLP provided for legal fees of a maximum aggregate cash payment of $1.5 million plus a contingency fee of up to 24% (based on the settlement being achieved at the trial stage) including legal fees of local counsel in Texas. With respect to royalty payments payable quarterly by Cisco to the Company in accordance with the Company's settlement and license agreement with Cisco, the Company has an obligation to pay Dovel & Luner 24% of such royalties received after expenses. During the years ended December 31, 2017 and December 31, 2016, total contingency fees incurred to Dovel & Luner, LLP were $1,801,000 and $2,117,000, respectively.
On February 28, 2013, the Company completed the acquisition of the Cox Patent Portfolio consisting of four patents (as well as a pending patent application) from Dr. Ingemar Cox, a technology leader in digital watermarking content identification, digital rights management and related technologies, for a purchase price of $1,000,000 in cash and 403,226 shares of the Company's common stock. In addition, the Company is obligated to pay Dr. Cox
12.5% of the net proceeds (after deduction of expenses) generated by the Company from licensing, sale or enforcement of the patents. Since the acquisition of the patent portfolio from Dr. Cox, the Company has been issued eighteen (18) additional related patents by the USPTO resulting in an aggregate of twenty-three (23) patents within the Cox Patent Portfolio. Professional fees 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 the Mirror Worlds Patents consisting of all of the patents previously owned by Mirror Worlds, LLC (which subsequently changed its name to Looking Glass LLC), including nine issued United States patents and five pending applications (one of which was issued in November 2013) covering foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system. As consideration for the patent acquisition, the Company paid Mirror Worlds, LLC $3,000,000 in cash and issued 5-year warrants to purchase an aggregate of 1,750,000 shares of the Company's common stock (875,000 shares of common stock at an exercise price of $1.40 per share and 875,000 shares of common stock at an exercise price of $2.10 per share) (the "Looking Glass Warrants"). On June 3, 2014, the Company repurchased the Looking Glass Warrants from Looking Glass LLC at a cost of $505,000. As part of the acquisition of the Mirror Worlds Patent Portfolio, the Company also entered into an agreement with Recognition Interface, LLC ("Recognition"), an entity that financed the commercialization of the patent portfolio prior to its sale to Mirror Worlds, LLC and also retained an interest in the licensing proceeds of the patent portfolio held by Mirror Worlds, LLC. Pursuant to the terms of the Company's agreement with Recognition, Recognition received (i) 5-year warrants to purchase 250,000 shares of the Company's common stock at $1.40 per share, and (ii) 5-year warrants to purchase 250,000 shares of common stock at $2.10 per share. Recognition also received from the Company an interest in the net proceeds realized from the monetization of the Mirror Worlds Patent Portfolio as follows: (i) 10% of the first $100 million of net proceeds; (ii) 15% of the next $125 million of net proceeds; and (iii) 20% of any portion of the net proceeds in excess of $250 million. During the year ended December 31, 2017 and December 31, 2016, the Company paid Recognition $-0- and $2,909,000, respectively, for its net interest in proceeds from the monetization of the Mirror Worlds Patent Portfolio. During the year ended December 31, 2016 and in January 2017, Recognition exercised warrants to purchase an aggregate of 750,000 shares of the Company's common stock, resulting in gross proceeds to the Company of $1,312,500 (see Note F[3] hereof). As part of the acquisition of the Mirror Worlds Patent Portfolio, professional fees and filing fees of $409,000 were capitalized as patent cost.
On December 29, 2017, the Company acquired from M2M and IoT Technologies, LLC ("M2M") the M2M/IoT Patent Portfolio consisting of twelve (12) issued United States patents relating to, among other things, the enabling technology for authenticating and using embedded SIM cards in next generation IoT, Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers as well as automobiles and drones. The Company paid $1,000,000 to acquire the M2M/IoT Patent Portfolio from M2M and has an obligation to pay M2M 14% of the first $100 million of net proceeds (after deduction of expenses) and 5% of net proceeds greater than $100 million from Monetization Activities (as defined) related to the patent portfolio. In addition, M2M will be entitled to receive from the Company $250,000 of additional consideration upon the occurrence of certain future events related to the patent portfolio. As part of the acquisition of M2M/IoT Patent Portfolio, professional fees and filing fees of $88,000 were capitalized as patent cost.
The Company leases its principal office space in New York City at a monthly base rent of approximately $3,700 which lease expires on May 31, 2018.
The Company leases office space in New Canaan, Connecticut expiring on September 30, 2019 at a base rent of $7,200 per month (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).
Rental expense for the years ended December 31, 2017 and 2016 aggregated $156,000 and $148,000, respectively.
The Company has a Savings and Investment Plan which allows participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code of 1986. The Company also may make discretionary annual matching contributions and profit sharing in amounts determined by the Board of Directors, subject to statutory limits. The 401(k) Plan expense for the years ended December 31, 2017 and 2016 was $108,000 and $102,000, respectively. |
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS |
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NOTE H - EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS |
Under the terms of the Agreement, so long as the Company's Chairman and Chief Executive Officer continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, he shall also receive incentive compensation in an amount equal to 5% of the Company'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% 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's royalties and other payments relating to Licensing Activities with respect to patents other than the Remote Power Patent (including the Company's Mirror Worlds Patent Portfolio, Cox Patent Portfolio and M2M/IoT Patent Portfolio) (collectively, the "Incentive Compensation"). During the year ended December 31, 2017 and December 31, 2016, the Company's Chairman and Chief Executive Officer earned Incentive Compensation of $823,000 and $4,252,000, respectively. As of December 31,2017 and 2016, the amount of accrued compensation for the Company's Chairman and Chief Executive Officer was $346,000 and $748,000, 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 employment of the Chairman and Chief Executive Officer 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 Company's assets, the Company has the option to extinguish the right of the Chairman and Chief Executive Officer to receive future Incentive Compensation by payment to him of a lump sum payment, in an amount equal to the fair market value of such future interest as determined by an independent third party expert if the parties do not reach agreement as to such value. In the event that the Chairman and Chief Executive Officer 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, RSUs or other awards.
In connection with the Agreement, the Company's 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 from the termination date, if terminated "For Cause" by the Company or "Without Good Reason" by the Chairman and Chief Executive Officer.
Prior to entering into the new employment agreement in July 2016 as referenced above, the Company's Chairman and Chief Executive Officer received a base salary of $415,000, an annual discretionary target bonus of $150,000, the same Incentive Compensation, non-compete and other similar provisions as set forth in his new employment agreement.
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, restricted stock units or any other awards he may receive in the future.
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LEGAL PROCEEDINGS |
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NOTE I - LEGAL PROCEEDINGS |
In June 2016, the Company reached a settlement with Sony Corporation and affiliated entities ("Sony"). With respect to the settlement, Sony received a non-exclusive fully-paid license for the Remote Power Patent for its remaining life. In July 2016, the Company reached a settlement with Dell, Inc. Under the terms of the settlement, Dell received a non-exclusive license for the Remote Power Patent for its full term, Dell paid a license initiation fee of $6,000,000 and agreed to pay quarterly royalties based on its sales of PoE products. In July 2016, the Company also reached settlement agreements with Alcatel-Lucent USA, Inc. and Alcatel-Lucent Holdings Inc. (collectively, "Alcatel") and ALE, USA ("ALE"). Under the terms of the settlement agreements, Alcatel and ALE, USA received a non-exclusive fully-paid license for the Remote Power Patent for its remaining life. The aggregate consideration received by the Company from Alcatel and ALE for the fully-paid license was $4,200,000 of which $1,900,000 was paid following signing of the settlement agreements and the balance of $2,300,000 was paid in three equal quarterly payments of $766,666 beginning on July 1, 2017. In August 2017, the Company entered into a settlement agreement with Axis Communications, Inc. and affiliated entities ("Axis"). With respect to the settlement, Axis received a fully-paid license for the Remote Power Patent.
In October 2016, the Company entered a settlement agreement with Polycom, Inc. ("Polycom"). Under the terms of the settlement, Polycom entered into a non-exclusive license for the Company's Remote Power Patent for its full term and is obligated, subject to certain conditions, to pay a license initiation fee of $5,000,000 for past sales of its Power over Ethernet ("PoE") products and ongoing royalties based on its sales of PoE products. $2,000,000 of the license initiation fee was paid within 30 days and the balance will be paid in three annual installments of $1,000,000 beginning in October 2017. Payments due in October 2018 and October 2019 need not be paid by Polycom if all asserted claims of the Remote Power Patent have been found invalid. If the District Court in our trial with Hewlett Packard (see below) enters an order finding certain claims of the Remote Power Patent obvious (invalid) and the Company is unable to overturn such order on appeal to the United States Court of Appeals for the Federal Circuit, Polycom will not be obligated to make the aforementioned remaining aggregate payments of $2,000,000.
In October 2017, the U.S. Bankruptcy Court of the Southern District of New York approved the Company's settlement with defendant Avaya, Inc. ("Avaya"). As part of the settlement, Avaya, which on January 19, 2017 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. Under the terms of the license, Avaya paid the Company a lump sum amount for sales of certain designated Power over Ethernet ("PoE") products, and agreed to pay ongoing royalty for other designated PoE products. In addition, Avaya agreed that the Company shall have an allowed general unsecured claim ("Allowed Claim") in the amount of $37,500,000, as amended, relating to all acts occurring on or before January 19, 2017. Under the Debtors' (Avaya and certain of its affiliates) Second Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and its Debtor Affiliates, which was approved by the Bankruptcy Court on November 28, 2017 and became effective on December 15, 2017, the Debtors 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 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's unsecured claim. In such an event, the amount recovered by the Company under its Allowed Claim may be substantially lower than 18.9%.
On November 1, 2017, defendant Juniper Systems, Inc. ("Juniper") agreed to settle its litigation with the Company for $13,250,000 for a fully- paid license for the Remote Power Patent. On December 8, 2017, the Company was advised by Juniper that it would not make the settlement payment to the Company as a result of the HP Jury Verdict and there was no binding agreement with the Company. In January 2018, the Company revised and closed its settlement with Juniper (see Note N - "Subsequent Events").
On November 13, 2017, a jury empaneled in the United States District Court for the Eastern District of Texas, Tyler Division, found that certain claims of the Company's Remote Power Patent were invalid and not infringed by Hewlett-Packard (the "HP Jury Verdict"). As a result of the HP Jury Verdict, several of the largest licensees of the Company's Remote Power Patent, including Cisco, Dell, and Netgear, have advised the Company that they will no longer pay the Company ongoing royalties pursuant to their license agreements. The Company disagrees with the position taken by such licensees because, among other reasons, the jury verdict is not an order of the District Court and may be thrown out as a result of motion practice in the District Court. If the Company does not satisfactorily resolve the issue with such licensees, it intends to pursue arbitration. However, the Company's position may not prevail in arbitration. On February 2, 2018, the Company moved to throw out the jury verdict and have the Court determine that certain claims of the Company's Remote Power Patent are not obvious (invalid) as a matter of law by filing a motion for judgment as a matter of law on validity and motions for a new trial on validity and infringement. A hearing on the Company's motions is scheduled for May 14, 2018. If the District Court enters an order confirming the HP Jury Verdict and finding certain claims of the Company's Remote Power Patent obvious (invalid) and either (i) the Company is unable to reverse the District Court order on appeal, or (ii) there is an arbitration ruling that the District Court order relieves the obligation of certain of the Company's licensees including Cisco Systems, Inc., the Company's largest licensee, to continue to pay the Company royalties and the District Court order is not subsequently reversed on appeal, the Company's business, results of operations and cash-flow will be materially adversely effected.
If the Company is successful in its efforts (i) to throw out the HP Jury Verdict in the District Court, (ii) to overturn the jury verdict on appeal if the District Court confirms the jury verdict and finding certain claims of the Company's Remote Power Patent obvious (invalid), or (iii) there is an arbitration ruling that the District Court order does not affect the obligations of certain of the Company's licensees (including Cisco) to continue to pay the Company royalties and the order is not overturned on appeal, licensees will be obligated to pay the Company ongoing royalties and all prior royalties that were not previously paid following the HP Jury Verdict in November 2017.
The royalty payments from Cisco are subject to certain conditions including that there is no "Adverse Ruling" as defined in the Agreement related to the Company's Remote Power Patent. Cisco notified the Company in January 2018 that in its view that no further royalty payments are due the Company under the Agreement because the jury verdict in the Company's Hewlett-Packard trial finding that certain claims of the Remote Power Patent are invalid and not infringed by Hewlett-Packard constituted an "Adverse Ruling" under the Agreement. The Company disagrees with Cisco that the HP jury verdict by itself relieves Cisco of its royalty obligations to the Company for, among other reasons, that the jury verdict has not been subject to an order of the District Court and is subject to motion practice. However, the Company cannot be certain its position will prevail.
On February 2, 2018, the Company brought motions in the District Court to throw out the HP Jury Verdict and have the Court determine that certain claims of our Remote Power Patent are not obvious (invalid) by filing motions for judgment as a matter of law and a new trial on validity and infringement. A hearing on the Company's motions is scheduled for May 14, 2018. If the District Court enters an order confirming the HP Jury Verdict, the District Court confirms certain claims of our Remote Power Patent are obvious (invalid), and these decisions are upheld on appeal to the United States Court of Appeals for the Federal Circuit, Cisco will likely continue not to pay the Company royalties unless there is an arbitration ruling that the District Court order does not affect the obligation of Cisco to pay the Company royalties under its license agreement. The loss of Cisco as a licensee would have a material adverse effect on our business, results of operations and cash-flow.
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 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 appeals to the United States District Court of Appeals for the Federal Circuit, as described below.
In December 2014, Google Inc. filed four petitions to institute Inter Partes Review ("IPRs") at the United States Patent and Trademark Office ("USPTO") pertaining to patents within the Company's Cox Patent Portfolio asserted in the litigation filed in April 2014 as described above. Google in each of the IPRs sought to invalidate certain claims of patents at issue within the Cox Patent Portfolio. On June 23, 2015, the Patent Trial and Appeal Board ("PTAB") of the USPTO issued an order instituting for oral hearing each of the four IPRs. The consolidated trial at the PTAB was held on March 9, 2016. On June 20, 2016, the PTAB issued its Final Written Decisions in the Company's favor in the four pending IPRs. On August 18, 2016, Google filed Notices of Appeal with respect to the PTAB's Final Written Decision to the United States Court of Appeals for the Federal Circuit. On March 26, 2018, the United States Court of Appeals for the Federal Circuit vacated certain rulings of the PTAB's Final Written Decisions in favor of the Company determining that the PTAB erred in its claim construction of a certain claim term and remanded the four cases to the PTAB for further proceedings to address the claims that contained the term that was erroneously construed. The Federal Circuit left undisturbed the PTAB's findings that the remaining claims of the patents (that did not include this claim term) are not invalid.
On April 13, 2015, Google filed a Petition for Covered Business Method Review (CBM) at the PTAB seeking to invalidate claims pertaining to the Company's U.S. Patent No. 8,904,464, the patent asserted in the Company's litigation against Google and YouTube filed on December 3, 2014 as referenced above. On October 19, 2015, the PTAB issued an order instituting for oral hearing the Covered Business Method Review on certain grounds. The oral hearing was held on May 11, 2016. On October 18, 2016, the PTAB issued its Final Written Decision in the Company's favor. On December 20, 2016, Google filed a Notice of Appeal to appeal the PTAB's Final Written Decision to the United States Court of Appeals for the Federal Circuit. On January 23, 2018, the United States Court of Appeals for the Federal Circuit affirmed the final written decision of the PTAB in favor of the Company relating to the CBM.
On July 8, 2016, Mirror Worlds Technologies, LLC, the Company's wholly-owned subsidiary, entered into a settlement agreement with Apple Inc. in connection with litigation in the United States District Court for the Eastern District of Texas, for infringement of the Company's '227 Patent. Under the terms of the settlement agreement, Apple received a fully paid non-exclusive license to the '227 Patent for its full term (which expired in June 2016), along with certain rights to other patents in the Company's patent portfolio. The Company received $25,000,000 from Apple for the settlement and fully paid non-exclusive license.
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REVENUE FROM PROFESSIONAL LIABILITY SETTLEMENT |
12 Months Ended |
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Dec. 31, 2017 | |
Notes to Financial Statements | |
NOTE J - 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 $17,500,000 in connection with the settlement of a professional liability claim relating to services rendered in 2008-2010. The Company, through MWT, acquired the claim in May 2013 as part of its acquisition of the Mirror Worlds Patent Portfolio. |
CONCENTRATIONS |
12 Months Ended |
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Dec. 31, 2017 | |
Notes to Financial Statements | |
NOTE K - CONCENTRATIONS | Revenue from three licensees constituted approximately 67% of the Company's revenue for the year ended December 31, 2017. Revenue from three licensees constituted approximately 83% of the Company's revenue for the year ended December 31, 2016 (exclusive of non-licensing revenue from the Company's professional liability settlementsee Note J above. At December 31, 2017, royalty receivables from three licensees constituted approximately 79% of the Company's royalty receivables. At December 31, 2016, royalty receivables from three licensees constituted approximately 85% of the Company's royalty receivables. |
STOCK REPURCHASE PROGRAM |
12 Months Ended |
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Dec. 31, 2017 | |
Notes to Financial Statements | |
NOTE L - STOCK REPURCHASE PROGRAM | On August 22, 2011, the Company announced that its Board of Directors approved a share repurchase program to repurchase up to $2,000,000 of shares of its common stock over the next 12 months ("Share Repurchase Program"). On June 14, 2017, the Company's Board of Directors authorized an extension and increase of the Share Repurchase Program to repurchase up to $5,000,000 of the Company's common stock over the subsequent 24 month period. The common stock may be repurchased from time to time in open market transactions or privately negotiated transactions in the Company's discretion. The timing and amount of the shares repurchased are determined by management based on its evaluation of market conditions and other factors. The repurchase program may be increased, suspended or discontinued at any time.
During the year ended December 31, 2017, the Company repurchased an aggregate of 649,549 shares of its common stock pursuant to the Share Repurchase Program at a cost of $2,081,135 (exclusive of commissions) or an average price per share of $3.20 per share.
Since inception of the Share Repurchase Program (August 2011) through December 31, 2017, the Company has repurchased an aggregate of 7,575,553 shares of its common stock at a cost of $13,545,008 (exclusive of commissions) or an average per share price of $1.79 per share. |
DIVIDEND POLICY |
12 Months Ended |
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Dec. 31, 2017 | |
Notes to Financial Statements | |
NOTE M - DIVIDEND POLICY | On December 7, 2016, the Board of Directors of the Company approved the initiation of a dividend policy providing for the payment of a semi-annual dividend of $0.05 per common share ($0.10 per common share annually) commencing in 2017. The Company anticipates paying the semi-annual dividends in March and September of each year. It is anticipated that the semi-annual dividend will continue to be paid through March 2020 (the expiration of 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, 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 declared a semi-annual cash dividend of $0.05 per share with a payment date of September 20, 2017 to all common stockholders of record as of September 1, 2017. However, if the Company is unable to overturn the jury verdict in its litigation with Hewlett-Packard (see Note I[1] hereof), or there is not an arbitration ruling that the HP Jury Verdict finding of non-infringement does not apply to certain licensees of the Remote Power Patent, the Board of Directors may decide to modify or discontinue annual cash dividends of an aggregate of $0.10 per common share. |
SUBSEQUENT EVENTS |
12 Months Ended | ||||||||
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Dec. 31, 2017 | |||||||||
Notes to Financial Statements | |||||||||
NOTE N - SUBSEQUENT EVENTS |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Summary Of Significant Accounting Policies Policies | ||||||||||||||||||||||||||||||||||||||||||||||
Use of Estimates and Assumptions | The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The significant estimates and assumptions made in the preparation of the Company's consolidated financial statements include revenue recognition, stock-based compensation, income taxes and valuation of patents. Actual results could be materially different from those estimates, upon which the carrying values were based. |
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Cash and Cash Equivalents | The Company places cash investments in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC"). At December 31, 2017, the Company maintained a cash balance of $42,066,000 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.
Cash and cash equivalents as of December 31, 2017 and December 31, 2016 are composed of:
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Marketable Securities | Marketable securities are classified as available-for-sale and are recorded at 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 period they are realized. At December 31, 2017 and December 31, 2016, the Company's marketable securities consisted of two corporate bonds (face value $1,000,000) with a 3.9% and 4.5% coupon and maturities greater than three months when purchased. The Company's marketable securities mature in 2021 and it is not the intention of the Company to hold such securities until maturity. |
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Patents | The Company owns patents that relate to various technologies. The Company capitalizes the costs associated with acquisition, registration and maintenance of its acquired patents and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the patents would be capitalized and amortized over the balance of the useful life for the patents. |
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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, the Company records impairment losses on long-lived assets used in operations or expected to be disposed of when indicators of impairment exist and the undiscounted cash flows expected to be derived from those assets are less than carrying amounts of these assets. At December 31, 2017 and December 31, 2016, there was no impairment to the Company's patents. |
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Allowance for Doubtful Accounts | The Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to their expected net realizable value. There was no allowance for doubtful accounts at December 31, 2017 and 2016. |
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Revenue Recognition | The Company recognizes revenue received from the licensing of its intellectual property and other related intellectual property activities. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been performed pursuant to the terms of the applicable license agreement, (iii) amounts are fixed or determinable, and (iv) collectability of amounts is reasonably assured. In connection with recurring revenue from royalty bearing licenses, the Company relies on royalty reports received from third party licensees to record its revenue. From time to time the Company may audit or otherwise dispute royalties reported from licensees.
Any adjusted royalty revenue as a result of such audits or dispute is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined.
Revenue from the Company's patent licensing and enforcement business is generated from negotiated license agreements. Generally, in the event of settlement of litigation related to the Company's assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license (a "Fully-Paid License"), or (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 (a "Royalty Bearing License").
The Company's license agreements, both Fully-Paid Licenses and Royalty Bearing Licenses, typically include some combination of the following: (i) the grant of a non-exclusive license to manufacture and/or sell products covered by its patented technologies; (ii) the release of the licensee from certain claims, and (iii) the dismissal of any pending litigation. The intellectual property rights granted pursuant to these licenses typically extend until the expiration of the related patents. Pursuant to the terms of these agreements, the Company typically has no further obligations with respect to the grant of the non-exclusive licenses. Generally, the license agreements provide for the grant of the licenses, releases, and other significant deliverables following execution of the agreement and the receipt of the up-front lump sum payment for a Fully-Paid License or a license initiation fee for a Royalty Bearing License.
Ongoing Royalty Payments: Certain of the Company's revenue from Royalty Bearing Licenses results from the calculation of royalties based on a licensee's actual quarterly sales (one licensee pays monthly royalties) or actual per unit activity, applied to a contractual royalty rate. Licensees that pay royalties on a quarterly basis generally report actual quarterly sales and related quarterly royalties due within 45 days after the end of the quarter in which such sales activity takes place. Licensees with Royalty Bearing Licenses are obligated to provide the Company with quarterly (or monthly) royalty reports that summarize their sales of licensed products and their related royalty obligations to the Company. The Company receives these royalty reports subsequent to the period in which its licensees underlying sales occurred. The amount of royalties due under Royalty Bearing Licenses, each quarter, cannot be reasonably estimated by management. Consequently, the Company recognizes revenue for the period in which the royalty report is received in arrears and other revenue recognition criteria are met.
Non-Refundable Up-Front Fees: 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 obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from Fully-Paid Licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations. |
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Costs of Revenue | The Company includes in costs of revenue for the year ended December 31, 2017 and 2016 contingent legal fees payable to patent litigation counsel (see Note G[1] hereof), other contractual payments related to net proceeds from settlements (see Note G[2] hereof) and incentive bonus compensation payable to its Chairman and Chief Executive Officer (see Note H[1] hereof). |
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Income Taxes | The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, "Income Taxes" (ASC 740), which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary (timing) differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.
ASC 740-10, "Accounting for Uncertainty in Income Taxes," defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company had no uncertain tax positions as of December 31, 2017 and December 31, 2016.
United States federal, state and local income tax returns prior to 2014 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.
On December 22, 2017, the 2017 Tax Cuts and Job Act was enacted into law and the new legislation contains key tax provisions that affect the Company. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring its U.S. deferred tax assets and liabilities as well as reassessing the net realizability of deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows the Company to record provisional amounts during a measurement period not extended beyond one year of the enactment date. |
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Stock-based compensation | The Company accounts for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718, Compensation - Stock Compensation ("ASC 718"). ASC 718 requires all stock-based compensation to employees, including grants of employee stock options and restricted stock units, to be recognized in the 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 payments issued to non-employees are recorded at their fair values, and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period and are expensed using an accelerated attribution model. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of options granted. The fair value of restricted stock units is determined based on the number of shares 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 F for further discussion of the Company's stock based compensation). |
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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 D). |
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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.
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 receivable, 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 B[3]). The Company also measures the fair value of certain assets on a non-recurring basis, when events or circumstances indicate the carrying amount of the assets may be impaired. |
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Dividend Policy | 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 M hereof). |
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Recently Issued Accounting Standards | 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. The adoption of this ASU will not 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. The Company is required to adopt the amendments in ASU No. 2014-09 using one of the two acceptable methods. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU No. 2014-09 to annual periods beginning after December 2017, along with an option to permit early adoption as of the original effective date. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends the guidance in 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. The ASU does not change the core principle of the guidance in Topic 606. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. 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). In November 2017, the FASB issued ASU 2017-14, Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606), 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. The ASUs apply 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 is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company will adopt ASU 2014-09 on January 1, 2018 using the modified retrospective approach. The Company does not anticipate a modified retrospective adjustment to be recorded upon adoption as it relates to the amount and timing of revenue recognized from its existing license agreements for its intellectual property. The Company will continue to evaluate any new license agreements entered into in the future relating to the new revenue recognition policy which will be adopted on January 1, 2018.
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. This standard, adopted on a prospective basis, will not have a material impact on its consolidated financial statements. |
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Accounting Standards Adopted in 2017 | 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. The Company has evaluated this on a modified retrospective basis and determined that no adjustment was necessary. Under the new method the Company recognizes 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 as a result prior periods have not been adjusted. The effective tax rate for the year ended December 31, 2017 was not materially different from the federal statutory rate. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Summary Of Significant Accounting Policies Tables | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of cash and cash equivalent |
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PATENTS (Tables) |
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Patents Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated amortization related to acquired intangible assets |
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Future amortization of current intangible assets, net |
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share |
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INCOME TAXES (Tables) |
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Income Taxes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant components of the income taxes |
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Significant components of deferred tax assets |
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Significant components of federal income tax |
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STOCKHOLDERS' EQUITY (Tables) |
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Stockholders Equity Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of restricted stock unit activity |
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Schedule of stock option activity |
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Summary of information of stock options outstanding and exercisable |
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Outstanding warrants purchase shares |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Summary Of Significant Accounting Policies Details | |||
Cash and cash equivalents | $ 9,764,000 | $ 9,452,000 | |
Money Market fund | 43,337,000 | 41,466,000 | |
Total | $ 53,101,000 | $ 50,918,000 | $ 20,608,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Summary Of Significant Accounting Policies Details Narrative | ||
Impairment of long-lived assets | $ 0 | |
Cash in excess of FDIC limits | 42,066,000 | |
Face value of marketable securities | $ 1,000,000 | $ 1,000,000 |
Corporate bonds one | 3.90% | 3.90% |
Corporate bonds two | 4.50% | 4.50% |
PATENTS (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Patents Details | ||
Gross carrying amount | $ 7,571,000 | $ 6,427,000 |
Accumulated amortization | (5,402,000) | (5,196,000) |
Patents, net | $ 2,169,000 | $ 1,231,000 |
PATENTS (Details 1) |
Dec. 31, 2017
USD ($)
|
---|---|
Patents Details 1 | |
2018 | $ 278,000 |
2019 | 272,000 |
2020 | 272,000 |
2021 | 266,000 |
2022 and thereafter | 1,081,000 |
Total | $ 2,169,000 |
PATENTS (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Amortization expense | $ 206,000 | $ 813,000 |
Expiration of Remote Power Patent | March 2020 | |
Expiration of QoS family patents | June 2019 | |
Minimum [Member] | ||
Estimated remaining economic useful of patents | 2 years 6 months | |
Expiration dates of the patents within the Company's Mirror Worlds patent portfolio | April 2018 | |
Expiration dates of the patents within the Cox patent portfolio | September 2021 | |
Expiration dates of patents within the Company's M2M/IoT Patent Portfolio | January 2034 | |
Maximum [Member] | ||
Estimated remaining economic useful of patents | 16 years | |
Expiration dates of the patents within the Company's Mirror Worlds patent portfolio | February 2020 | |
Expiration dates of the patents within the Cox patent portfolio | November 2023 | |
Expiration dates of patents within the Company's M2M/IoT Patent Portfolio | May 2034 |
EARNINGS PER SHARE (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Earnings Per Share Details | ||
Weighted-average common shares outstanding - basic | 24,147,908 | 23,320,065 |
Dilutive effect of options, warrants and restricted stock units | 2,248,252 | 1,565,217 |
Weighted-average common shares outstanding - diluted | 26,396,160 | 24,885,282 |
Options, restricted stock units and warrants excluded from the computation of diluted income per share because the effect of inclusion would have been anti-dilutive | 230,978 |
EARNINGS PER SHARE (Details Narratrive) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Earnings Per Share Details Narratrive | ||
Potentially Dilutive Shares | 2,830,000 | 3,575,000 |
INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Current | ||
State and local | $ 45,000 | $ 170,000 |
Federal | 2,012,000 | 4,017,000 |
Total Current Tax Expense | 2,057,000 | 4,187,000 |
Deferred | ||
State and local | 1,000 | 163,000 |
Federal | 38,000 | 4,588,000 |
Total Deferred Tax Expense | 39,000 | 4,751,000 |
Total Income Taxes | $ 2,096,000 | $ 8,938,000 |
INCOME TAXES (Details 1) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Deferred tax assets: | ||
Options, warrants and restricted stock units | 168,000 | 207,000 |
Net deferred tax assets | $ 168,000 | $ 207,000 |
INCOME TAXES (Details 2) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Income Taxes Details 2 | ||
Income tax - statutory rate | 34.00% | 34.00% |
State and local, net | 0.73% | 1.03% |
Other - Net | (1.08%) | 0.30% |
Change in valuation allowance on deferred tax assets | (7.30%) | |
Statutory federal income tax rate | 33.65% | 28.03% |
INCOME TAXES (Details Narrative) |
Dec. 31, 2016
USD ($)
|
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Income Taxes Details | |
Net operating loss carry-forwards | $ 20,700,000 |
STOCKHOLDERS' EQUITY (Details) - Restricted Stock Units (RSUs) [Member] |
12 Months Ended |
---|---|
Dec. 31, 2017
$ / shares
shares
| |
Number of restricted stock units outstanding, Beginning balance | shares | 890,000 |
Weighted average grant date fair value, Beginning balance | $ / shares | $ 2.29 |
Grants of restricted stock units | shares | 40,500 |
Grants of restricted stock units, weighted average grant date fair value | $ / shares | $ 3.80 |
Vested restricted stock units | shares | (110,500) |
Vested restricted stock units, weighted average grant date fair value | $ / shares | $ 2.96 |
Unvested restricted stock units, shares, Ending balance | shares | 820,000 |
Unvested restricted stock units, weighted average grant date fair value, Ending balance | $ / shares | $ 2.28 |
STOCKHOLDERS' EQUITY (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Number of options, outstanding | ||
Outstanding, beginning of period (in shares) | 2,310,000 | 2,855,000 |
Granted (in shares) | ||
Expired (in shares) | (15,000) | |
Exercised (in shares) | (300,000) | (530,000) |
Outstanding, end of period (in shares) | 2,010,000 | 2,310,000 |
Exercisable, end of period (in shares) | $ 2,010,000 | $ 2,310,000 |
Weighted average exercise price | ||
Outstanding, beginning of period (in dollars per share) | $ 1.29 | $ 1.33 |
Granted (in dollars per share) | ||
Expired (in dollars per shares) | 1.31 | |
Exercised (in dollars per share) | 1.31 | 1.53 |
Outstanding, end of period (in dollars per share) | 1.28 | 1.29 |
Exercisable, end of period (in dollars per share) | $ 1.28 | $ 1.29 |
STOCKHOLDERS' EQUITY (Details 2) |
12 Months Ended |
---|---|
Dec. 31, 2017
$ / shares
shares
| |
Options outstanding | shares | 2,010,000 |
Weighted average exercise price | $ 1.28 |
Weighted Average Remaining Life in Years | 2 years 1 month 6 days |
Options exercisable | shares | 2,010,000 |
Minimum [Member] | |
Range of Exercise price | $ 0.83 |
Maximum [Member] | |
Range of Exercise price | $ 2.34 |
STOCKHOLDERS' EQUITY (Details 3) |
12 Months Ended |
---|---|
Dec. 31, 2016
$ / shares
shares
| |
Number of warrants | 375,000 |
Exercise Price $ 2.10 | |
Number of warrants | 250,000 |
Exercise Price | $ / shares | $ 2.10 |
Expiration Date | May 21, 2018 |
Exercise Price Two Member | |
Number of warrants | 125,000 |
Exercise Price | $ / shares | $ 2.10 |
Expiration Date | Jul. 26, 2018 |
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jul. 14, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 15, 2017 |
Sep. 15, 2017 |
Jun. 15, 2017 |
Mar. 15, 2017 |
|
Recognized stock-based compensation | $ 12,000 | ||||||
Aggregate intrinsic value of options exercisable | $ 2,245,550 | ||||||
Options exercised | 300,000 | 530,000 | |||||
Option exercised on cashless basis | $ 50,000 | $ 470,251 | |||||
Net shares issued | 26,734 | 132,080 | |||||
Proceeds from exercise of warrants | $ 787,500 | $ 525,000 | |||||
Accrued dividend rights on restricted stock units | 84,000 | ||||||
Restricted Stock Units (RSUs) [Member] | |||||||
Restricted stock unit compensation expense | 949,000 | $ 497,000 | |||||
Unrecognized restricted stock unit compensation expense | $ 860,000 | ||||||
Weighted average amortized period | 1 year 6 months 29 days | ||||||
RSUs granted to each non-management director | 13,500 | 15,000 | |||||
RSUs issued to each non-management directors vested on the date of grant | 7,500 | ||||||
Quarterly installments of shares | 3,375 | 3,375 | 3,375 | 3,375 | |||
RSUs issued to each non-management director vested on September 9, 2016 | 3,750 | ||||||
RSUs issued to each non-management director vested on December 9, 2016 | 3,750 | ||||||
RSUs granted to Chief Financial Officer | 50,000 | ||||||
RSUs granted to Executive Vice-President | 50,000 | ||||||
RSUs granted to Consultant | 40,000 | ||||||
RSUs vesting description | Each such RSUs vests 50% on the one year anniversary of grant (June 9, 2017) and 50% on the two year anniversary of grant (June 9, 2018). | ||||||
Accrued dividend rights on restricted stock units | $ 84,000 | ||||||
Minimum [Member] | |||||||
Exercise Price | $ 1.14 | $ 1.21 | |||||
Maximum [Member] | |||||||
Exercise Price | 1.40 | 1.60 | |||||
LLC [Member] | |||||||
Exercise Price | $ 2.10 | $ 1.40 | |||||
Warrants outstanding | 375,000 | ||||||
Warrants exercised | 375,000 | 375,000 | |||||
Proceeds from exercise of warrants | $ 787,500 | $ 525,000 | |||||
Former Director [Member] | |||||||
Options exercised | 125,000 | 25,000 | |||||
Consultant [Member] | |||||||
Options exercised | 90,000 | ||||||
Option exercised in lieu of stock option | 17,273 | ||||||
Director [Member] | |||||||
Options exercised | 50,000 | 75,000 | |||||
Option exercised on cashless basis | $ 50,000 | ||||||
Option exercised in lieu of stock option | 47,283 | ||||||
Executive Vice President [Member] | |||||||
Options exercised | 240,000 | ||||||
Option exercised in lieu of stock option | 23,944 | ||||||
Director One [Member] | |||||||
Options exercised | 50,000 | ||||||
Chief Financial Officer [Member] | |||||||
Options exercised | 100,000 | ||||||
Option exercised in lieu of stock option | 43,580 | ||||||
Chief Financial Officer [Member] | Three Children [Member] | |||||||
Options exercised | 75,000 | ||||||
2013 Stock Incentive Plan [Member] | |||||||
Common stock to be available for distribution | 2,600,000 | ||||||
Common stock available for issuance | 1,253,099 | ||||||
2013 Stock Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
RSUs granted to chairman and chief executive officer | 750,000 | 750,000 | |||||
Closing price vesting condition | $ 4.25 | ||||||
Volatility | 38.80% | ||||||
2013 Stock Incentive Plan [Member] | Stock Option One [Member] | |||||||
Stock options to purchase shares | 1,625,000 | ||||||
2013 Stock Incentive Plan [Member] | Stock Option [Member] | |||||||
Stock options to purchase shares | 385,000 | ||||||
2013 Stock Incentive Plan [Member] | Transaction 1 [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
RSUs granted to chairman and chief executive officer | 250,000 | 250,000 | |||||
Closing price vesting condition | $ 4.25 | ||||||
2013 Stock Incentive Plan [Member] | Transaction 2 [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
RSUs granted to chairman and chief executive officer | 250,000 | 250,000 | |||||
Closing price vesting condition | $ 3.25 | $ 3.25 | |||||
2013 Stock Incentive Plan [Member] | Transaction 3 [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
RSUs granted to chairman and chief executive officer | 250,000 | 250,000 | |||||
Closing price vesting condition | $ 4.25 | ||||||
2013 Stock Incentive Plan [Member] | Minimum [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Risk-free interest rate | 0.67% | ||||||
2013 Stock Incentive Plan [Member] | Maximum [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Risk-free interest rate | 1.10% |
COMMITMENTS AND CONTINGENCIES - Legal Fees (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Legal Service Agreement With Russ, August Kabot For Litigation Filed In May 2017 [Member] | ||
Legal Fees payment ,Terms | Cash payments on a monthly basis subject to a cap plus a contingency fee ranging between 15% and 24% of the net recovery (after deduction of expenses) | |
Legal Service Agreement With Russ, August Kabot For Litigation Filed In April 2014 and December 2014 [Member] | ||
Legal Fees payment ,Terms | Legal fees on a full contingency basis ranging from 15% to 30% of the net recovery (after deduction of expenses) | |
Legal Service Agreement With Dovel And Luner For Litigation Filed In September 2011 [Member] | ||
Legal Fees payment ,Terms | Legal fees on a full contingency basis ranging from 12.5% to 35% (with certain exceptions) of the net recovery (after deduction for expenses) | |
Legal fees and expenses | $ 2,954,000 | $ 4,626,000 |
Legal Service Agreement With Dovel And Luner For Litigation Settlement In July 2010 [Member] | ||
Legal Fees payment ,Terms | 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) | |
Legal fees and expenses | $ 1,801,000 | $ 2,117,000 |
COMMITMENTS AND CONTINGENCIES - Patent Acquisitions (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Dec. 29, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Jun. 03, 2014 |
May 21, 2013 |
Feb. 28, 2013 |
|
Exercise price of five year option | ||||||
Acquisition of Cox patents cash, purchase price | $ 1,000,000 | |||||
Acquisition of Cox patents, common stock issued | 403,226 | |||||
Obligated to pay Cox, net proceeds percentage | 12.50% | |||||
Capitalized professional fees and filing fees related to Cox Patent Portfolio | $ 169,000 | |||||
Cash consideration for Mirror Worlds patent acquisition | $ 3,000,000 | |||||
Cost of repurchase of Mirror Worlds warrants | $ 505,000 | |||||
Issued 5-year warrants (Looking Glass) to purchase shares of common stock | 1,750,000 | |||||
5-year warrants (Looking Glass) to purchase 875,000 shares, exercise price per share | 1.40 | |||||
5-year warrants (Looking Glass) to purchase 875,000 shares, exercise price per share | 2.10 | |||||
Capitalized professional fees and filing fees related to Mirror Worlds patents | $ 88,000 | $ 409,000 | ||||
Net proceeds percentage payable to Recognition from the monetization of the Mirror Worlds patent portfolio | ||||||
First $100 Million | 10.00% | |||||
Next $125 Million | 15.00% | |||||
Over $250 Million | 20.00% | |||||
Recognition paid related to Mirror Worlds patents | $ 0 | $ 2,909,000 | ||||
Recognition exercise warrants to purchase shares | 750,000 | |||||
Proceeds from issuance of warrants | $ 787,500 | $ 525,000 | ||||
Payment to acquire M2M/IoT Patent portfolio | $ 1,000,000 | |||||
Description of M2M Patent Portfolio, net proceeds | obligation to pay M2M 14% of the first $100 million of net proceeds (after deduction of expenses) and 5% of net proceeds greater than $100 million from Monetization Activities (as defined) related to the patent portfolio. | |||||
Additional contingent consideration upon related to the patent portfolio | $ 250,000 |
COMMITMENTS AND CONTINGENCIES - Operating leases (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Rental expense | $ 156,000 | $ 148,000 |
New York City [Member] | ||
Rental cost per month | $ 3,700 | |
Expiring date | May 31, 2018 | |
New Canaan CT [Member] | ||
Rental cost per month | $ 7,200 | |
Expiring date | September 30, 2019 | |
Description lease agreement | The Company leases office space in New Canaan, Connecticut expiring on September 30, 2019 at a base rent of $7,200 per month (increasing $100 per month each year), | |
Tyler, Texas [Member] | ||
Rental cost per month | $ 620 | |
Expiring date | April 30, 2018 |
COMMITMENTS AND CONTINGENCIES - Savings and investment plan: (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Commitments And Contingencies - Savings And Investment Plan Details Narrative | ||
Plan expense | $ 108,000 | $ 102,000 |
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS (Details Narrative) - USD ($) |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 09, 2018 |
Jun. 09, 2017 |
Jul. 14, 2016 |
Jun. 09, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Apr. 09, 2014 |
|
Annual base salary Chairman and CEO | $ 475,000 | ||||||||
Target annual bonus or minimum bonus Chairman and CEO | $ 175,000 | ||||||||
CEO Incentive Compensation - percentage of gross royalties - Remote Power Patent | 5.00% | ||||||||
CEO Incentive Compensation - percentage of net royalties - Additional Patents | 10.00% | ||||||||
CEO Incentive Compensation - percentage of gross royalties - Additional Patents | 6.25% | ||||||||
Annual base salary of Chief Financial Officer | $ 175,000 | $ 157,000 | |||||||
Issuance of 5 year stock option to CFO | 50,000 | ||||||||
CFO stock option, exercise price | $ 1.65 | ||||||||
Option vested | 25,000 | 25,000 | |||||||
Earned incentive compensation - Chairman and CEO | $ 823,000 | 4,252,000 | |||||||
Incentive compensation included in accrued expenses - chairman and chief executive officer | 346,000 | 748,000 | |||||||
Annual cash bonuses for CEO | 175,000 | 650,000 | |||||||
Annual bonus for Chief Financial Officer | 30,000 | 75,000 | |||||||
Annual bonus for Executive Vice President | 40,000 | $ 125,000 | |||||||
Prior To New Employment Agreement [Member] | |||||||||
Annual base salary Chairman and CEO | 415,000 | ||||||||
Annual cash bonuses for CEO | 150,000 | ||||||||
Executive Vice President [Member] | |||||||||
Annual base salary of Executive Vice President | $ 200,000 | ||||||||
Executive Vice President [Member] | Restricted Stock [Member] | |||||||||
Percentage of option vested | 50.00% | 50.00% | |||||||
Restricted stock units granted | 50,000 | ||||||||
Chief Financial Officer [Member] | Restricted Stock [Member] | |||||||||
Percentage of option vested | 50.00% | 50.00% | |||||||
Restricted stock units granted | 50,000 | ||||||||
2013 Stock Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | |||||||||
RSUs granted to chairman and chief executive officer vested on July 14, 2018 | 750,000 | 750,000 | |||||||
Closing price minimum for vesting beginning July 14, 2018 | $ 4.25 | ||||||||
2013 Stock Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | Transaction 3 [Member] | |||||||||
RSUs granted to chairman and chief executive officer vested on July 14, 2018 | 250,000 | 250,000 | |||||||
Closing price minimum for vesting beginning July 14, 2018 | $ 4.25 | ||||||||
2013 Stock Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | Transaction 2 [Member] | |||||||||
RSUs granted to chairman and chief executive officer vested on July 14, 2018 | 250,000 | 250,000 | |||||||
Closing price minimum for vesting beginning July 14, 2018 | $ 3.25 | $ 3.25 | |||||||
2013 Stock Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | Transaction 1 [Member] | |||||||||
RSUs granted to chairman and chief executive officer vested on July 14, 2018 | 250,000 | 250,000 | |||||||
Closing price minimum for vesting beginning July 14, 2018 | $ 4.25 |
LEGAL PROCEEDINGS (Details Narrative) |
1 Months Ended | 12 Months Ended | 51 Months Ended | 55 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 08, 2016
USD ($)
|
Oct. 31, 2019
USD ($)
|
Oct. 31, 2018
USD ($)
|
Oct. 31, 2017
USD ($)
|
Jul. 01, 2017
USD ($)
Agreement
|
Oct. 31, 2016
USD ($)
|
Jul. 31, 2016
USD ($)
|
Jul. 31, 2010
USD ($)
|
Dec. 31, 2017
USD ($)
|
Mar. 31, 2020
USD ($)
|
Dec. 31, 2015
USD ($)
|
Jan. 09, 2018
USD ($)
|
|
Litigation settlement payment in number of installment | Agreement | 3 | |||||||||||
Litigation settlement quarterly installment amount | $ 766,666 | |||||||||||
Payments received from license defendants upon settlement | $ 32,000,000 | |||||||||||
Maximum Cisco royalty payment per year through 2015 | $ 8,000,000 | |||||||||||
Maximum Cisco royalty payment per year for remaining term of the remote power patent | $ 9,000,000 | |||||||||||
Avaya [Member] | ||||||||||||
Allowed claim amount, as amended | $ 37,500,000 | |||||||||||
General unsecured claims, amount | $ 305,000,000 | |||||||||||
General unsecured claims, percentage | 18.90% | |||||||||||
ALE USA Inc. [Member] | ||||||||||||
Company's litigation settlement Amount | $ 4,200,000 | |||||||||||
Payments received from license defendants upon settlement | $ 1,900,000 | |||||||||||
Apple Inc [Member] | Mirror Worlds Technologies, LLC [Member] | ||||||||||||
Payments received from license defendants upon settlement | $ 25,000,000 | |||||||||||
Polycom [Member] | ||||||||||||
Company's litigation settlement Amount | $ 5,000,000 | |||||||||||
Payments received from license defendants upon settlement | $ 2,000,000 | |||||||||||
Annual installment payment | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | |||||||||
litigation settlement description | If the District Court in our trial with Hewlett Packard (see below) enters an order finding certain claims of the Remote Power Patent obvious (invalid) and the Company is unable to overturn such order on appeal to the United States Court of Appeals for the Federal Circuit, Polycom will not be obligated to make the aforementioned remaining aggregate payments of $2,000,000. |
|||||||||||
Dell Inc [Member] | ||||||||||||
Payments received from license defendants upon settlement | $ 6,000,000 |
REVENUE FROM PROFESSIONAL LIABILITY SETTLEMENT (Details Narrative) |
Apr. 22, 2016
USD ($)
|
---|---|
Mirror Worlds Technologies, LLC ("MWT") [Member] | |
Revenue from professional liability | $ 17,500,000 |
CONCENTRATIONS (Details Narrative) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Licensees One [Member] | ||
Percentage revenue | 67.00% | 83.00% |
Percentage of royalty receivable two and three licensees, respectively | 79.00% | 85.00% |
Licensees Two [Member] | ||
Percentage revenue | 67.00% | 83.00% |
Percentage of royalty receivable two and three licensees, respectively | 79.00% | 85.00% |
Licensees Three [Member] | ||
Percentage revenue | 67.00% | 83.00% |
Percentage of royalty receivable two and three licensees, respectively | 79.00% | 85.00% |
STOCK REPURCHASE PROGRAM (Details Narrative) - USD ($) |
12 Months Ended | 77 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2017 |
Jun. 14, 2017 |
Aug. 31, 2011 |
|
Number of shares, common stock repurchased | 649,549 | 7,575,553 | ||
Average price per share, common stock subject to repurchase | $ 3.20 | $ 1.79 | ||
Aggregate cost of common stock eligible for repurchase | $ 2,081,135 | $ 13,545,008 | ||
Board of Directors [Member] | ||||
Stock Repurchase Program, dollar amount of shares authorized to be repurchased | 5,000,000 | |||
Stock Repurchase Program, dollar amount of shares authorized for repurchase since inception | 2,000,000 |
DIVIDEND POLICY (Details Narrative) - $ / shares |
12 Months Ended | ||||
---|---|---|---|---|---|
Jul. 25, 2017 |
Feb. 02, 2017 |
Dec. 07, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Dividend Policy Details Narrative | |||||
Semi-annual dividend per common share | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.10 | |
Annual dividend per common share | $ 0.10 | $ 0.10 | |||
Dividend Payment Date | Sep. 20, 2017 | Mar. 24, 2017 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
Mar. 08, 2018 |
Feb. 09, 2018 |
Jan. 09, 2018 |
Dec. 31, 2017 |
Dec. 07, 2016 |
---|---|---|---|---|---|
Per share semi annual cash dividend payable | $ 0.10 | $ 0.10 | |||
Avaya [Member] | |||||
Allowed claim amount | $ 37,500,000 | ||||
Subsequent Event [Member] | |||||
Number of restricted stock units issued to each non-management director | 15,000 | ||||
Subsequent Event [Member] | March 24, 2018 [Member] | |||||
Per share semi annual cash dividend payable | $ 0.05 | ||||
Subsequent Event [Member] | March 15, 2018 [Member] | |||||
Number of restricted stock units issued to each non-management director | 3,750 | ||||
Subsequent Event [Member] | June 15, 2018 [Member] | |||||
Number of restricted stock units issued to each non-management director | 3,750 | ||||
Subsequent Event [Member] | September 15, 2018 [Member] | |||||
Number of restricted stock units issued to each non-management director | 3,750 | ||||
Subsequent Event [Member] | December 15, 2018 [Member] | |||||
Number of restricted stock units issued to each non-management director | 3,750 | ||||
Subsequent Event [Member] | Unaffiliated Third Party [Member] | |||||
Allowed claim amount | 6,320,000 | ||||
Subsequent Event [Member] | Avaya [Member] | |||||
Allowed claim amount | $ 37,500,000 | ||||
Subsequent Event [Member] | Juniper [Member] | |||||
Bankruptcy claims, amount paid to settle claims | $ 12,700,000 |
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